The federal government should define financial advice by its consideration of personal circumstances only and move any no-cost discussions about product outside the advice regime, according to the Financial Services Council (FSC).
The industry body made the call for a clearer definition of advice linked to the work of practitioners and the needs of consumers as part of the release of a white paper yesterday that recommended a break in the nexus between advice and product.
Speaking at the release of the white paper, FSC policy manager Zac Castles said: “We seem to define advice by virtue of provider than by what they are providing as a universal activity which should be regulated by industry.”
Castles said the FSC was calling for a distinction between what was advice and what was general information given to consumers, with the latter replacing the ‘general advice’ term currently in use.
“What we are proposing is that personal advice is any activity that takes into account an individual’s circumstances and makes a product recommendation, and general information is activity that sits outside that and incorporates factual information and education but does not involve a product recommendation,” he said.
“If a fee applies for general information, then it should sit within the licensing regime but outside of that it sits in free speech territory.”
He said the idea that personal advice takes into account an individual’s personal circumstances made sense to most people, but that definition still had to be adopted by government.
“By legislating those definitions and sorting out the substance of those definitions, as we propose, individual circumstances is the border between personal advice and general information and we think that is the best fix. The definitions will need to be debated, but we are confident they are the best so far to get the ball rolling.”
He said the adoption of the definitions would also rationalise the terms used to describe financial advice in the future.
“We want to get rid of redundant terms such as intra-fund advice, specialised advice, limited advice and if providers can meet the standards, they should be eligible to join the profession,” he said.
“That is much easier to license and easier to regulate and improves transparency of the industry and it does not mean changes for what advice businesses are doing currently, but it does mean one approach for all.”