General advice

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For a variety of reasons, including client preferences, the 'cost of compliance' and perceptions of value, there is an increasing focus on general advice. For some a sanctuary from the Financial Adviser Standards and Ethics Authority (FASEA), increasing costs and onerous personal advice obligations and for others the only source of appropriate, low-cost advice available to consumers.

All advisers recognise the need for consumers to better understand, and to be better engaged in, the management of their financial affairs, but it is often difficult for advisers and licensees to identify, and operationalise, practical solutions.

Traditionally, most have focused on scaled advice but even this strategy provides, at best, a partial solution to issues of affordability and accessibility. Scaled personal advice, for example, is largely ineffective in addressing the issues of cost, complexity and conflicts or post-Hayne distrust of advisers.

General advice may provide an alternative that, when properly structured and supported, could provide consumers with the practical advice they need and from which they would clearly benefit.

Unfortunately, it appears that many licensees and advisers fail to understand the specific character of 'general advice' or their obligations to the consumers to whom it is provided. This may be an inevitable consequence of a regulatory regime that focused on personal advice and voluminous disclosure. However, a regulatory regime that focuses on engagement and understanding might recognise general advice as a public policy solution to the reality of broadly unaffordable and inaccessible financial advice.

In our experience, few consumers are able to clearly identify and articulate their needs, preferences and objectives. They often blur the distinction between advice, information and help. The default response is to subject them to disclosure documents and cascading costs that often dissuade them from obtaining the advice from which they would clearly benefit.

General advice is not a complete solution but it is, in our view, a key component of any effective solution. Unfortunately, the scope, nature and limitations of general advice is not well understood but we will try to address the key aspects while assessing some of the key challenges with the model.