ISA calls for greater clarity around ‘general advice’ definition
Industry Super Australia has made a late bid to retain the term ‘general advice', claiming the term is still useful in some contexts but has been misused by product providers who have hidden sales activities under the term.
In a submission, penned by ISA deputy chief executive Robbie Campo, to the Senate Economics References Committee, ISA claimed that changing the term would impact superannuation funds which provide basic advice to fund members.
ISA claimed that any change to the term would impact over-the-phone and face-to-face general advice, member educational materials, and online tools such as retirement income calculators and superannuation comparators.
The submission claimed a distinction needed to be made between the type of advice listed above and that identified by the Financial System Inquiry (FSI), which was characterised as "guidance, advertising, and promotional and sales material highlighting the potential benefits of financial products".
"ISA agrees that the regulatory settings should discourage consumers from excessive reliance on activities which are designed to sell financial products, rather than deliver financial information, education and guidance activities which are of benefit to the consumer."
"However, general advice also includes a wide range of activities that are valuable to consumers. Regulatory settings should support activity that is valuable to consumers, while protecting consumers from so-called general advice that is actually sales activity."
"Many members who receive general advice about superannuation from their super fund would not obtain personal advice if it was the only option available to them due to cost, inconvenience, or lack of trust and confidence in traditional financial planners."
ISA stated that while it supported change the widespread re-labelling of all general advice to general information was not required and the consumer confusion that has been highlighted at the FSI and other inquiries "does not flow from what the technical term for that form of advice but from the fact that providers are able to cloak sales activity in general advice."
As a result ISA called for advertising and sales activities that attract conflicted remuneration to be labelled as sales information and for staff who are eligible to receive any form of conflicted remuneration to clearly disclose this to consumers while sales advisers should be required to explain their relationship with product issuers in a clear and understandable way.
AUTHOR
Jason Spits
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