FOFA changes provide scope for general advice
The proposed scrapping of the Future of Financial Advice (FOFA) conflicted remuneration ban could give planners the green light to offer general advice - but they should still approach with caution, a financial services lawyer says.
Without the ban, planners could introduce a general advice model for clients who do not wish to pay for full advisory services, according to Claire Wivell Plater, managing director of The Fold Legal.
Under the general advice model, Statements of Advice (SOAs) are replaced with a general advice warning and advice can be given over the phone or internet, improving the service scope for planning practices.
However, the planner must be certain they know the difference between general and personal advice, she said.
“In the early days of the Australian Financial Services (AFS) regime, there was some uncertainty over where to draw the line,” she said.
“But we’re pretty clear about it now - and we’ve got pretty good at developing sales process and training that ensure the adviser stays on the general side of the advice spectrum.”
Wivell Plater warned planners to beware of situations where there was a miscommunication about the nature of advice.
“If a client reasonably believes they have been provided with personal advice, then the advice will be considered personal, even if the adviser intended to give general advice and even if the adviser thought it was general,” she says.
Wivell Plater said general advice had an expanding role in the financial services space, particularly when clients have a specific goal.
“This happens a lot with general insurance and some life insurance. It is rarer in financial advice relationships,” she says.
“We expect product providers to make the most use of the removal of the ban on commissions for general advice because it will allow them to remunerate on the basis of sales.”
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