ASIC wants banks banned from using the words ‘general advice’

The corporate cops want banks banned from using the words “general advice” after discovering the phrase hoodwinks many into believing they are getting tailored help not a sales spiel.

The corporate cops want banks banned from using the words “general advice” after discovering the phrase hoodwinks many customers into believing they are getting tailored help when the information can be little more than a sales spiel.

The Australian Securities and Investments Commission’s (ASIC) quest has commenced as banks exit the business of providing “personal advice” through financial planners in the wake of the royal commission and ramp up their use of general advice to sell complex products.

When personal advice is provided, important consumer protections kick in, such as a legal obligation to act in a consumer’s best interest. That is not the case for general advice.

But many people are unable to tell which is what.

RELATED: What the financial services royal commission means for you

Can you tell the difference between a bank’s ‘general advice’ and ‘personal advice’?

New ASIC research has revealed that even when prompted with the terms ‘general advice’ and ‘personal advice’, participants have difficulty distinguishing.

In an online survey, people were read two advice scenarios and then asked to select which type of advice was being provided.

Only 53 per cent correctly identified the general advice scenario, even though the

general advice warning was given.

And just 19 per cent could pick the personal advice.

Most either thought that the personal advice scenario was general advice or a mix of both types of advice.

“This disturbing gap in understanding whether the advice they are getting is personal or not means many consumers are under the false premise their interests are being prioritised, when no such protection exists,” ASIC’s deputy chair Karen Chester said.

ASIC’s Karen Chester says confusion needs to be addressed. Picture: Kym Smith

“ASIC is seeing increased sales of complex financial products under general advice models — so not tailored to personal circumstances — leaving many consumers, especially retirees, exposed to the potential risk of financial loss,” Ms Chester said.

“And while the Financial Services Royal Commission, and the Government’s response, dealt with the most egregious risks of hawking of complex financial products, consumer confusion about what is personal and general advice needs to be addressed.”

ASIC intends to do further research to work out what form of words would make consumers stop and think about whether what they are being told is help or marketing.

The Federal Government has already received two reports from the Productivity Commission that have specifically recommended renaming general advice.

“We need to stop calling sales by bank tellers and telemarketers ‘advice’ when it is clearly not,” Choice CEO Alan Kirkland said.