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Although it’s common knowledge that financial advisers who provide general advice to retail clients must provide a general advice warning, the warning must be effective. If you believe a simple warning at the bottom of a website is sufficient, think again! 

What should a general advice warning look like?

The legalese says general advice warnings must cover 3 points, i.e.:

  • The client’s objectives, financial situation or needs have not been taken into account;
  • The client should consider the appropriateness of the advice having regard to those factors before acting on it; and
  • If the information relates to a specific product, the client should consider the PDS before making any decision about whether to acquire it.

On this basis, a comprehensive (and compliant) warning would look like this:

“This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. (If relevant: Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement).”

But you don’t need to write the warning in the language of the law like the example above – that’s just a typical lawyer’s response!

You can use your own words to make the warning more customer friendly. The important thing is that the effect of the 3 required elements are conveyed.

Different rules for oral

General advice is often provided orally, by phone or face-to-face. In this situation, a simplified warning can be provided, explaining that the advice:

  • Is general; and
  • May not be appropriate for the client.

It’s not strictly necessary to include the 3 elements.

This reduces the regulatory burden on advisers and helps retail clients to easily understand the warning. However, it is good practice to be upfront about the fact that you are only providing general advice, so the client understands from the get-go.

An effective general advice warning when speaking to a client may sound like this:

“These suggestions will give you a general idea of the options available to you; you’ll need to work out what’s appropriate for you.”

Proximity matters!

Your general advice warning may be ready to go, but where should you put it? After all, what good is a warning if no one can find it?

To be effective, a warning must be close to the advice. If it is not given to the client at the same time and in the same manner as the advice, the warning will not be compliant.

For instance, a warning hidden in a large chunk of text or displayed in fine print on a website will not be compliant. And you can’t direct readers to another webpage or source of information to access the general advice warning.

You might find it helpful to read our blogs on the Challenges for Digital Advice and General Advice - Are You Tempted?

Or if you need legal advice on your general advice warnings – or your website or advertising content, contact us for a quote. We’re always happy to help.

Author: Marcus Wong

July 2016

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