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Contrary to the shrieks of protest being heard in the mainstream press, the proposed removal of the ban on conflicted remuneration for general advice won’t spell an end to full advice relationships.

But it will provide new opportunities for financial advice businesses to offer more cost effective solutions to clients who want to make their own investment decisions or who don’t want to pay for a full advisory service.

General advice is just a form of scaled advice. It can be provided online, by telephone or face to face. If the business then arranges for the client to acquire the financial product, they can be remunerated by commission for their services.

BUT - and this is a big but - in full service and ongoing advice relationships, where a financial adviser has undertaken a detailed needs analysis and the client expects and pays for the adviser to recommend strategies and investments that will achieve their personal goals, their advice will usually be personal advice.

Not only does this depend on whether the adviser has considered the client’s individual circumstances when providing the advice, it also depends on what relationship the client believes is in play. 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.

Statements of Advice aren’t required when general advice is given. Instead, a ‘general advice warning’ must be provided. Full service financial planners and their authorising licensees are unlikely to rely on the exemption, because they know the obligation to provide an SoA is a core part of the AFS regime and they‘re unlikely to want to run the risk of breaching it.

For this reason, businesses who want to provide general advice need to have a detailed understanding of when advice is considered general and when it is considered personal.

The key is to design the sales process carefully, to ensure that most client questions and scenarios can be addressed without giving opinions or making recommendations that take the client’s individual circumstances into account. Staff need to be carefully trained on how not to provide personal advice.

This is not new. Banks and call centres extensively provide general advice when servicing clients who need a product to fulfill a specific need. It also happens in other industries which offer simple life and general insurance products.

The Fold has helped over 50 businesses develop scaled general and no advice models over the past 11 years. Click here for more information.

If you have any concerns about any of these issues, please contact us.

Author: Claire Wivell Plater

March 2014

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