ASIC’s test, in two parts
ASIC’s Regulatory Guide 36 says a recommendation or a statement of opinion, or a report of either, is financial product advice when it is meant to influence a decision about one financial product, or a class of them (or could reasonably be regarded that way), and no exemption applies.
The guide adds that the overall impression and the surrounding circumstances count, including how the person giving the information is paid. In ASIC’s words, a communication “is more likely to be financial product advice if its provider (or associate) is remunerated by the client or stands to benefit depending on the decisions made by a client”.
AskHow is the presenter paid, and does anyone earn more if I choose one way?
Four of ASIC’s own examples
Table 1 of the guide sets the same setting twice: once as factual information, then with one sentence of opinion added. Here are four of them, shortened.
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A seminar on investing
Likely factual information
The presenter gives a general description of the kinds of financial products available for investing.
Likely financial product advice
The presenter says that when the share market is volatile, property trusts are more desirable than shares because their returns are steadier. ASIC calls that a matter of opinion that could reasonably be seen as meant to influence the audience.
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Salary sacrifice into super
Likely factual information
A fund representative explains what the term ‘salary sacrifice arrangement’ is generally understood to mean.
Likely financial product advice
The representative adds a judgement, such as calling salary sacrifice more tax effective than negative gearing.
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A spare $10,000 at the bank
Likely factual information
An officer gives the interest rates on a savings account and on a term deposit.
Likely financial product advice
The officer also mentions an ‘attractive special rate’ on a six-month term deposit, which is a matter of opinion.
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A home loan enquiry
Likely factual information
A customer asking about a mortgage also asks about income protection insurance, and is told the institution offers it.
Likely financial product advice
The representative suggests taking it out because it can give ‘peace of mind’ about the repayments.
Where property fits
The house or the land itself sits outside most of this. Moneysmart lists direct investment in real estate among the investments ASIC does not regulate, and says many such investments carry higher risk and that you are not protected if things go wrong.
AskIs the property the whole story, or is my super or a loan part of the plan?
Property talk usually reaches the regulated ground through three doors.
| The topic | What the official source says | The register |
|---|---|---|
| Using super through an SMSF | SMSF advice may only come from the holder of an Australian financial services (AFS) licence, or from someone an AFS licensee has authorised. Moneysmart adds that property developers must hold an AFS licence if they give financial advice, including about setting up an SMSF. | Financial advisers register on Moneysmart |
| Borrowing to buy | Moneysmart tells borrowers to make sure a mortgage broker has a licence to give credit advice, or is a representative of a licensee. | ASIC’s professional registers: credit licensee or credit representative |
| Investments, super and life insurance | Advisers who give personal advice on investments, superannuation and life insurance must appear on the financial advisers register; Moneysmart says one who is not on it cannot legally give that personal advice. | Financial advisers register |
When it is advice, which kind
Moneysmart separates three things. Financial information is facts about products, services and strategies, and needs no licence. General advice is a recommendation or opinion about a financial product that does not take your circumstances into account. Personal advice is tailored to them, and its providers must act in your best interest.
Moneysmart says a provider of general advice must give a warning: that the advice does not consider your own objectives, financial situation or needs; a prompt to think about whether it suits you before acting; and, in some cases, a Product Disclosure Statement if the advice is about a financial product.
AskWas I given the general advice warning, and was anything I said about my own money used?
Moneysmart also says you may be getting general advice if you were not asked about your finances, needs and objectives, or if the person will not recommend a specific product for you.
Moneysmart lists free sources of factual material on money and investing, including the Services Australia Financial Information Service.
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