Giving financial product advice

You must  be authorised under  an Australian financial services (AFS) licence to provide financial product advice.

Financial product advice and dealing

To determine your obligations under the licensing provisions you first need to consider whether you provide a ‘financial service’.

You provide a financial service if (among other things) you:

  • ‘provide financial product advice’; or
  • ‘deal in a financial product’.

Arranging for a person to engage in certain conduct, such as applying for or acquiring a financial product, will constitute dealing unless it amounts to providing financial product advice or is exempt.

If you provide a financial service you need to consider whether you must hold an Australian financial services (AFS) licence or hold an authorisation from a licensee.

See RG 36 Financial product advice and dealing

Giving information, general advice and scaled advice

Regulatory Guide 244 explains:

  • the differences between giving factual information, general advice and personal advice; and
  • how to meet the advice obligations in Ch 7 of the Corporations Act 2001, including the best interests duty and related obligations, when giving ‘scaled’ advice (i.e. personal advice that is limited in scope).

Our guidance aims to facilitate access for retail clients to good quality information and advice about all financial products.

See RG 244 Giving information, general advice and scaled advice

Example statement of advice

Our example SOA is based on a hypothetical and limited financial advice scenario developed in consultation with stakeholders. The financial advice scenario deals with personal advice about investing in managed funds and basic deposit products and personal insurance, given to a new client (i.e. not in an ongoing advisory relationship).

The advice we developed is one of a number of possible outcomes. The purpose of this example SOA is to illustrate clear, concise and effective disclosure and not to illustrate the giving of suitable or best advice.

See RG 90 Example statement of advice

Conflicted remuneration

RG 246 sets out our guidance on complying with the provisions on conflicted remuneration and other banned remuneration and how we will administer them.

The provisions apply to financial product advice given to retail clients.

See RG 246 Conflicted remuneration

Product disclosure statements

Under the Corporations Act, a retail client may receive a number of disclosure documents before acquiring a financial product.

ASIC has published some Good Disclosure Principles to help product issuers and other professionals in preparing a PDS. They will also be useful when preparing other disclosure documents for retail clients.

The Corporations Act facilitates the use of shorter, simpler PDSs by allowing Short-Form PDSs and incorporation by reference, and by applying a tailored disclosure regime to some products.

ASIC has procedures in place to monitor and assess PDSs once issued.

See RG 168 Disclosure: Product Disclosure Statements (and other disclosure obligations)  also RG219, RG221 or Product disclosure

Conduct and disclosure

Under Pt 7.7 of the Corporations Act, providing entities that provide financial product advice to retail clients must prepare and provide a Financial Services Guide (FSG), give a general advice warning when giving general advice, and prepare and provide a Statement of Advice (SOA) when giving personal advice.

Under Div 2 of Pt 7.7A, advice providers providing personal advice to retail clients must comply with the ‘best interests duty’ and related obligations, which have been introduced as part of the Government’s Future of Financial Advice (FOFA) reform package to improve the quality of financial advice received by retail clients.

See RG 175 Licensing - Financial product advisers - conduct and disclosure (RG 175) also RG 221, INFO 99, CO10/1219

SMSF auditors

The following information sheets provide guidance for Australian financial services (AFS) licensees (including limited AFS licensees) and their representatives who provide personal advice to retail clients about self-managed superannuation funds (SMSFs):

  • Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks (INFO 205)
  • Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206)

You can also see Information Sheet 182 Super switching advice - complying with your obligations (INFO 182) for general information and compliance tips for financial advisers who provide super switching advice.

Related links

What's new

Fees for no service

Asic Logo Special Podcast 60X40

2 November 2016

Joanna Bird, Senior Executive Leader, Financial Advisers joins the podcast to discuss ASIC's recent Report 499, Financial advice: fees for no service.

Listen to the podcast 

 

Last updated: 20/10/2014 12:00