When giving advice about a financial product, the type of advice you are giving is important. Financial product advice is regulated under the Corporations Act 2001 (Cth) (Corporations Act) and is defined as any recommendation or statement of opinion that is, or could reasonably be regarded as being, intended to influence someone in making a decision about a financial product. Financial product advice generally involves an evaluation, recommendation or opinion about a financial product. This is different from simply giving factual information, which refers to objectively ascertainable information whose truth or accuracy cannot reasonably be questioned. Unlike the provision of factual information, giving financial product advice requires an Australian Financial Services Licence (AFSL).
Under the Corporations Act, all financial product advice is either ‘personal advice’ or ‘general advice’. Unlike general advice, personal advice is tailored to a client’s situation and circumstances. Those that give personal advice therefore require an additional authorisation to do so under their AFSL.
Personal advice is where the person giving the advice has considered at least one aspect of the client’s objectives, financial situation or needs, or a reasonable person might expect the person giving the advice to have considered these factors. It is important to note that even if you do not in fact consider these matters when giving the advice, it will nevertheless be personal advice if it is given in circumstances where the client might reasonably expect you to have done so. This can occur where you offer to provide personal advice before the advice is given, or you request information about the client’s circumstances. In these situations, the client might expect the advice to be tailored to their objectives, financial situation or needs. Regardless of whether you in fact considered these matters, your advice would likely be categorised as personal advice in such a scenario.
All financial product advice falling outside the definition of personal advice is considered general advice under the Corporations Act. If you intend to only give general advice, it is important to make this clear to the client from the outset, for example by using appropriate disclaimers. AFSL holders that provide personal advice despite only having the general advice authorisation on their licence face potentially serious breaches and legal consequences.
King Irving can help you determine which AFSL authorisations you require and draft applications to obtain or vary your licence.
For more information, please contact us.