Many advisers struggling to pass the adviser exam have asked me what I think of the option of transferring to a general advice licensee.

This is a way of circumventing the need to pass the FASEA adviser exam because the Code of Ethics only applies to personal advice provided to retail clients.  The Code doesn’t apply to general advice.

My advice is to think it through!  ASIC will be closely watching this trend.

One of the positives to come out of the adviser exam is that it has forced advisers to come to grips with the advice rules, and in particular, the difference between personal and general advice.

On 3rd February 2021, in an ASIC case against Westpac subsidiaries, the High Court of Australia clarified the difference between general and personal advice.

One of the main issues highlighted was the immense difficulties in providing one-to-one general advice to an existing personal advice client where their individual objectives and other relevant circumstances have already been elicited.

I suppose the adviser argument in this instance would be that financial product information is forwarded to the client; making it clear to the client that it is general advice rather than personal advice; and the client would then be expected to follow the steps outlined in the accompanying general advice warning to make up their own mind to buy the product, or not.   By doing so, it would be argued that none of the client’s objectives, financial situation or needs were considered.

I see difficulties mounting this argument, given the personal advice history, the high level of expectation and trust that clients can place on their advisers; and the universal lack of understanding of the difference between personal and general advice.  It has been my experience that a significant proportion of advisers don’t understand the difference.

It is likely that ASIC’s argument, as it was in the Westpac case, will be that because the adviser already has the client’s objectives, financial situation and needs, “the reasonable person might expect the person giving or directing the advice to have considered one or more of these matters”.   In my opinion, this ‘reasonable person expectation’ test which forms the second part of the personal advice definition will prove to be potent in general advice cases.  

And then there’s the matter of the adviser’s best interest duty.  Deliberately providing general advice to avoid the personal advice disclosure and conduct obligations; or providing general advice where client relevant circumstances clearly warrant the provision of personal advice are both likely breaches of the best interest duty and the Code of Ethics.

My view is it will be much easier to stare down the adviser exam and continue providing personal advice than it will be to stare down ASIC.

Reference: 21-013MR ASIC successful against Westpac subsidiaries’ appeal to High Court