Is it possible to give general advice if you have details of that client’s personal financial situation, needs and/or objectives?

[Grant Holley]

The Corporations Act says that financial product advice will be personal advice if the adviser has considered one or more of the person’s financial situation, needs or objectives.   The word ‘considered’ is an important word.  It requires something more than ‘having’ the information.

 

The thing to remember though, is that an objective test is applied to determine whether the adviser has ‘considered’ one or more of those things.  The fact that the adviser has the information, and may have provided personal advice in the past, may lead strongly to the conclusion that personal advice is being given.

 

So, if you are expressing an opinion or making a recommendation, you have the client’s information but you are not “considering” it, be sure to let them know that and to give the general advice warning.  Document this, in case you ever have to prove it.

 

Example:  John, the client, calls Jill, his stockbroker.  Jill has previously provided personal advice to John in relation to his portfolio.

 

“Hi Jill.  I’ve been looking around at stocks and I want to know your view of BHP”.

 

“Hi John.  We have BHP as a buy at the moment.  Although the price of iron ore has been dropping, BHP’s costs of production are quite low and the company is engaged in a restructure which should see further costs cut.  The house view is that the stock is reasonable value at the current price.”

 

In this example, Jill has given financial product advice because she’s expressed an opinion or made a recommendation.  However, it is not personal advice because it is clear she hasn’t taken into account John’s personal circumstances in expressing the ‘house view’.  It is therefore general advice and she must give the general advice warning.

 

“Of course, John, I haven’t considered whether it’s right for your portfolio and you’ll need to consider whether it’s right for you.  If you want advice on that, I’ll need to look at your portfolio and ask you some more questions.”

 

Don’t forget to always make a file note!

 

Author: Grant Holley

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