The Ins and Outs of Financial Advice – How We Can Help
The Commercial and Business Law team at Berrigan Doube Lawyers provides expert legal advice to the leading Financial Service providers in New South Wales. We also act for individual clients with an understanding of the legal complications which may arise from the provision of personal financial advice and the reliance on such advice.
Generally, financial advice may be sought from brokers, planners and other financial advisers for questions relating to superannuation, shares, insurance as well as many basic banking products. By law, the only people permitted to give personal financial advice are those who work for, or represent, a financial advisory business that holds an Australian financial services (AFS) licence. All financial product advice is either personal advice or general advice. The definition of personal advice is critical, since it triggers various legal obligations. Far less onerous obligations apply to general advice.
In determining whether financial product advice is ‘personal advice’, the advice will be ‘personal’ if it is given or directed to a person ‘in circumstances where:
- the provider of the advice has considered one or more of the person’s objectives, financial situation and needs; or
- a reasonable person might expect the provider to have considered one or more of those matters.
In addition to the above, 'personal advice' may encompass mere statements of opinion where the provision of the opinion by the providing entity has been influenced by a consideration of the client's objectives, financial situation or needs.
In providing personal financial advice, advisers should not make false or misleading statements in relation to financial products to induce a person to deal in financial products. A breach of this rule can result in harsh civil and criminal penalties for the financial advisor, even though they may have not had the intention to mislead or deceive.
When providing personal advice about financial products to a retail client, the advisor must:
- Give the client a Financial Services Guide (FSG) before providing the advice. The FSG gives the individual the key information he or she will need to help him or her decide if they wish to use their services such as their fees, how to make a complaint and the business’ insurance or other compensation arrangements;
- Ensure the advice is appropriate to the client having regard to consideration of the client's personal circumstances and make reasonable inquiries of the client’s financial status before proceeding;
- Ensure that their statements of advice are not motivated by a desire to maintain clients, increase trading volume or cause the value of a particular security to increase;
- Give the client a Statement of Advice (SOA) as required by the Corporations Act 2001 (Cth) unless this is not required. If on the other hand, the financial advice was ‘general’, then a warning must be given to the client under s. 766B(4) of the Corporations Act 2001 (Cth). The Purpose of a SOA is to help the client check that the information possessed by the providing entity about the client's relevant personal circumstances is complete and correct, and to understand the advice.
Our clients tend to be unsure about the type of advice that they give or receive. Section 766B of the Corporations Act 2001 (Cth) stipulates that the advice will be regarded as financial product advice if it is intended to influence a person or persons in making a decision on a particular financial product or class of financial products. However, there are various exemptions to this rule and a sound determination will be based on an assessment of the client’s particular circumstances.
In choosing Berrigan Doube Lawyers, you can be assured that a dedicated and skilled team of lawyers will be protecting your interests. Whether you are an Australian Financial Service Provider or an individual client who has received financial advice, our team will ensure that your business meets its prudential and regulatory challenges in an ever-changing regulatory environment.
Please be advised that this article is not intended to be legal advice. All advice Berrigan Doube Lawyers provides is tailored to our client’s needs and therefore our advice is on a case-by-case basis after having consideration of our client’s circumstances.
Should you have any questions in relation to this article, please feel free to contact us.