Why Levy changed her mind on general advice

Speaking at the FPA Professionals Congress in November last year, the lead of the Quality of Advice Review (QAR) admitted to second-guessing some of her recommendations, including her views on general advice.

Namely, in her proposals paper, Ms Levy recommended that the regime should no longer regulate general advice as a financial service; however, following a considerable backlash, she was forced to review her thoughts.

“I was thinking it could move out of the regulated regime; I know people have raised significant concerns about that, and so I am not going to proceed with the recommendation,” Ms Levy said at the time.

In her final QAR report, published by the government on Wednesday, Ms Levy recommended that “general advice should continue to be a financial service, but the requirement for a general advice warning to accompany general advice should be removed”.

“I have been persuaded that there is merit in retaining the requirement for providers of general advice to hold an AFS licence or to be the representative of an AFS licensee, and so I have not recommended its removal from the regulatory framework. I accept that the obligation to hold an AFS licence is a regulatory barrier to mis-selling,” Ms Levy said.

She explained that by expanding the definition of personal advice, more financial product advice would be brought into the personal advice definition, but conceded that not all financial product advice would be converted into personal advice.

“There will still be circumstances in which a person will be able to provide general advice to a client,” she said.

This, she clarified, would primarily be where they do not talk to the client on a one-to-one basis and where they do not hold information about the client.

“This will be general advice,” she declared, adding that widely broadcasted advertising of financial products will continue to be general advice, in addition to research reports, seminars and newsletters that are not individualised.

As part of her general advice recommendation, Ms Levy also suggested removing the obligation to provide a general advice warning.

“It seems clear not only that a general advice warning does not serve the intended purpose — consumers are neither warned nor likely to in fact consider the appropriateness of the advice to their own circumstances — but it can be harmful,” she said.

“In saying this, there will be cases where general recommendations about financial products may require warnings about its limitations. However, this is a matter that should be considered on a case-by-case basis, and the law should not prescribe the terms of any warning,” Ms Levy concluded.