Personal vs general financial product advice under section 766B

Definition of financial product advice

Section 766B of the Corporations Act defines financial product advice as a recommendation or statement of opinion intended (or that could reasonably be regarded as intended) to influence a person's decision about a financial product. Providing this advice constitutes a 'financial service' and generally requires an Australian Financial Services Licence [AFSL vs ACL vs Authorised Representative].

Factual information, which is not a recommendation or opinion, does not fall under the definition of financial product advice. This distinction is crucial in determining whether the requirements of section 766B apply.

The advice is categorised as either personal or general. Personal advice exists when the provider has considered, or a reasonable person might expect them to have considered, one or more of the client’s objectives, financial situation or needs.

Personal advice triggers

Personal advice is triggered when an adviser considers one or more objectives, financial situation, or needs of a client. The High Court’s decision in *Westpac Banking Corporation v ASIC* confirmed that the threshold for personal advice is relatively low. This means that even a seemingly broad recommendation can still be considered personal advice if it is based on a consideration of a client’s individual circumstances.

Advice can still be considered personal even when delivered to a group of customers. This is the case if the provider considered a shared characteristic amongst those customers. The key factor is whether the provider factored a client’s specific attributes into the advice given.

When personal advice is provided, certain obligations apply. These include a best interests duty, the obligation to provide appropriate advice, and a priority of client interests. Furthermore, a Statement of Advice (SOA) must be provided unless an exemption exists, and the provider must be a registered ‘relevant provider’ meeting specified education and ethics standards.

General advice rules

General advice is defined as financial product advice that is not personal advice. This distinction is important because general advice operates under a different set of regulatory requirements than personal advice. It does not require the provision of a Statement of Advice (SOA) and does not trigger the best interests duty that applies to personal advice.

A mandatory warning must be provided before or when general advice is given. This warning must be in writing or delivered orally, but must convey the same essential meaning. ASIC RG 244 advertising financial products provides guidance on how to ensure advice remains within the boundaries of general advice.

The regulatory landscape surrounding general advice is currently subject to change. Government proposals, including those stemming from the Quality of Advice Review and Delivering Better Financial Outcomes reforms, are considering adjustments to the definition of general advice, potentially introducing a new category of ‘simple advice’.

Common misclassification risks

Misclassifying advice as general when it is personal presents significant compliance risks. Customer-facing scripts that attempt to ascertain a customer’s needs, such as retirement timing or the presence of dependants, are particularly vulnerable to being reclassified as personal advice. This is because such inquiries move beyond providing information and towards tailoring a solution to an individual’s circumstances. AFSL Responsible Managers RG 105 highlights the responsibilities of those overseeing advice delivery.

Robo-advice and digital tools are also common areas of misclassification risk. While calculators that simply project outcomes without recommending a financial product may not constitute advice, any tool that asks about objectives or a customer’s financial situation will almost invariably provide personal advice once a recommendation is given. This is due to the inherent tailoring of the output based on the information provided.

ASIC’s enforcement actions, such as the Westpac Securities case, demonstrate the potential consequences of incorrectly classifying advice. Where ‘general advice’ calls involve consideration of client needs, the classification will be challenged. Authorised representatives can be held liable for breaches of personal advice obligations, and the AFSL holder is ultimately responsible for the actions of their representatives.