Are you in danger of giving financial advice?

Following on from Hobo-Jo's post; Are you in danger of giving financial advice?

ASIC monitors this, but then again they are the same group that has copped flack from any effective policing of some of the larger groups that have failed dismally, (think HIH, Storm Financial, Fincorp, Timbercorp, Great Southern, Westpoint, Babcock & Brown).

What if you tell your Grandmother about the benefits of on-line savings accounts?

Whats an employer to do when telling new employee's of their superannuation fund options re: Superchoice?

How about giving your kids financial advice?

I tried to be smart and give an example such as Share ABC, then look what happened a stock listed using those letters, now I have to say Share XYZ... until a share lists using those letters :D

If you receive bad advice from a financial planner can you recoup lossses (don't think so) and many a super fund will still hit you up for management fee's in times of negative performance... "we lost you $20k this year, sorry, by the way, here's our 6% management fee, please remember you need to look long term...look to the left at my pretty chart of the index consisting of constantly changing stocks...see it always go's up!"

Like signing your tax return, you're on your own once you hand your money over to your chosen professional i.e. you sign a disclaimer saying you understood everything they told you, including the don't worry about that verbal nuances and you wont hold them liable

Do you have to be in the business of providing financial advice, to be seen as giving "finacial advice" rather than an "opinion" or can we sue every Tom, Dick and Harry for bad advice and stock market tips given after a few rums at a BBQ?

ASIC struggles with blogs, bulletin boards link

Securities regulator ASIC has released a consultation paper that aims to clarify the grey areas blurring what constitutes financial advice on a blog or bulletin board.

"It's not designed that way. To expect ASIC to come in and safeguard every mum and dad that goes into an investment is unrealistic."

Chairman of ASIC, Tony D'Aloisio

food for thought or discussion?
 
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I'm all for protecting the SS forum and community, but its hard nowdays to know when you're stepping into the grey when commiting to writing...

Then you have the arena outside of SS and verbal discussions therein
 
The critical part of any 'financial advice' is the payment of the advice. If there is payment, then there is a presumption of reliance on that advice, rather than it just being the 'opinion' of whoever made the comment.
 

Sim

Administrator
Navra Financial Services got told by ASIC to shut down their customer forums. They were concerned that some clients may construe general comments made in there to other people, as advice they could personally act upon.

Personally I think that is an over-reaction and removes all responsibility from the individuals who were stupid enough to act upon something that was written in a general discussion forum and not in a personal consultation - although I acknowledge that in some circumstances it can be less clear-cut than this for a site like NFS was operating in comparison to a generic site like Somersoft.
 
Personally I think that is an over-reaction and removes all responsibility from the individuals who were stupid enough to act upon something........

The human race of today sadly.

eg; "Caution; contents are hot"

and so forth.

I'm all for protecting the SS forum and community, but its hard nowdays to know when you're stepping into the grey when committing to writing...
Just put one of those lame exclaimers at the bottom of your posts as your sig; "Opinion only; don't construe these comments as professional advice" and so on.
 

Sim

Administrator
Just put one of those lame exclaimers at the bottom of your posts as your sig; "Opinion only; don't construe these comments as professional advice" and so on.

If ASIC had their way, the forums would be hidden from the public (and search engines!!) and you'd need to read a full disclaimer before you read any page on the site! :eek:
 
The critical part of any 'financial advice' is the payment of the advice. If there is payment, then there is a presumption of reliance on that advice, rather than it just being the 'opinion' of whoever made the comment.
I think it should extend further than that to any individuals who are on a forum in an official capacity to represent their business (e.g. have signatures tied to a business that offers financial advice). I don't think it is necessary for an exchange of payment to occur to presume that the advice will be relied on.

For example if someone poses questions and several individuals (representing financial advisory businesses) chime in to provide advice then I would presume that many users would rely on what was said (especially in the case where multiple respondents agree on one conclusion).

From redwings linked article:
If a person is providing financial product advice through an IDS (whether as the IDS operator or otherwise); and the advice forms part of a financial services business, that person should, like any other provider of financial product advice, hold an AFS licence and comply with the relevant disclosure and conduct requirements of the Corporations Act.

Sim's suggestion that they rely on users be self policing (quoted from another thread):
We rely on our members to be "self-policing" to some degree and alert us to things which need attention.
Is clearly not what ASIC would suggest should be the case. This from the article again:
Blog and bulletin board operators "must be aware of and control what is occurring on the IDS, including through having systems and processes in place to review and keep records of postings and be aware and keep records of the identity of authors of postings," the report says.
This puts the responsibility back on the operator of the board, not the users to review content and deem whether appropriate.

If we have the long down turn in property prices that I am expecting I can't help but wonder if some of those burned from advice provided on this forum might come back to bite....
 
How about this excerpt from the Treasury with regards to a public forum?

Financial Services Regulation (FSR)

1.18 Exemption from the requirement to provide a Financial Services Guide


The Corporations Act states that a providing entity does not have to give a client a Financial Services Guide in situations where the financial service is general advice provided in a public forum. However, under the Corporations Regulations, a public forum is defined as an event which ‘any person is permitted to attend’

There's also an interesting paper here on IDS (Internet Discussion Sites) by ASIC Regulatory Guide 162

ASIC's explanation of its internet discussion site policy:

Our policy is a balance between three public policy
concerns:

(a) the value in people being able to communicate freely with one
another;
(b) the value in permitting an inexpensive and easy way for consumers
to better inform themselves about securities and developments in
securities markets; and
(c) the need to promote consumer protection and market integrity by
minimising the risk that IDS may be used for market manipulation,
insider trading and other abuses, or allow people to take advantage
of consumers.
 
If we have the long down turn in property prices that I am expecting I can't help but wonder if some of those burned from advice provided on this forum might come back to bite....

Nah; none of us here are from the "victim mentality"...right?
 
Places like HotCopper are monitored because they only talk about 'financial products' under the Corps Act like shares, options etc. Properties, on the other hand, are not 'financial products' and hence do not fall under this scope.
 
I'm more worried about accidently giving 'legal' advice. Whish is why my advice around legalities is nearly always "go and talk to a lawyer".....
 
Places like HotCopper are monitored because they only talk about 'financial products' under the Corps Act like shares, options etc. Properties, on the other hand, are not 'financial products' and hence do not fall under this scope.

Unfortuantely credit advice (advice on home loans) is now regulated, so some people could be considered to be in breach when talking about about home loans and other lending products.
 
I think he'd be unlicensed today, but you can't go past -

Quo magis in dubiis hominem spectare periclis convenit adversisque in rebus noscere qui sit; nam verae voces tum demum pectore ab imo eliciuntur et eripitur persona, manet res. So it is more useful to watch a man in times of peril, and in adversity to discern what kind of man he is; for then at last words of truth are drawn from the depths of his heart, and the mask is torn off, reality remains.
Book III, line 55-8. Lucretius
 
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