Getting financial advice? What your adviser needs to provide (2024)

On this page

• Understanding the different types of financial advice
• Documents you must receive
• Conduct obligations for your financial adviser
• Using simple, clear language

Documents you must receive

In Australia, giving financial advice is highly regulated. It’s largely governed by the Corporations Act 2001(which requires anyone providing financial product advice to retail clients to comply with certain conduct and disclosure obligations) and is regulated by the Australian Securities & Investments Commission (ASIC).

These obligations are designed to ensure you receive good quality advice and can make informed decisions about the advice. If you receive personal advice, your adviser must give you:

1. Statement of Advice (SOA)

An SOA is a written record of financial advice and is designed to explain what advice you’regetting.

Every SOA is different, but it should contain information about:

• Your risk profile
• The financial advice you’re receiving and the basis for making the recommendations
• Any risks involved with the recommended investment products and strategies
• How the recommended products align with your personal risk profile
• Pros and cons of following the recommendations, including any benefits you may lose if you switch products
• How the recommended products will make money and how they will help you achieve your financial goals
• Reasons for choosing one product over another, or for suggesting you switch providers or super fund
• Any entry, ongoing and exit fees or loss of access (such as insurance cover or product discounts) if you switch products
• Name, contact details and AFS licence number of the providing entity
• Information about the remuneration, commission and other benefits your adviser will receive that might influence the advice
• Details of any interests or relationship that might influence the advice.

An SOA must clearly disclose if the product recommendations in it are based only on products from the AFS licensee’s approved product list (APL).The adviser can only recommend this type of product to you if a reasonable adviser would besatisfied it was in your interests.

The adviser must provide you with an SOA at the same time or as soon as possible after they provide personal advice.

If you’re an existing client, your adviser may provide you with a Record of Advice (ROA)which is a simple record confirming the advice provided. This is shorter and less formal than an SOA and usuallysimply confirms changes or implementation of advice.

2. Financial Services Guide (FSG)

Your financial adviser is also required to provide you with an FSG when they give you financial product advice. This document is designed to disclose the financial service you’re receiving.

You must receive the FSG early enough that you have sufficient time to consider the information in it beforeyou decide whether or not to use the financial services of the adviser and AFS licensee.

The FSGmust include:

• Who will provide the financial service
• Name, contact details and AFS licence number of the providing entity and authorised representative
• Financial services the entity is authorised to provide
• How the adviser will be paid for their advice
• Remuneration, commission and other benefits the adviser and AFS licensee will receive(including client fees, any form of commissionfrom product issuers and licenseesand any ‘soft’ dollar benefits)
• Any relationships that might influence the advicebeing provided
• Dispute resolution procedures the AFS licensee has in place.

3. Product Disclosure Statement (PDS)

Another key disclosure document you must receive before you invest in any financial product recommended by your adviser is a PDS. These documents are designed to provide you with all the key details aboutthe financial product you’re buying.

ASIC sets rules for what information must be included in a PDS. The document is prepared by the issuer or seller of a financial product (such as the insurer or fund manager) and must contain sufficient information so you can make an informed decision about whether to purchase it.

APDS must include information onthe product’s:

• Key features, characteristicsand benefits
• Fees
• Risks
• Commissions payable
• Complaints handling procedure.

These disclosures help make it easier for you to compare similar financial products and to understand the different options available to you(such asdifferent ways you can pay fees).

Conduct obligations for your financial adviser

As well as giving you the required documents, your adviser must follow several conduct obligationsset by ASIC. Advisers are required to:

1. Act in your best interests

When a financial adviser gives personal advice, they must comply with their best interests dutyand other related obligations. When providing personal advice, your adviser must prioritise your interestsover their own.

These best interest dutiesare designed to ensure you receive financial advicemeetingyourobjectives, financial situation and needs.

Under these rules, if you follow your adviser’s advice it’s likely to leave you in a better position. It doesn’t mean, however, thatthe advice will not result in you losing money (such as if investment markets drop).

2. Provide you with appropriate personal advice

Generally, ASIC considers appropriate personal advice has been provided if your adviser has compliedwith their best interests duty to you and the advice is fit for its purpose.

3. Warn you if their advice is based on incomplete or inaccurate information

An adviser cannot provide appropriate financial advice if they don’t understand or know allyour financial circ*mstances and goals.

4. Prioritise your interests

Your adviser must prioritise yourinterests if there is a conflict between your interests and the interests of the adviser, AFS licensee or any other related parties.

5. Make reasonable inquires

Your adviser must work with you to obtain complete and accurate information about all your financial circ*mstances,as this information is used to create your personalised advice statement.

Using simple, clear language

ASIC requires any financial advice given to you must provide clear, concise and effective disclosure.

This means when you receive yourSOA, it should bein easy-to-understand language. Thetables and graphs in the SOA must beclearly explained, so you can understand them before making a decision.

In addition, the language throughoutthe SOA must be accurate and consistent and must include a clear statement on how your adviser’s commission will be calculated.