ASIC has released a new report saying consumers are confusing different types of financial advice.
New research by the regulator shows consumers are having a hard time telling the difference between 'general' and 'personal' advice, putting them at risk of making poor financial decisions.
ASIC deputy chair Karen Chester said: "This disturbing gap in understanding whether the advice they are getting is personal or not means many consumers are under the false premise their interests are being prioritised, when no such protection exists."
"The survey not only revealed consumers are not familiar with the concepts of general and personal advice, but only 53% of those surveyed correctly identified 'general' advice.
"And even when provided the general advice warning, nearly 40% of those surveyed wrongly believed the adviser had an obligation to take their personal circumstances into account."
ASIC says that the report highlights the importance of consumer awareness, as the Future of Financial Advice protections only apply when personal advice is provided.
The FoFA protections include obligations for advisers to act in their clients best interests and to provide advice that is appropriate to their client's personal circumstances. These same obligations do not exist when general advice is given.
Chester said: "Nearly 40% of those surveyed were unaware that advisers were not required by law to act in their clients' best interests."
ASIC indicated it expects the need for financial advice to grow due to the aging population in Australia.
Chester said: "ASIC is seeing increased sales of complex financial products under general advice models - so not tailored to personal circumstances - leaving many consumers, especially retirees, exposed to the potential risk of financial loss."
"And whilst the Financial Services Royal Commission, and the Government's response, dealt with the most egregious risks of hawking of complex financial products, consumer confusion about what is personal and general advice needs to be addressed."
The report was commissioned by ASIC and undertaken by an independent research agency, Whereto Research. The research used hypothetical scenarios where consumers were getting financial advice to test whether people could tell the difference between general and personal advice.
This is part of ASIC's ongoing research into consumer experiences within the financial services industry, and specifically the financial advice sector. It has indicated that it plans to conduct further research.