The outcome of the High Court decision on general advice will have an interesting and simplifying effect on the design and distribution obligations coming into effect later this year, according to a lawyer.
Speaking at a Financial Services Council (FSC) event King & Wood Mallesons partner Nathan Hodge said the DDO imposes a lot more implications for product providers and financial advisers when distributed under a general advice model compared to a personal advice model.
"For example, one of the requirements under DDO is to take reasonable steps to distribute a product to its target market. That obligation only applies to a general advice context and not a personal advice context," he said.
"The High Court case could actually mean there are less situation where the full range of DDO obligations apply because there is more situations where personal advice is being provided."
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The discussion comes after the High Court affirmed the Federal Court's 2019 decision that two Westpac subsidiaries provided unlicensed personal financial advice.
"The High Court has provided clarity concerning the differences between personal advice and general advice. Westpac were actively conducting a sales campaign aimed at rolling customers into Westpac products under the banner of general advice," ASIC commissioner Danielle Press said.
"By clarifying the distinction between tailored, quality, personal advice in the customer's interest, and general advice given via a sales campaign, today's judgment will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients."
The industry is already gearing up for DDO to come into effect and has developed solutions to assist advisers in meeting the obligations.
Morningstar today announced a solution that will allow Target Market Determination (TMD) data to be backed by the 8300-unit prices daily, 4000 portfolios monthly and hundreds of PDS documents it collects and processes.
Iress will also released a DDO solution, with three key features: TMD storage, a messaging solution to facilitate distributor and issuer contact and information for licensees and advisers by providing TMDs to them and their clients.
Further to this, Hodge said the financial services industry is grappling with the availability of limited or scaled advice compared to holistic advice and wanting to be able to provider a cheaper service but the compliance costs are too high.
"The industry has a cost and it's starting to increase which has a flow on effect to the consumer," Hodge said.
Pollinate head of society Pamela Souvlis shared similar sentiments and said consumers are not valuing a Statement of Advice and get a sense of trust from their advisers in other ways.
"Consumers don't see it as being anything more than the fine print. They don't necessarily relate to huge amounts of documentation with trust - that's the misconception," she said.
"There are probably better ways that consumers can get a sense of trust and other than a whole lot of documentation that frankly is hard to read and unclear."