Unit 4: The Concept of Advice

Question 1

What is a broad definition of a financial product, as contained in the Corporations Act?

Answer 1

A facility through which, or through the acquisition of which, a person does one or more of the following:

a. Makes financial investment
b. Manages financial risk
c. Makes non-cash payments

Question 2

What is factual information, as defined by RG 244.24?

Answer 2

“Objectively ascertainable information, the truth or accuracy of which cannot reasonably be questioned”

Question 3

Under the Corporations Act, do you need an AFSL license to provide factual information?

Answer 3

No

Question 4

Under the Corporations Act, do you need an AFSL license to provide financial product advice (beyond factual information)?

Answer 4

Yes

Question 5

Under the Corporations Act, when is someone considered to be providing advice on a financial product?

Answer 5

If they make “a recommendation or a statement of opinion, or a report of either of those things, that:

a. Is intended to influence a person or persons in making a financial decision in relation to a particular financial product or class of financial products; or

b. Could reasonably be regarded as being intended to have such influence.”

Question 6

What are the two types of financial product advice?

Answer 6

1. Personal advice (considering customer needs or objectives)
2. General advice (all other types of advice)

Question 7

Under the Corporations Act, do customers need to be warned when receiving general advice?

Answer 7

Yes, they must be told that the advice does not take their needs, objectives, or situation into account, and the customer needs to consider what is best for themselves.

Question 8

What is hawking?

Answer 8

Selling financial products based on unsolicited contact with the customer. It is illegal.

Question 9

In regards to hawking, if a customer consents to contact, how long is that consent valid for?

Answer 9

6 weeks, but the customer can change this at any time. Customer can also specify how they wish to be contacted.

Question 10

What are two disclosure documents that must be provided to retail clients?

Answer 10

1. Financial Services Guide (FSG) - contains info help customers understand services, including fees and charges, and any commission or benefits that may be received.
2. Product Disclosure Statement (PDS) - must be provided to clients prior to their purchasing of a financial product. Must include enough info to allow customers to decide whether a financial product is suitable for them, including:
   - summary of key features
   - any risks to customer
   - info on complaint resolution
   - cool-off info
   - fees and costs, and application of these