General vs personal advice

SAFAA’s recent CPD webinar on General V Personal advice provided a good opportunity for attendees to ask questions about the grey areas between general and personal advice and tease out the issues raised in the Westpac case High Court decision.

Presented by Paul Derham, Partner, Holley Nethercote, the session went through the various definitions of what constitutes:

  • financial product advice
  • personal advice; and
  • general advice

before watching a role play of the fact matrix underlying the Westpac case.

The case related to Westpac’s Super Activation Team campaign. During this campaign, Westpac super trustees wrote to their members offering to find out whether they had holdings with more than one super fund.  After a member accepted this service, and where the Westpac entity found that the member had multiple super holdings, a Westpac representative called the member with the aim of getting them to roll their other super holdings into their BT Funds Management Ltd account.

The campaign had been structured with a view to the communications with members only constituting general advice, and not personal advice and had resulted in an increase of over $600 million in funds under management.

In Westpac Securities Administration Ltd v ASIC [2021] HCA 3 the High Court dismissed Westpac’s appeal and agreed with the Full Federal Court that Westpac had impliedly recommended that a particular customer roll over her external accounts into her BT account. In doing so, the court found that Westpac had overstepped the role of giving general advice and had assumed the higher standard of obligations imposed by s 766B(3)(b) of the Corporations Act for providers of personal advice.

Section 766B(3)(b) defines personal advice to mean circumstances where a reasonable person might expect a financial services provider to have ‘considered one or more’ of that person’s objectives, financial situation and needs. In this context, the High Court held that ‘considered’ signifies ‘took account of’, consistent with the title of s 949A (General advice provided to retail client – obligation to warn client that advice does not take account of client’s objectives, financial situation or needs).

The High Court confirmed the objective nature of the test under section 766B(3)(b), which is to be applied at the time the advice is given and having regard to the circumstances in which it is given. Where there is a reasonable possibility that a reasonable person, standing in the shoes of the person receiving the advice, might expect the adviser to have in fact considered one or more of the person’s objectives, financial situation or needs, the advice will be personal advice. The court also confirmed that the three elements of a person’s objectives, financial situation and needs are not compendious, and advice can be deemed to be personal advice if it considers any one of the objectives, financial situation or needs of the client.

As personal, not general advice had been provided, the High Court upheld the decision of the Full Federal Court that Westpac had contravened s 961B of the Corporations Act by failing to act in the customers’ best interests. Westpac had also contravened s 946A by failing to give each customer a written statement of advice.

Key takeaways of the session were:

  • Context is everything when considering whether advice is personal or general and will be determined by the facts of each situation.
  • The more you know about the client, the harder it is to prove you have provided general advice to them.
  • The use of terms such as ‘I recommend’ and ‘You need’ are more likely to indicate you are providing personal advice than terms such as ‘this is generally recommended for most people’.
  • Contemporaneous file notes are very important in backing up your side of events, particularly that you provided the general advice warning.

SAFAA presents regular webinars as part of its high calibre program of CPD designed to enhance members’ knowledge and meet ongoing CPD requirements.

A video recording of this webinar is available on our website. Webinars are free for members and $55 for non-members.