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Financial product advice: when a coach’s opinion needs an AFS licence
Financial product advice is a recommendation or opinion meant to influence someone’s decision about a financial product, or one that “could reasonably be regarded as being intended to influence” it, and ASIC says giving it requires authorisation under an Australian financial services (AFS) licence. Factual information needs no licence.
General information about ASIC’s guidance, not financial or legal advice. The official place to check is ASIC, linked at the foot of this page.
Coaching side
ASIC: no licence needed, or unlikely to be advice
- Factual information whose accuracy can’t reasonably be questioned, given without implying a recommendation
- Tips on saving money and budgeting that involve no financial product
- Describing how two kinds of product work, with no suggestion that one is better
Licensed side
ASIC: financial product advice, or a financial service
- Recommending which financial product to buy
- An opinion that a class of product will give a guaranteed return
- A unique, paid link that sends someone to a platform to trade financial products
From ASIC’s guidance and its worked examples in Information Sheet 269, summarised.
What counts as a financial product
ASIC’s list of financial products takes in shares and bonds, superannuation, life and general insurance, interests in managed investment schemes, derivatives and margin lending facilities. Insurance and super are on that list, as well as shares.
Giving financial product advice is one way of providing a financial service; dealing in a financial product is another, and arranging for someone to apply for or acquire a product can count as dealing.
Information, general advice and personal advice
ASIC’s Regulatory Guide 244, issued in December 2012 with a note added in December 2021, separates three things a person might give a client.
Factual information
ASIC describes factual information as information that can be objectively established, whose truth or accuracy can’t reasonably be questioned, and says no AFS licence is needed to give it. RG 244 adds that factual information may be advice if it is presented in a way that is meant to, or could reasonably be read as meant to, recommend what a client should do.
Advice
Financial product advice generally involves judging a product: a qualitative judgement about some or all of its features, or an evaluation, assessment or comparison of them.
General or personal
Advice may be personal advice if it is presented so that a reasonable person might expect the adviser to have taken into account the client’s objectives, financial situation or needs, or any one of them. Having some personal information about a client doesn’t, on its own, turn factual information into personal advice.
RG 244 sets out the test for personal advice in two parts: first, whether the communication is financial product advice at all; second, whether the adviser has considered the client’s relevant circumstances, or a reasonable person might have expected them to. The test is not whether the adviser merely holds information about the client, which matters in coaching, where a coach may already know a client’s goals and finances well. Either way, a licence is generally needed: as a general rule, a business giving general advice that is a financial service needs an AFS licence too, or must act as an authorised representative of a licensee, unless an exemption applies.
Licensed advice to retail clients comes with duties of its own. Providers must give a Financial Services Guide or make website disclosure available, give a general advice warning with general advice, and give a Statement of Advice with personal advice, and personal advice brings the best interests duty.
ASIC’s own examples
Information Sheet 269 was written for people who discuss financial products online, and its worked examples show where ASIC puts the line. Each verdict below is ASIC’s.
| What is said | ASIC’s view |
|---|---|
| Naming five long-term stocks the audience should buy and hold | Likely advice It aims to influence a decision to buy specific products. |
| Saying a class of fund will make a guaranteed positive return | Likely advice It is also likely to be misleading. |
| Explaining how shares and exchange traded funds each work, with no hint that one is better | Unlikely advice A description of product types. |
| Suggesting home-cooked lunches instead of eating out, to save each week | Unlikely advice Budgeting tips involving no financial product. |
Payment, referrals and links
ASIC says an influencer who receives benefits or payment for comments on financial products is more likely to be giving financial product advice, because payment “indicates an intention to influence”. The sheet is written about influencers, not coaches, and says nothing directly about a referral fee paid to a coach.
Arranging for a person to deal in a financial product is also a financial service, and whether it happens depends on how involved the person is in making the transaction happen. In ASIC’s example, a unique link to a licensee’s trading platform, paid per click-through, is likely to be dealing by arranging; giving the names and details of licensees, with no further involvement, is unlikely to be.
Licences, exemptions and penalties
Under the Corporations Act 2001, it is an offence to carry on a financial services business without an AFS licence, unless the person is authorised as a representative of a licensee or an exemption applies. ASIC notes penalties of up to five years’ imprisonment for an individual. Depending on circumstances, a person may be exempt, hold a limited AFS licence, or act as an authorised representative of a licensee.
Moneysmart’s checklist for people weighing up a finfluencer’s content asks whether they have checked ASIC’s Professional Registers Search for the finfluencer’s AFS licence details. Separately, the rules against misleading conduct about financial products apply whether or not a person is licensed, a point taken further in the guide on claims about results.
Consumer credit has its own licence, the Australian credit licence, under the National Consumer Credit Protection Act 2009. The credit assistance guide sets out where that line falls.