A common perception about financial product advice (or commonly referred to as financial advice) is that it’s limited to only investing. However, financial product advice covers a range of areas such as superannuation, insurance and estate planning.
The objective of financial advice is to help you make informed decisions, and you may like to consider the type of advice depending on your circumstances, goals and needs which may extend beyond a single area such as investments.
Before we dive deeper, it’s important to understand the difference between ‘advice’ and ‘information’.
- Factual information is a statement of fact and is not a recommendation for or against a financial product. An example is ‘a term deposit for 12 months has an interest rate of 4% p.a.’
- Financial product advice is a recommendation or opinion on a particular investment (or financial product) and is considered either as ‘general advice’ or ‘personal advice’.
General advice
General advice is general in nature and does not take into consideration an individual’s personal circumstances, that is, their objectives, financial situation and/or needs when providing the financial product advice (discussing a particular investment or financial product and who it may be generally suitable for – not specifically). General advice is usually provided with a warning noting this.
For example, a financial services professional may discuss the high return potential and risks of investing in international shares and may offer information that states that this may be suitable for investors with a particular investor profile – though not specifically about the individual whom they are discussing it with.
Personal advice
Personal advice is financial product advice which considers (or has taken to have considered) an individual’s personal circumstances, including their objectives, financial situation, and/or needs. This may include discussing or providing recommendations on financial products in areas such as investments.
For example, a financial services professional may recommend a personalised investment strategy that the individual should adopt, based on their specific financial situation, objectives and/or needs.
So, do you need it?
This depends on your overall financial goals and needs, level of financial knowledge and whether you can afford advice; among other considerations you should consider whether advice is suitable for your needs. Depending on the advice you seek, you may be able to receive simple general advice at no cost in some instances or personal advice usually at cost.
