Do investment managers give personal advice?

Most probably do.

There is a common fallacy in the investment industry that only financial planners give personal advice. That’s simply not true!

The law defines personal advice broadly: all you need to do is take into account one of your client’s objectives, financial situation or needs and you’ve given personal advice. And there is no exemption for wholesale clients.

So what if I am just investing within a set mandate with pre-agreed parameters? Am I giving personal advice then?

To answer those questions, you need to consider how the parameters were set. If your parameters are applied across mandates and are provided on a ‘take it or leave it basis’, then you are probably not providing personal advice to your fund manager or trustee client. In every other case, you are likely to be providing personal advice.

So what does it mean for you if you are providing personal advice to your wholesale fund manager or trustee client?

Whilst you do not need to supply a statement of advice (SOA) or a financial services guide (FSG), and the statutory best interests duty does not apply, you have to make sure your Australian financial services licence (AFSL) is not limited to the provision of general financial product advice only. And even though the statutory best interests obligation does not apply, that does not mean the common law ‘best interests’ duties – fiduciary duties – do not apply. When you do stand with a client as a fiduciary, then you must observe the common law duties of ‘no conflict’ and ‘no profit’, among others. This means you need to disclose and obtain informed consent to any conflicts (real or potential) and fees – including downstream fees in a chain, like you might disclose in an FSG!