Many trustees now offer website calculators online for members to analyse their superannuation fund, plan for their retirement and assess differing investment options.
In providing an online calculator, trustees need to be prudent and give consideration to the following issues:
1. Does the calculator amount to the provision of financial product advice as defined in section 766B of the Corporations Act?
A recommendation or a statement of opinion constitutes financial product advice if it is intended to influence a person in making a decision on a particular financial product or class of financial products or could reasonably be regarded as being intended to have such an influence.
If the calculator amounts to the provision of financial product advice, the trustee will need to hold an AFS licence and to comply with disclosure requirements regarding the provision of financial product advice, such as providing an FSG. If general advice is provided, the mandatory general advice warning (pursuant to section 949A) must be given.
We believe that, as a general guide, the output of the calculator and the context in which the output is presented are the riskiest factors in determining whether a recommendation or statement of opinion are provided by the trustee. If an online calculator only contains objectively ascertainable and factual information, then it is arguable that the calculator does not constitute financial product advice.
If the calculator provides personal advice:
- the provider’s AFS licence would need to allow for the provision of personal advice, and
- a Statement of Advice would need to be provided in accordance with the Corporations Act. This would involve identifying and collecting contact details from each person who uses the calculator to enable provision of a Statement of Advice.
2. Does the calculator fall under the relief provided by Class Order 05/1122?
Under Class Order 05/1122, ASIC exempts a provider of a financial calculator who is providing financial product advice from having to comply with the licensing requirements and the resulting FSG, Statement of Advice and other disclosure requirements where the following conditions are met:
- the financial calculator does not advertise or promote a specific financial product (this will not be the case where the calculator compares other financial products)
- if the financial calculator is an electronic facility, it enables the user to calculate an estimate on the basis of changed assumptions
- the assumptions are reasonable
- there is a clear and prominent statement:
- identifying the purpose and limitations of the calculator
- explaining the reasonableness of the default assumptions
- commenting on any significant limitation of the calculator
- recognising the impact of the time value of any estimates, and
- to the effect that the calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product and that the user should consider obtaining advice from a financial services licensee before making any financial decisions
- if the calculator is electronic, it does not prevent the user from readily printing or storing the estimate, and
- the provider keeps a copy of the calculator for seven years.
3. Each AFS licensee must comply with its licence requirements, including to do all things necessary to ensure that its financial services are provided efficiently, honestly and fairly (section 912A of the Corporations Act).
4. Is there an appropriate disclaimer? The financial product advice requirements of the Corporations Act cannot be avoided by use of a disclaimer, however a disclaimer can be used to:
- disclaim other matters
- attempt to protect the licensee, and
- fulfil the mandatory general advice warning requirements.
5. Is the calculator accurate? Licensees must always ensure that any material which they present to their customers is technically correct and not misleading. Licensees should take care to ensure that the calculator fulfils these basic requirements.
More information
For information regarding possible implications for your business, contact a member of the Financial Services team.