A new ASIC survey reveals that most advisors do not dig deep into clients' situations before giving recommendations on capital protected products.

A new survey by the Australian Securities and Investment Commission on how financial services firms give advice on capital protected products has found that many advisors did not consider looking into clients' personal circumstances before rendering service. 

Report 377 "Review of advice on retail structured products" revealed that in approximately half of the files, there was insufficient evidence to show that advisors had investigated clients' relevant circumstances, the subject matter of the advise and then to provide appropriate recommendations.

"The findings were disappointing and with the Future of Financial Advice now raising the bar for advisors, our warning against inappropriate selling cannot be clearer," said Peter Kell, ASIC deputy chairman, in a statement.

"Capital protected products are complex and can be difficult for investors to understand. Advise about them needs to be appropriate and accurate. Where it isn't, we will take action," added Kell.

The study found that most advisors narrowed advise to a single product rather than considering a range of potentially suitable products, adopted a one-size-fits-all approach and lacked evidence to support gearing recommendations. It also noted concerns with disclosure, including misrepresentation of products in terms of safety or capital protection.

ASIC reviewed five pieces of advise from each of 10 Australian financial services licensees. The majority of advise reviewed was provided in 2012 and complied with a section of the Corporations Act 2011. This section has since been replaced by the FOFA reforms, which include a requirement that advisers must act in the best interests of clients.