Professional Adviser's Armchair Critic Brendan Llewellyn has this advice - or guidance - for any non-advisory service: call it what you will so long as its name and style do not imply the giving of advice
The Financial Advice Working Group's conclusions on the distinctions between advice and guidance is entirely incoherent and its recommendations on how to use the two terms is well set to fail.
First, it is attempting to solve a problem that should not be there. Consumers need to know if they are being offered regulated financial advice. They need to know that, while it is still their decision, their adviser is offering the advice taking full account of their circumstances - it is personal advice. If it is not advice, there is no value in coining a term - guidance or otherwise. Still, if pushed for a term, then, as I have argued before, information will do.
The group noted that consumers found the terms confusing and tended to transpose them. I am not surprised. Advice and guidance are near-synonyms - so of all the possible other words to set up alongside advice, guidance is about the worst choice. Some might even think it is stronger than advice - more prescriptive. Indeed, here is a quote from the research carried out - talking about guidance:
"You will be guided in a particular way which should benefit you … guidance is slightly more controlled than advice which you can very much take or leave. Guidance is more ongoing"
So, anything but guidance then.
The report concludes both ‘guidance' and ‘advice' should stay - and I would agree with half of that. Of course it would be bizarre to bin advice. We have case law on advice. We have thousands of professional financial advisers.
I would call on the planners to end their attempt at differentiation. We do not need Lilliputian factions of ‘Big Endians' and ‘Little Endians'. If we still need to work to help consumers understand what advice means, then let's get on with that - more achievable - task.
The report suggests that, if we place labels to clearly differentiate guidance and advice, then all will be well. That is just too unlikely, I am afraid. The terms are near-synonyms so consumer, having been subject to these clarifying labels, will then wander off into the rest of the world and have their preconceptions reinforced - namely that these two terms mean more or less the same.
'Kind of advice - but no redress'
So why, exactly, does this problem arise? Because we wish to be able to say we are coping with the advice gap by encouraging non-advisory services to offer something that might have some of the benefits of advice without actually being advice. In other words, kind of advice - but with no redress.
So, I would say this to any non-advisory service - call it what you will so long as its name and style do not imply the giving of advice. And use a much simpler label - ‘THIS IS NOT ADVICE' - at regular and prominent points in the communication.
This should not dissuade anyone wishing to not offer advice from giving helpful information to consumers. But it should ensure no consumer would think they had a right to redress when they did not.
The report suggests consumers be presented with the following two pieces of information (I have taken the liberty of making comments on the text):
* Guidance is an impartial [I'm not sure about "impartial" - is it? Is it always? Who pays for it?] service which will help you to identify your options and narrow down your choices but will not tell you what to do or which product to buy; the decision is yours. [But the decision is always the consumer's - even when advice is taken.]
* Providers of guidance are responsible for the accuracy and quality of the information they provide but not for any decision you make based on it. [They need not be qualified or regulated.]
* Guidance is free unless your provider clearly tells you otherwise.
* It will suggest what you could do. [Too close to a recommendation.]
* Advice will recommend a specific product or course of action for you to take given your circumstances and financial goals. This will be personal to you, based on information you provide. [In contrast, the guidance text is silent on whether the consumer provides information - do we presume they do not?]
* Advice will be provided by a qualified and regulated individual or online by a regulated organisation.
* Providers of advice are responsible and liable for the accuracy, quality and suitability of the recommendation that they make and you are protected by law. [You are also protected by law for the accuracy and so forth of guidance.]
* You will usually pay a fee for advice. Fees will be disclosed before you are asked to commit yourself.
* It will recommend what you should do.
So my advice - or guidance - would be stick with advice, help consumers appreciate it and help them understand, very clearly, when they are getting in and when they are not. As to guidance, we do not need to build up the expression.
And, even if we did, it is too close to advice to be realistically differentiated outside the rarefied confines of a research group.
Brendan Llewellyn is owner of Marketing Edge and director of Adviser Home
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