Working out new terms to describe advice and guidance is proving a “nightmare”, a member of the Financial Advice Working Group says.
Speaking as part of a Money Marketing Wired debate about the Financial Advice Market Review, Old Mutual Wealth chief distribution officer Richard Freeman says creating a shortlist of terms to help customers tell the difference between advice and guidance was proving tougher than first thought.
Freeman says: “I am specifically working on advice and guidance and trying to define that, which is a nightmare, it is much, much harder than I thought it was. But we are on track.”
Consumers have shared their views on advice and guidance, which Freeman says has been “eye-opening.”
He says: “As soon as you bring consumer groups in, which we have done about 10 sessions, it is mind-blowing because their understanding and their definition and their nuances on it…you suddenly sit there and think I have never thought of that.”
Freeman says one issue is defining where the “gate” is between guidance and advice.
He adds: “It has been a real eye-opener for me to sit and watch videos of consumers. I did not really appreciate that is what they thought. Some of them flip guidance and advice the other way around; you give me advice and guide me to the answer. We would see it the other way.”
Royal London pension specialist Fiona Tait, who was also part of the Wired debate, says liability must be taken into account when looking at advice and guidance.
She says: “[I] would urge that we do stick to a simple phrase that does say, ‘do you understand you have been given a recommendation, you can complain’. Or, ‘do you understand you have not been given a recommendation, and you cannot complain’.”
Personal Finance Society chief executive Keith Richards agrees there are liability complications with simplifying the definitions around advice and guidance, and also calls for a focus on service standards and costs.
He adds: “That is what we are going to struggle with in this definition, not least that the consumer won’t always understand the difference between advice [and guidance]. The labels mean nothing to the consumers. What an adviser tells a consumer they will do for them and at what charge is the most important thing. The title is irrelevant.”
Robo-advice was also addressed in the debate with Freeman questioning when robo-offerings constitute advice.
He says: “Most of them see themselves as robo-guidance. We want to provide technology to our advisers so they can use it with their clients, not going direct to clients, that is not our strategy.”
Tait adds: “It is our strategy that the technology we are developing is to support the advice process. When we talk about robo-advice we tend to talk about it as if that is the whole thing. There is going to be a market but there is a lot of space between everything is done online and everything is done face-to-face. What technology can do is allow advisers to provide a more efficient and streamlined service.”