The terms “advice” and “guidance” should be kept but come with an explanation of the difference between the two, the Financial Advice Market Review’s working group is set to recommend.
Money Marketing understands the group’s report, which is due to be released in the next few weeks, will not call on the FCA to scrap the words altogether because there are no clearer terms available.
But the group wants wording introduced during the advice and guidance process to clarify what each term means, such as whether there is Financial Services Compensation Scheme protection.
A source who has seen draft reports from the working group says: “The group did consider whether the terms should be replaced, but they’ve basically found through consumer testing that there is nothing better.
“But they’re both poorly understood. Consumers didn’t really know the difference, didn’t understand what kind of protections they are getting with advice that they are not getting with guidance, but the group couldn’t find a way of describing those things.”
“The group’s recommendation is to stick with the labels, but there would be some kind of uniform way of describing both advice and guidance. It’s unclear what exactly the description would be to explain you are not protected by the FSCS, or your decision is with a recommendation that someone else has liability for.
“They want to put forward a proposal, which would be tested by someone like the Money Advice Service, that there will be a requirement for any firm offering advice to upload at some point, but they’ll have to decide at what point is has to be disclosed.”
The FAMR working group was formed in June last year. It is chaired by Scottish Widows chair Nick Prettejohn, and its 15 members include outgoing St James’s Place chief executive David Bellamy, Nutmeg director Nick Hungerford and Legal & General savings director Jackie Noakes.
The working group was tasked with publishing a shortlist of potential new terms to describe guidance and advice, but also designing a set of rules of thumb and “nudges” to try and increase consumer engagement with advice and developing a guide for employers to support the financial health of their staff.
The shortlist of advice and guidance terms was due to be published in either the third or fourth quarter of 2016. A revised timetable of the end of March was then given, with the report to be presented to the FCA and Treasury imminently.
Money Marketing understands the working group is also ready to finalise some of its nudges and employee financial health recommendations.
Phrases such as “pile into your pension” are being touted as ways to communicate the tax advantages of saving into a pension, while the group is also looking at cues that would break down the stigma around seeking financial help, be that through a debt charity or a financial adviser.
The source says: “They’re keen to promote the idea that lots of people already get help, and that you shouldn’t feel it’s not available to you as well.”
The working group is also set to put forward a blueprint for employers to white-label as an online financial help resource for their employees.
This could be sent to employees in one-off events like receiving a bonus, for example, to suggest potential savings and investment strategies, with the hope being the large employers will sign on at an early stage to encourage more to adopt the working group’s blueprint.