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FCA chair: Advice and guidance divide has been blurred by technology

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FCA chairman John Griffith-Jones

Defining advice and guidance has become more difficult as technology has progressed, the FCA’s chairman has said.

In a speech to Cambridge’s Judge Business School last night, John Griffith-Jones said understanding what should fall within the regulator’s remit had proved a challenge in recent years, for example where the process for setting Libor rates and physical trades in commodities fell outside the FCA’s perimeter.

He added that new technology had made some of these issues worse, including by making the divide between regulated advice and guidance “greyer.”

Griffith-Jones said: “The problem is exacerbated further by the remorseless march of technology. Rules that were designed for the paperwork era do not work necessarily for the online one. The distinction between advice and guidance, once reasonably clear, has become much greyer with the advent of platforms and the potential of robo-advice.”

Jones added that while the regulator’s approach had to adapt to Government policy, the FCA needed to remain independent from Westminster and was “perfectly capable and willing” to discuss what policy change would mean with Government.

He said: “The Government decides to change the pensions regime, the regulatory regime must follow suit. The Government wants a cap on the cost of pay day loans, the regulator is asked to implement one. With Brexit in train, we should not seek to hide from change rather than co-opt it, and clarify its impact on the regulatory regime as quickly as is possible.”

“Policy is for elected government not for the regulator. This is not to say that the regulator should be passive in any sense; the FCA is perfectly capable and willing, to draw Government’s attention to the consequences of policy change. But experience tells us that regulation acts most effectively as a support for Government policy not a substitute. It also makes clear that regulation cannot be independent of Government, although regulators most certainly should be in discharging their duties.”



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There are 12 comments at the moment, we would love to hear your opinion too.

  1. I’m surprised that a chair can express a point of view. I asked my chairs in the dining room and they refused to answer. They can, however, spell Cambridge correctly!

  2. “regulation cannot be independent of Government, although regulators most certainly should be in discharging their duties” is sort of saying that, whilst the regulator doesn’t mind the government telling it what it wants, it [the FCA] remains fiercely resistant to the idea of any oversight from the government as to how it implements such requirements. That’s a bit like commissioning an architect to design a house for you but not being allowed any input into what sort of dwelling will eventually emerge.

  3. Nicholas Pleasure 14th February 2017 at 9:33 am

    Essentially the idea of regulated advice is a poor one, and effectively the FCA doesn’t regulate advice anyway, it regulates product sales. When was the last time they conducted any past business review on pure advice?

    It is now time for the FCA to recognise this and to regulate products as advice is impossible to regulate as it is expert opinion. My expert opinion may be different to yours but we can both be correct.

  4. Come on! How hard is it. Advice involves a specific product (whether purchased or not) Advice is centered on generics and the basic principles. Sometimes the vocabulary might be confusing. I advise that you should maximise your ISAs. This is generic. I suggest you invest your ISA into the Bloggs European fund. This is advice.

    How hard is this? Why do people have to agonise on what is essentially simple?

    • Actually I would suggest Harry, that true advice, doesn’t involve a specific product recommendation. The real advice is about what strategy and what tax wrapper is most likely to provide the best outcome for the client given their circumstances and goals. Which specific provider/fund/investment choice, should be a simple comparison, with the adviser giving an viewpoint on which is the best and why, so that then is really part guidance, part opinion.

      Well that’s my philosophy anyway

    • Well, it was hard enough that the FCA felt the need to publish a 40 page document in January 2015 that attempted to clarify it… and failed

  5. It’s dead easy. Advice is where one recommends a given course of action based on individual circumstances, the ‘advisers’ skill, competence, experience and qualifications.

    Guidance is where a notional list of possibilities is provided and the individual makes up their own mind, and suffers or benefits from the consequences.

    By the way ‘Robo Advice’ must surely be an oxymoron. Does anyone remember how successful ‘decision trees’ were?

  6. I’m with Harry on this……. really how thick do you need to be, not to able to distinguish to difference between advice and guidance.

    What is also very worrying, it now seems the FCA cant keep up with advances in technology……… might it be fair to say the industry is 5 or 10 years ahead of the FCA in this respect and they really don’t know how to handle this ?

    Also does the blame game still have a place, do government legislation changes really pose long term problems as the JGJ suggests ? I have to be honest and say (with out seeming to big headed) it takes me a about 5 minutes to fathom out, lets face it most of the time its……. oh it used to be like this, now its like that;

    JGJ needs to sit and reflect “WHY” ! the regulator takes something quite simple and makes it complicated ?

    Is it truly for the consumer, its own existence & longevity, or as I suspect they just don’t really understand the market they regulate, so they just throw everything but the kitchen sink at it !

    Something as common and differing in variety as an apple….. is at the end of the day, a bloody apple ! I have not come across one yet that will kill me, some are sweet some are sour, all I do is ask my green grocer which one will be good to make into a pie, he points me in the right direction, I ask the green grocer which one would be nice to have with a cheese sandwich again he points me to the right one, nudge nudge wink wink this is advice !

    Now what do you think it would be if I went and asked my fishmonger about apples ?

    Does this change if I e-mail them ?

    I could go on but why bother………..

  7. Harry, “You Can Not be serious” you forgot to put Advice after your Generic, if the client deems it was advice for which I hope you charged, It was Advice!!!

  8. Why does the FCA always have to make things complicated? Surely it is simple because this purely designed to try not confuse retail consumers and therefore protect them
    Guidance – “The process shows your objective is to save/invest towards (an end goal whatever that may be). Here is a list of available ways to do it. Go off and take your pick for what you feel is correct for you.

    Advice – You should save/invest towards (the same end goal as above). Based on your circumstances/objectives/ATR/CFL etc etc here’s what I recommend you should do to achieve your objective, why you should do it, how it meets your objective and why this strategy is suitable for you……….. How can it really be any more complicated than this to distinguish?

    The FCA is drowning in its own bulls*it and all it seems capable of doing is creating more (false in my view) complexity instead of using some common sense and making it so easy for anyone to understand.

    Maybe it would be an idea to ask the public what they think Guidance and advice is. Is it actually possible a big response from those who will actually use guidance/advice what they think and keep it very simple.

    I really wonder how utterly incompetent the FCA senior management are if they cannot grasp something so simple.

    Thoughts anyone?

  9. Are we being softened up here? The ideal position for the banks is to offer advice but call it guidance. Are we being told that the advice/guidance split is soooo difficult that it cannot be policed?

    Julian is spot on we cannot have a regulator unaccountable to anyone officially but actually accountable to the powerful.

  10. I do think as Garry says there is more to all this than meets the eye.

    The Government believes there is a savings/wealth/support gap and the state can no longer afford. How can they move the burden back to individuals?

    The Banks are saying we can do this on an industrial scale but don’t want all these rules getting in our way. We can make shed loads of profit, employ more staff and pay a lot of Corp Tax.

    The FCA are appointed to facilitate it, they are trying to fudge it so that the banks can give “robo-guidance” with very little regulatory comeback but the rules remain to drive the smaller (and more difficult to regulate) businesses out of business. Massive fees for the FCA, a few free lunches and future job offers, “no” possibility of mis-selling and a fully saving, protected, wealthy public. No pesky small advice firms taking up their time.

    Everyone’s a winner. Conspiracy theory? Maybe!!!!

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