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Govt: No legislation needed for ‘advice’ vs ‘guidance’

A leaked memo has set out why the Government does not think the terms “advice” and “guidance” need to be set out in forthcoming legislation.

Last week, the House of Lords debated the bill that will introduce a new public financial guidance body to merge existing services The Money Advice Service, The Pensions Advisory Service and Pension Wise.

From the start of the debate, Peers raised the importance of the public understanding what type of support they would receive, particularly when it came to clarity over the distinction between advice and guidance.

In a briefing note circulated to Lords ahead of further debate and seen by Money Marketing, the Government sets out why it does not want to confirm definitions of the two terms in the Financial Guidance and Claims Bill.

Govt sets out new guidance body remit

The note points to a recent clarification of the definition of advice as a result of the Financial Advice Market Review.

After the review recommended the move, the definition of advice will change to make clear that it involves a personal recommendation, in line with the Mifid II definition of the term, and will come into force from January 2018.

The briefing says this was “warmly welcomed” by the sector.

In the memo, the Government acknowledges that the previous framework was inadequate.

It reads: “The previous definition of regulated investment advice fell short of properly identifying the boundary between advice and guidance. This had the damaging impact that in order to avoid inadvertently stepping across the line into regulated financial advice, many providers took a very restricted view of the information they could provide, for example choosing to not contact a customer to point out that they may not have used their ISA allowance this year, for fear that this might be construed as advice.”

However, some advisers have said that this still does not fully qualify where guidance ends and advice begins.

The Government has said further clarity through legislation could “cut across the existing regulatory architecture” though.

It says: “The government fully agrees that consumers should be aware of the distinction between advice and guidance and, indeed, that they understand the nature of the service they are receiving at every stage. However, we do not believe that it is appropriate to define these terms in the Financial Guidance and Claims Bill.”

“Given the recent changes to the definition of financial advice, the government does not believe it is necessary or prudent to introduce a new definition of regulated financial advice in this Bill. This definition could cut across the existing regulatory architecture, undermining the very extensive work undertaken over the past two and half years by the government, FCA, industry and consumer groups.”

The memo says that the new guidance body will make it clear that it is not offering regulated financial advice, but will explain what this is to consumers who may need it and tell them how to go about finding it.

It reads: “Our expectation is that, alongside other guidance and advice providers, the [guidance body] would provide information to consumers, in line with FAMR, on what terms such as advice and guidance mean, and what they can expect from the organisations which are offering them.”



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  1. So presumably this is left to the Regulator to police – or are we going to have the usual cock up with unregulated cowboys blurring the lines?

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