Are you a financial adviser? I do not mean do you have at least a QCF4 qualification, a statement of professional standing and an entry on the Financial Services Register showing “Status: Active”. I expect you do.
What I mean is, can you advise people about finance? Not just about pensions and investments but about income tax, benefits, rent, overdrafts, tax credits, being mortgage ready, where best to save, bankruptcy, credit reference agencies, premium bonds, inheritance tax, credit cards, care home fees, debt and fraud? Oh, and the state pension too, including pension credit.
Go ahead, tick the ones you are comfortable about advising on. You may well have ticked a few, even a lot in a kind of “well, sort of” way. And because the good guys tend to read Money Marketing, some of you may have ticked them all. But those who have will know what a rare beast they are. So, my point is this: if you cannot give advice on all matters of finance, in what sense are you a financial adviser? Is that term fair, clear and not misleading?
“Ah,” you splutter, “I am a Financial Services and Markets Act 2000 financial adviser.” Hmmm. Search as you will in its original 321 pages and 15 years of amendments and additions, but the term does not appear. Because, as you no doubt know, the term financial adviser has no legal standing at all. It only appears in UK legislation four times and is never defined. Clients may not be too impressed if you insisted you were a financial adviser as mentioned in The Sheep Annual Premium and Suckler Annual Premium Quotas (Amendment) Regulations 1993, Sch.2, Part V, para 1.(2).
This is a shame. Your years of study, your qualifications, your experience and your FCA registration should be recognised. And now is the ideal time to achieve that.
You will know the Government is seeking evidence for its Financial Advice Market Review. With its hand firmly held by the Treasury, its inquiry will look at, among other things, the difference between advice and guidance. That distinction was made only recently when the financial advice industry heard with horror George Osborne’s promise to Parliament that “free, impartial, face to-face advice” would be available as part of pension freedom. The thought that anyone other than regulated advisers could give advice led to its replacement with the term guidance, which is not so much advice-lite as signposting in the general direction of information.
Here is what the FCA/HMT evidence trawl says: “Labels like focused advice and basic advice, and the distinction between ‘guidance’ and ‘advice’, are not always consistent with people’s understanding of what advice is. We welcome views on whether we should seek new ways for firms and parties to communicate with consumers about the different forms of financial advice available.”
In response, I am asking whether we should get rid of the term financial adviser altogether. As I argue above, can you be a financial adviser when the financial matters people need to know about are beyond your professional knowledge and training?
Take Tracy, for example. The principal advice Tracy needs is around what her tax credit payment will be in April. Will it be cut by £1,562 as the Chancellor originally proposed, cut by a third of that as the changes are phased in, or deferred by three years? And what about her friend Jasmine, who, though she does not know it now, will become a single parent in May? Will she be subject to the new rules from day one? Tracy also wants to know whether she would be better off if she worked another five hours a week, as her boss has offered. And, if so, by how much?
“Harumph,” you tweet. “What does this idiot think I am, a Citizens Advice worker? She is not the sort of client I want anyway.” I understand that. But what if Tracy asks: “Will me or Jasmine be auto-enrolled into a pension? What is it anyway? Should we opt out? If we don’t, what kind of pension will we get from those basic contributions when we retire?”
The crux of the matter is this: is the term financial adviser appropriate when you cannot give advice about all aspects of finance?
As a way of regulating financial advice and clarifying what it is, I propose the term financial adviser be scrapped. Instead, let’s call you advisers about what you can do and usually do very well.
Some of you would be investment advisers; some of those would also be savings advisers. There would be pensions advisers, equity release advisers, inheritance tax advisers and banking services advisers. You never know, there could even be benefits advisers. Already, equity release advisers must do a benefits module to get the equity release badge. The ones I talk to are very impressive on benefits, for older people at least.
In other words, your title would effectively reflect your qualifications, the modules you had passed and professionally developed. That way the public would know what it was getting. And you would comfortably be able to say “Sorry, Tracy. I can’t advise about tax credits. I’m a pensions adviser. But I can tell you all about auto-enrolment.”
And, of course, if you covered the whole market in your specialist field, you could add that treasured word independent to your title. And if not, you would have to call yourself restricted. Now that would be fair, clear and not misleading.
Paul Lewis is a freelance journalist and presenter of BBC Radio 4’s ‘Money Box’ programme. You can follow him on twitter @paullewismoney