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Nic Cicutti: Let’s not pretend advice and guidance are the same

The new service should lead to consumers better identifying  the benefits of regulated advice

Earlier this month, my colleague Paul Lewis wrote a column criticising the new, unified financial guidance body in that it will probably not be able to state its primary role as that of giving advice to consumers.

The Financial Guidance and Claims Bill now wending its way through Parliament will create one organisation out of three: the much-loved Money Advice Service, The Pensions Advisory Service and PensionWise.

Paul told Money Marketing readers the bill would be “giving the financial services industry a monopoly over the word advice”. By pushing for non-regulated advice to be described as guidance, with advice being used to describe recommendations about specific regulated products, “the industry has now defied the dictionary”.

I will come back to Paul’s argument shortly. But first it is worth noting how disappointing it is when one or two contributors to the online debate on his article do not even bother to engage with the points he makes, simply responding with comments like “waste of ink” or “drivel”.

Paul Lewis: The end of advice as most know it

The issue of what consumers can expect from the new service – and, critically, where they go in the next stage of their journey towards better financial outcomes for themselves and their families – deserves better than snide remarks.

Second, it is not entirely clear from his column whether Paul welcomes the bill’s proposed rationalisation of these various advice/guidance bodies. Probably not: there is slightly light-hearted reference to the absence of mass demonstrations calling for a unified financial guidance body.

In this regard, Paul is indeed correct. Yet the absence of such mass movements should not be used to invalidate a sensible approach to bringing similar functions under one roof, reducing duplication of resources and ensuring a single port of call for all the financial information consumers need.

I do not recall any marches, true, but then I do not recall an armed uprising before 2012 demanding workplace pension schemes, or a Tooting Popular Front-style urban guerrilla movement in favour of pension liberalisation in 2014. The far more important issue is not whether such a move is a sensible idea – as I think it is on balance – but how the idea itself is executed.



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There are 14 comments at the moment, we would love to hear your opinion too.

  1. As both Nic and Martin imply in their articles, this issue about trying to establish some sort of meaningful distinction between “guidance” and “advice” has bedevilled all of us in the industry for many years.

    Personally, I think all the evidence so far tells us that consumers will never understand the distinction we’re trying to make between the two, and so the time has come to try something different.

    It’s not perfect, but my best suggestion would be to switch to the terms “personal advice” and “general advice.” I think this would capture and express the key difference much more clearly.

  2. “But the answer here is not to pretend that what they will receive from a guidance service can ever remotely resemble good advice.“

    I have spent many years working in advice; for CABx, for the National Association of CABx, as chair of a national group of welfare rights advisers, as an advice & information consultant, etc. I have never sold financial products. If you are saying that nothing I have ever done “remotely resembles good advice” then either I’ve wasted 30years or you should apologise.

    Presumably you never seek advice from a doctor, a lawyer or a sommelier.

    By all means hang onto ‘regulated financial advice’ but don’t try and stop people who, frankly, often offer more important advice from using the word.

    • Perhaps the easiest way to determine if you have given advice is to ask what happens if the person receiving it acts on it and it goes wrong. If the giver pays then it’s probably advice. If the receiver pays it’s probably guidance.

      On that basis doctors, lawyers and sommeliers probably give advice.

      I don’t think Nic needs to apologise.

  3. I genuinely don’t see the beef Paul Lewis has.

    No one ‘owns’ the word advice, but if there is a clear definition then everyone knows what they are working to and if the regulator decides that ‘advice’ needs to be regulated then that means that only ‘regulated advisers’ can advise.

    IMO guidance is general whereas advice is specific to the person (and therefore the individual giving that advice carries the responsibility if they are wrong).

    Fraud, scams and opportunism arises when there are grey areas, I therefore fail to see why consumers should be in any doubt as to what they have received.

  4. The labels are irrelevant, clients are either recommended a specific course of action or they are not. Information can be provided that may help them decide for themselves on a specific course of action. Most people would probably say they want the former if asked.

    But they can’t because advice has become inaccessible. Why? As you point out Nic, there is a ‘hellish financial landscape’ that in practice cannot be navigated by the average person (even with basic financial education). The fundamental problem is complexity and the biggest culprit is regulation. Over the last 20 years it has, on the whole, made for better and safer advice. However, the way it has been done, where even the average adviser is often not clear about what is being asked of them, means that financial advice has become expensive, taking it away from the ‘masses’.

    The FCA wants everyone to get high quality financial advice. But it’s like saying everyone should be able to drive a Rolls Royce/Aston Martin/Ferrari and mandating that all cars must meet the same standards. Very laudable, but flawed because it flies in the face of reality.

    And let’s be clear that this is a problem for clients, not advisers. Advisers are sitting pretty, perhaps they have never had it so good. If they only cared about themselves they would just take the money and keep quiet. But they don’t because they know this is not working for clients, and prospective clients, as a whole.

    The fly in the ointment is that the only real practical answer to all this is politically unacceptable. It needs a radical change to the rules that allows lower quality (there, I said it!) advice to be acceptable in certain, well defined, circumstances that make advisers comfortable to do it. Tinkering with definitions (FAMR), and yet more guidance, in the face of the complex and unquantifiable liabilities faced by advisers via the FOS is not going to change adviser behaviour.

    So, things will continue as they are. Well meaning people like Nic, Paul and most of the commentators on here will continue the good fight, but without a radical re-think I fear we’ll be lamenting the same things in five years time…

  5. Of course, most of the huge expense of these guidance bodies could be saved by way of a simple voucher system, with which consumers could go straight to a regulated adviser for an initial consultation that would cost them no more than engaging with whatever this new amalgamation of quangos is labelled.

    As for the difficulties of distinguishing between guidance and advice, the MAS has hardly helped by calling itself a service that provides the very commodity that it cannot How stupid is that?

    And anyway, the conclusion of many if not the great majority of these guidance sessions is likely to be to go to an adviser. So, really, these guidance bodies aren’t about much more than creating jobs for unqualified (and, anecdotally, not very well trained) people who can’t hack it in the real world of advising.

  6. Michael Johnson 2nd October 2017 at 4:45 pm

    Almost all consumers receiving guidance think they are being given advice. This is the crux of the problem: consumers do not appreciate the difference.

  7. Sorry Nic, you’ve written too sensible an articl here and youre preaching to the converted. You need to bate us a bit more to get our hackles up and typing away 🙂 Paul Lewis seems to have taken over your mantle and you’re getting more reasonable/realistic in your old age.

  8. I’m rather glad that Nic has attempted to set Paul Lewis straight on this topic.

    Indeed a good few of us did try in a detailed way to explain to Paul why we thought he was in error.

    The bottom line is in fact quite simple. Advice stands by what is offered. If in breach of the regulations redress or compensation is payable. Guidance takes no such responsibility and is regulated far more leniently..

  9. Advice / Guidance, same thing to most people. Our obsession with the word Advice and trying to own it is a self defeating waste of time. I quite like the term “Personalized recommendation”.

    • I couldn’t disagree more. I think the point is about what clients expect/think they are getting. What most clients consider ‘advice’ probably involves regulated advice. In practice they want to know whether to cash in their pension, which investment to go into, etc.

      The problem comes when ‘guidance’ services are labelled advice and the clients think they are getting something they are not.

      Has anyone, FCA included, actually done a study on this with real people? Ultimately it’s not about advisers, regulators or commentators, it’s about the people on the street.

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