View more on these topics

Peter Hamilton: The blurred line between advice and information


The FCA has recently published a guidance consultation on retail investment advice. Part of its objective is, as its subtitle makes clear, to clarify the boundaries between advice and information. One of the questions the paper addresses is over the extent to which firms can offer advice being limited in its scope, that is, simplified advice. 

But although the paper mostly explains the issues well, it is clear the issues are complicated and have not become simpler since the FSA’s paper on simplified advice, published in March 2012.

Complications are inevitable because, first, the FCA’s rules are complex, second, the ordinary law also applies to what is going on and, third, the facts of each case will inevitably be different. 

The starting point is to decide whether the client is being given advice or simply information. That is important because different rules apply depending on whether the answer is advice or information.  In a High Court decision in 2011 in the case of Rubenstein v HSBC, the judge had to decide whether the bank had given Rubenstein information or advice when it had sold him a single-premium investment bond.  The judge decided it was advice. 

He said: “The key to the giving of advice is that the information is either accompanied by a comment or value judgement on the relevance of the information to the client’s investment decision, or is itself the product of a process of selection involving a value judgement so the information will tend to influence the decision of the recipient.”

The judge went on to say that the starting point was to ascertain what the client wanted: if it was advice, then it was almost inevitable that is what he got. But if the client was clearly only asking for information, and the reply was limited to answering the question, it is likely no advice was given.

Other High Court decisions illustrate that simply because the client claims he was given advice does not mean that was so.  Thus in the case of City Index v Balducci, decided soon after the Rubenstein case, the claimant offered its customers spread bets on financial derivative products. The customers were supposed to make their own trading decisions and trade at their own risk.  The claimant’s role was to operate the system by opening or closing positions on instructions. This was made clear by its risk warning which said the claimant was prohibited by the FSA from giving advice, subject to clearly spelled out exceptions. Balducci had been spreadbetting on the price of heating oil over a period of two years and had run up substantial losses with the claimant which it was seeking to recover in court.

His defence was that he was acting on the claimant’s advice and it was the claimant’s fault that he had made those losses.  The judge had no difficulty in deciding the claimant had not given advice.  He said, “not only… was there no advisory relationship but… Mr Balducci did not regard the relationship as an advisory one”. 

Can advice be automated? 

The FCA rightly says it can.  Thus, in a decision in 1998 Re Market Wizards Systems, the question was whether a computer software system gave investment advice. 

When a current price and certain other information was entered into the system and then processed, the system generated a “buy”, “sell” or “hold” message in relation to a particular stock.

The judge held it was giving advice and was not simply a tool for analysing the market.  The principle is this case will apply to a decision tree.  If the result of the decision tree process amounts to advice under the rules, the rules on advice will apply.

Once it has been decided that what is being given to the client is investment advice, the next question is whether it also amounts to a recommendation. If it is, then the rules on suitability apply and that is true even if the advice is limited or focused in any way – although, of course, the limitation will affect the extent of the advice.

Under the ordinary law which applies all the time, an adviser is required to advise with due skill, care and diligence.  If he is giving information to his client who is relying on him, he must take care that what he says is accurate and reasonably full. 

In other words, he must not mislead by what he says or by what he does not say.

This high-level view is enough to make good the point that even if one is giving limited or simplified advice, the issues involved are indeed complex.  It is difficult to be clear about how the rules will apply in the cases close to the border between advice and information. 

Peter Hamilton is a barrister specialising in financial services at 4 Pump Court and co-founder of



Nic Cicutti: Wheatley’s wages are not the real scandal

Over the years I have followed regulatory affairs, both as a Money Marketing columnist and for certain newspapers. One of the striking things about many discussions has been their utter predictability, usually on the IFA side. Take a given subject and you can almost guarantee what the response will be. Some advisers, and others in the […]


Mortgages comment: Andrew Montlake

Yesterday I was quite angry so I took to the Twittersphere to have a little vent. Just one comment that read: “Sometimes, just sometimes, lenders and their ridiculous systems and decisions get on top of you – seriously time-consuming for no reason!” In no time at all I had more than a few virtual consoling arms […]

Spotlight on charges 700x450.jpg

Aviva scraps drawdown platform charge following Budget

Aviva is scrapping the £100 ongoing charge on income drawdown through its platform following changes announced in this year’s Budget. The price change will apply to both new and existing clients from the start of September. The platform will allow advisers to produce quotes based on the new pricing from the start of August. Aviva […]


HMRC debt recovery proposals under attack

Plans to hand HM Revenue & Customs powers to take tax from people’s bank accounts have been fiercely criticised by accountants, lawyers and building societies.  Direct Recovery of Debts proposals outlined as part of the Budget would allow the Revenue to go into a person’s savings and deposits and recoup tax owed without the need […]


Neptune video: UK economy: a sustainable recovery?

After years of a slowly brewing economic recovery, the UK has seen a strong rise in growth in recent months. Mark Martin, manager of the Neptune UK Mid Cap Fund, discusses the strength of this recovery and whether it is sustainable.

In the video, Martin addresses the following:

• Structural features supporting the UK economy
• UK mid-caps and the potential for M&A activity
• Valuations and opportunities in house builders


News and expert analysis straight to your inbox

Sign up


There are 10 comments at the moment, we would love to hear your opinion too.

  1. In quantum physics the Heisenberg’s Uncertainty Principle describes how the more precisely you measure one variable the less certain becomes another connected one. For example, the more precisely you measure the position of a particle, the less sure you can be of its momentum.

    I propose a Hamilton’s Uncertainty Principle in respect of simplified advice, the FOS and clients. An example would be the more detailed the guidance from the FCA, the less sure you can be about how the FOS will apply ‘fairness’ to an individual client situation. Or, the more precise you can be about your simplified process, the less sure you can be about what it means for a specific client.

    In quantum physics the Heisenberg Uncertainty Principle is inherent to the system and cannot be changed.

    In financial services it can be changed but it needs to be done at a fundamental level. Either the FCA need to come out and say ‘do it this way and you will be OK’, or the rules that govern how the FOS operate need to be changed (acknowledging an issue would be a start Mr Boorman).

  2. Is any form of advice VATable? Just wondered.

  3. Derek Bradley ceo Panacea Adviser 28th July 2014 at 2:05 pm

    Simplified advice or Simplified Solutions?

    Kelly Johnson, lead engineer at the famous Lockheed Skunk Works, coined the acronym KISS.

    Whilst today it translates as ‘Keep it simple stupid’, the principle was best illustrated by the story of Johnson handing a team of design engineers a handful of tools, with the challenge that the sophisticated jet aircraft they were designing must be repairable by an average mechanic in the field under combat conditions with only these tools.

    Hence, the ‘stupid’ refers to the relationship between the way things break and the sophistication available to fix them when it happens.
    As a country, UKplc has moved away from the manufacture of goods and products heading instead toward the manufacture and provision of intangible goods and services.

    Financial services is often collectively referred to as an industry. Distribution was seldom linked to a profession, until the RDR arrived, and the industry is made up of many different “manufacturers” (providers) and distributers large and small.
    Often very similar, intangible products have been designed to address a vast array of perceived financial needs or problem solving solutions for both personal and corporate consumption.

    But in the brave new world of post apocalyptic RDR, the delivery of consumer friendly, understandable, simplified advice (to those consumers disenfranchised by adviser segmentation as being not cost effective to service) that could lead to a transactional outcome online is being thwarted by the very thing that should make it simple.

    It is a fact that any ‘industry’ that “designs and manufactures” products have done so because it has identified a consumer need, or at least thinks it has. In doing so it then needs to create awareness of what it has made – and to find a way of getting it distributed. That still often means finding a sales force or in our more technologically enlightened times an easy way for somebody to buy it.

    Indeed, obviously simple and there are so many ways to achieve the awareness and understanding with technology to enable the ‘shop’ button to be hit.

    Video linked to free internet research opportunity and understandings can have a big impact in gaining better informed, engaged and protected consumers.

    There are some 340,000 years of video watched globally online every day. 68% share their viewings and for firms that have video embedded on their site relating to a product or service, 88% of visitors spend more time on their site.

    Consumers who watch a product video are 85% more likely to buy it. The phrase ‘what goes on in Vegas stays in Vegas, but what goes on in YouTube stays on Google forever’ is a great reminder that a compliance trail is nicely dealt with at the same time, no more ‘he said, she said’.
    Simplified advice is possible, maybe a starting point would be inventing a different descriptive such as “Simplified Outcomes” or ‘Simplified Solutions’?

    And to make this work, a set of plain English protocols should be put in place that simplifies the regulation and responsibility for “Simplified Outcomes” or ‘Simplified Solutions’, placing a consumer looking for low cost financial ‘understandings’ in an informed space, able quickly and easily to make a good decision and purchase while at the same time ensuring understanding they have an element of responsibility for their choices.
    Steve Jobs said “We made the ‘buttons’ on the screen look so good you’ll want to lick them”.

    As an industry, that should be our target, to get attention, to create confidence in the end user.

    How can this be achieved though when the existing lines between advice, product and who is responsible are blurred when it suits?
    Well, as a start, all manufacturers of financial services products should be required to have the product they “manufacture” certified or licensed as fit for “Simplified Outcomes” or ‘Simplified Solutions’ delivery in a clearly defined set of tick boxed financial planning circumstances and licenced accordingly- by the regulator.

    The outcome of this would be that those not able to afford fees will know that “Simplified Outcomes” or ‘Simplified Solutions’ to satisfy their needs can be wrapped up in a recommended packaged product that has been deemed fit for that purpose by the regulator.

    The word ‘advice’ must be removed from the process to make this work.

    The regulator would carry responsibility for what it is regulating in the “Simplified Outcomes” or ‘Simplified Solutions’ space, creating the simplicity bit, unlike today. We would then see an end to the possibility of inappropriate or faulty products being sold or bought for the wrong reasons to the wrong people.

    After all it seems crazy that in today’s regulatory world (where cars cannot get on the road, planes cannot fly, drugs cannot be consumed without a regulatory body certification that they are safe to drive, fly, inject) regulated products, funds and schemes are not licensed as fit for a particular, even specific purpose and instead often deemed unfit for purpose after the event because of perceived miss-selling, miss-understanding or miss-buying.

    Can the FCA embrace KISS, well let’s see?

  4. Generally in engineering concerned with combat this may possibly have been valid. But in other branches – such as Automotive it has long since been confined to history. Years ago you might have been able to service your own car – today? Forget it.

    As for financial services – is there anything less simple? Much of the problem and perhaps the main driver for the RDR was the sales culture. Very often flogging something someone didn’t know they wanted and probably didn’t need anyway. The product once purchased often had the persistency of a Mayfly. Oh the general public was served and often stitched, but the insurance companies got rich, as did some advisers. Those who are the assumed beneficiaries of simplified advice would probably be best served by receiving advice to reduce their debt and review their expenditure habits before piling up more financial obligations. Hardly a job for an adviser as it is unlikely to be remunerative.

    You don’t have to look at simple products to see the line between advice and information being blurred. SJP has been a past master of this for years. Is the phrase ‘if I were you’ (or similar) advice or information?

  5. Thanks to Peter Hamilton for this insightful article. I am now wondering where the Chancellor’s “guidance” on pensions matters will fit into the complex spectrum which runs between advice and information. I am guessing that many prospective retirees will be looking for advice, so it will be essential for all guidance providers to be very careful how they explain and position the information they pass across.

  6. I don’t think it is a blurred line. There is no line at all – From our perspective it could well look, smell and fell like information but it really doesn’t matter what we think. It is what the FOS thinks at the time it gets involved.

  7. Thanks to Peter Hamilton for this insightful article. I am now wondering where the Chancellor’s “guidance” on pensions matters will fit into the complex spectrum which runs between advice and information. I am guessing that many prospective retirees will be looking for advice, so it will be essential for all guidance providers to be very careful how they explain and position the information they pass across.

  8. brian weatherley 29th July 2014 at 11:10 am

    Thank you Peter for your article. It leads me to believe that in simple terms, there is no such thing as “guidance” as far as Financial Services are concerned. Information of a factual nature can be given without consequential value judgements or direction to act being made.

    If applicability of such information beyond that is sought then advice is given.

    Perhaps, it is along these lines that the FCA can define the role of an Adviser.

  9. Julian Stevens 29th July 2014 at 1:24 pm

    Marty yesterday at 3.43 p.m. ~ bang on. Even the line (if there is one) between information and guidance is more blurred than a chalk one in a rainstorm. Best to stick to focussed advice and charge for it accordingly.

  10. Why are pseudonyms appearing in comments but ‘real’ names appearing under “Most recent comments” on the right of the screen?

Leave a comment