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PFS calls for guidance providers to get authorisation

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Guidance services should only be offered by authorised firms that commit to professional standards and treating customers fairly frameworks, the Personal Finance Society has said.

While the PFS is backing the Treasury’s plans to redefine regulated advice to just advice involving a personal recomendation, the professional body fears the increasing the scope of unregulated guidance could lead to consumer detriment without further safeguards.

Chief executive Keith Richards said: “Extending the scope of guidance to address entry-level or less complex savings and investment needs will help consumers make better informed decisions, and protect them from the increasing risks of ‘mis-buying’ and scams.”

“However, as the prevalence of scams continues to rise, consumers must be able to rely upon minimum standards from any firm or individual offering financial guidance, coupled with appropriate levels of protection.”

Guidance providers should have to abide by professional frameworks such as the Standards, Training, Accreditation and Revalidation programme, the PFS suggests.

Richards says: “The measures we have proposed should mitigate the risks of firms attempting to use guidance services to distribute products without being subject to regulation.”

When the new definition of advice and guidance is introduced, the PFS says it would also like to see those being the only two labels used in the sector, removing terms like “basic,” “simplified,” “streamlined” “focused” or “gated” advice so consumers are clear on what each offers.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. In theory I totally agree and it makes life simpler for firms like us where there is a blurring of the edges between guidance and advice. The serious downside I reckon is that the Government want guidance to be delivered cheaply and you cannot do that in a heavily regulated environment with CMC looking at everything you do.

  2. The present confusion in the minds of consumers as to just what guidance, as distinct from advice, means must surely, in large measure, stem from the MAS and the PAS both having the word Advice in their names. How can the people who created these names have failed to foresee this as inevitable? As a result, people approach these organisations in the belief that they can get what they need ~ advice ~ without having to pay for it, only to find that they can’t. So, without a specific, personalised recommendation and still reluctant to accept the need to pay for one, they may well try to make their own arrangements and end up doing the wrong thing. Alternatively, if they find themselves unable to make certain arrangements other than via an authorised adviser firm, they may try to limit costs by trying the Exec Only approach which, in this day and age, most firms simply aren’t prepared to accommodate.

    Rather than create these expensive (and mis-named) guidance bodies (one of which is now to be scrapped), a far better approach would (as many others have suggested) have been a system of vouchers for (initial) advice. That would send out the key messages right from the starting gate that a correct and personalised strategy, with the appropriate consumer protection, is available only by way of regulated advice and that such advice is not available FOC.

  3. This is a fine idea in principle. However, there are two practical stumbling blocks.

    Firstly, as indicated, it would be necessary to define guidance within the rules. At the moment it’s anything which isn’t regulated advice but clearly that would have to change if people wanted to be authorised to do it – whatever ‘it’ is. The general public doesn’t understand the difference between the two categories we have now, introducing a third is unlikely to assist. “We offer regulated advice, regulated guidance and directions (that’s unregulated/unauthorised advice and/or guidance). Let me explain…”

    Secondly, the FCA is trying to divest itself of authorising vast numbers of people by implementing the SMR, so I can’t see they would want to start adding, monitoring and supervising ‘Guiders’ afterwards. And who’s going to pay for it?

    In many ways the PFS shouldn’t be bothering with this. The fact that vast numbers of investors have been excluded from regulated advice (delivered by it’s members) is a problem created by regulation. In general it’s left IFAs better off, delivering services to wealthier clients who both appreciate what they can do and are willing to pay. Until such time as the regulators and politicians make it easier and less risky to deliver the same to the rest of the population, it’s their problem, let them get on with it, guidance included.

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