Advisers should be less sensitive to the misuse of the word ‘advice’ in the Government’s plans to provide free-at retirement guidance, according to Personal Finance Society chief executive Keith Richards.
Chancellor George Osborne set out new pension freedoms in the Budget which will allow people aged 55 or over to take their entire pension pot as cash from next April.
The reforms will be backed by what Osborne described as “free, impartial, face-to-face advice” for those at-retirement, later clarified as guidance rather than advice.
Osborne later dismissed concerns from advisers that the terminology is misleading for consumers, claiming he needs to “communicate in English”.
Speaking to Money Marketing at the PIMS conference on board the Aurora last week, Richards said: “Some advisers get really upset about the Chancellor’s reference to advice, when he actually meant guidance.
“But if we look at this from a public interest perspective, if you read something, it’s information. If you’re told something, it’s advice.
“And while we might get upset in the industry that advice means professional, regulated advice, actually to the public it doesn’t.”
He said the industry needs to start thinking “in a more consumer-centric way” and to have “less sensitivity around terminology”.
Richards said: “What we have to help the public understand is the difference between professional qualified advice and unqualified advice. Because when consumers realise an adviser is more competently trained and regulated, and affords them protection, they can differentiate between that and a non-advised service.”
Separately, Richards said the way forward to engage with consumers who have not sought financial advice in the past is to move to a fixed fee charging structure which separates review and implementation charges.
He said: “The big challenge is how do we engage with the millions of people who need advice and have the capacity to pay for it, but are sceptical about engaging with advisers as they believe the process will be deliberately complicated to justify fee charges.
“We are already seeing the development of more fixed fee charging structures and some firms are dividing their process into an initial review charge and then an implementation charge. That makes advice more approachable and can empower the consumer to feel more confident about the process.”