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PFS: Firms are overly sensitive to misuse of ‘advice’

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.”


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There are 26 comments at the moment, we would love to hear your opinion too.

  1. Philip Milton 19th May 2014 at 3:37 pm

    It’s not the industry – it’s the Regulator and the Ombudsman. They are the ones who will judge the difference between information and advice – and to the detriment of advisory and product-selling firms so that hindsight will be used in the face of complaints from under-performance or loss experienced by the ‘advised’ person. Which adviser can afford to take that risk?

    Perhaps a new level of advice is needed based on caveat emptor, let the buyer be aware and a statement signed by the recipient that he has no recourse against the adviser in following the guidance given, which he believes represents a fair appraisal of the circumstances at the time of the advice, based upon the circumstances and he understands the risks involved with his actions?

  2. If the ” industry leaders” use such abysmal language, to berate the working classes in the industry I.E. Financial Advisers as part of their vanity and abuse of their position, then it should be just as acceptable that Advisers bring to their attention their stupidity . . . .their arrogance . . .and their incompetence . . .to run insurance companies – whilst paying huge fines to people who appear to have little or no idea what they are talking about. For example people like Andy Hornby and Fred Goodwin a couple of incompetents . . . who were appointed by reckless Boards of Directors – to run the company down and destroy the business – destroy customer relations – employee relations – for their personal profit , racketeering – yet no Director appears to have taken a blind bit of notice . It is interesting the CII have been distant – extremely quiet – when ” TRUST “, has been removed by directors of insurance companies – and no one cares. Now we are run by outsourced FCA – who are forcing additional administration – forcing new requests and requirements – in their abuse of advisers . . .and it appears advisers have to submit to this incompetence – to bow to these individuals – who lack common sense or care in the community – unaware of the destruction of advice now available . It is worth checking the sponsors ads on TV now for ” insurance from various areas . . . .with little or no control . . . . and less people purchasing insurance . In my opinion this is because of the stupidity of Regulators slagging of advisers and insurance company directors slagging of advisers – and who are too stupid to realise . . .it is the advisers – the sales people who brought in their business – and lined their pockets.

  3. My goodness! First the PFS eschews the idea of independence, now it doesn’t even stand up for advice. What does it stand for? Why then bother to take its myriad qualifications in order to provide competent advice?

    Where on earth are they coming from? Are they determined just to be Government and Regulator stooges?

  4. In light of recent FCA concerns on clients being confused about whether they have received regulated advice or not this is a truly astonishing statement from the PFS. I seem to remember Rory Percival saying at one point that if clients believe they have received advice then that’s a good indication they have.

    It’s more important than ever that clients understand the distinction between execution only, advice and guidance. This article seems to suggests they should remain blissfully unaware. That’s manifestly not right, proper or TCF.

  5. Simon Webster 19th May 2014 at 5:15 pm

    Writing as someone who sells financial advice for a living I am disappointed that the normally excellent Keith Richards as chief executive of my professional body should be so sanguine about the misuse of the word advice. Whilst his wages do not depend on the public’s best possible understanding of who he is and what he does mine do!

    Tied vs independent; restricted vs independent; guided advice, information, execution only are all terms barely understood in the trade – what hope Jo Public?

    Govt and regulator need to get a handle on the widely held belief that best advice is always independent; while the PFS who represents all advisers need to get a handle on the idea that face to face advice is always better than ANYTHING ELSE! and attempts to conflate independent financial advice with anything else causes consumer detriment!

  6. Philip Castle 19th May 2014 at 5:47 pm

    I very much hope that Keith Richards comments have been taken out of context, if so he needs to post a clarification directly on the comments page here.If not, then in my opinion he needs to consider resigning and applying for a job at the CII rather than the PFS, which is supposed to be about ADVICE (SOFA actually had advice in its title, perhaps that was a flaw with the change to PFS).
    As Simon says, what hope when Rory Percival says if the client THINKS they got advice, that is what counts as I agree, that is what the FOS will usually decide and having spent 2 hours reading FOS published decisions a few days ago, I am inclined to agree with the FOS on that.

  7. Julian Stevens 19th May 2014 at 5:57 pm

    If people want just guidance, they can avail themselves of the multitude of information freely available on the InterNet or go to the MAS ~ or should that be the MGS?

    If they come to me, my offering will be advice and it’ll have to be paid for.

  8. Keith Richards 19th May 2014 at 9:23 pm

    Simon, Phillip, I appreciate your respective points and please be under no doubt that my objective is to ensure that the benefits and value of professional advice is better understood and trusted by the public which is why we have put in place a number of key initiatives.

    The Chancellors reference to advice, when he subsequently confirmed that he meant guidance, was also justified by confirmation that he was referring to the ‘plain English’ definition of advice. Whether we like it or not, the public will generally refer to the spoken word as advice in the generic sense, which is also what consumer groups and research tells us. The government has set up a number of consumer support organisations – Citizens Advice Bureaux, The Pensions Advisory Service and of course the Money Advice Service, none of which provide ‘regulated professional’ advice even though ‘advice’ is in their titles.

    We need to join and influence the debate from a consumer, not an adviser or industry perspective and equally with terminology that is both intuitive and not confusing to the public. Professional Qualified Advice is the real differentiator and is the point I was trying to make, when providing comment during a conversation, especially given the previous point regarding the need for consumer facing plain English. Professional Qualified Advice comes with a comprehensive range of benefits, value and protection and is where, as a Professional Body, we are trying to drive effective change rather butting heads with government and consumer groups.

    The Government have publically recognised the likelihood that more consumers will need Professional Qualified Advice as a result of the announced changes – this is what we need to focus on and develop.

    Julian – we both know that consumers recognise that there is a cost for Professional Qualified Advice. It is important that they can differentiate between free advice set up by Government, as you have pointed out, which should of course sign-post the public to fee (not free) based professional advice when appropriate.



  9. Let me pose a question. If you say to a customer, “I can’ t tell you what is the best thing to do”‘ is that advice?. I suggest it is an example of excellent advice. A fundamental part of the advice process should be to help the client differentiate between what is known and what is unknown. Let’s apply this to options at retirement . The two big unknowns are how long you will live and the rate of future inflation. If we knew that it would be simple but we don’t so to imply to the client that we can identify the best decision is downright misleading. In my view one of the causes of the problems that have beset our business is that we have over promised what advice can deliver. The only test of whether advice is good was did it enable the client to make an informed decision.

  10. I think it is a major issue – if someone thinks they have received advice when they have received guidance will those in the adviser community have to pick up the FSCS tab when it goes pearshaped?

  11. Simon Webster 20th May 2014 at 9:21 am

    Keith I appreciate you coming back on this. But the fact remains that certain words have very specific meanings in certain contexts. “Score” means one thing on a football pitch and something quite different on a street corner.

    The FS profession needs to own the language of advice. Face to face financial advice is precisely that, while money guidance is what flows from decision trees, internet and MAS – which IMHO should be renamed the money guidance service.

    Then finally there would be clarity and these two words (guidance and advice) would have clear and unambiguous meanings in common and professional usage. Simples.

  12. Julian Stevens 20th May 2014 at 9:48 am

    The danger for advisers is that what they may honestly believe to have been nothing more than a semi-formal chat (guidance) will be construed and acted upon independently by the other party as advice. Then, if that course of action turns out badly, the other party will complain against the adviser, possibly egged on by a CMC, on the basis that “This is what you told me I should do but now it turns out that I shouldn’t have, so you’re liable and I want compensation. Oh, and by the way, I made a recording of our conversation and your recommendations which I’m sure the FOS will, if necessary, be interested to hear.”

    Yes, most members of the public now realise that there’s a cost for Professional Qualified Advice but there are still a few who think that with a bit of subterfuge they can get it for free. Stick to chargeable advice and leave guidance to others.

  13. Keith

    I’m afraid your post, although appreciated, is disingenuous. All the bodies you mention have been set up to (amongst other things) educate the public. What better way to start than to educate them in the difference between advice and guidance.

    I’m afraid that in today’s world we all know that educational standards are about as low as they have ever been and the ‘great and the good’ do nothing to encourage higher standards. The man at the very pinnacle of all things financial doesn’t seem to know the difference between Avoidance and Evasion or Advice and Guidance. Our regulator is worried that the public doesn’t understand percentages. How is any of this helpful to anyone? Shouldn’t the PFS and the CII be at the forefront of trying to encourage the public to attain at least a basic level of comprehension? After all you are pretty gung-ho about educating the adviser community. Where better to start than with the definitions? At least then they won’t be disappointed when what they think is advice turns out to be no such thing.

  14. @Keith – Like Simon, I thank you for coming back to us on this statement, but I am afraid I am in agreement with Simon’s latest comment and as such I suspect if you asked other members, the vast majority would confirm Simon’s opinion is theirs too.

  15. This whole issue is blown up as insurance companies sponsoring the current Government – and undermining the advice process the facility of Advice, and the importance of Independent Financial Advice. What is clear, and what is being demonstrated is that along with Auto Enrolment – it is being used to further furnish selling opportunities – and Churning between insurance companies – who have neither respect nor interest nor care for their clients money. As a broker consultant with Scottish widows it never failed to amaze me of the contempt for their customers – advisers and clients – which comes down form the top ( Chairman, CEO, Actuaries, Finance Director, Sales Director, Board of directors . . . and non executive directors) – who wish to put in place a Group Pension Scheme – but without taking into account the requirements of the scheme members . Put simply do as little as you can for as much as you can commissions new business etc., Auto enrolment follows the same process – and I wonder who will be first to challenge the Government – through the FCA and Courts – on Fraud or the concept of Missselling – convenient cover up for fraud. It is interesting that employers must provide Guidance – to their employees where auto enrolment is giving employers – additional administration and worsening employer employee relationships . . . . . One way round this is to ” outsource ” to a convenient insurance company such as Standard Life – who already claim to hold 30% market share in pensions . . .if so, . . . .where is the competition ? Now advice like ” guidance ” is driven underground . . .with no controls . . . . no checks or balances . . .and with some 20,000 advisers left in the UK paying FSCS – Fees – FCA Fees – PI Liability Fees – there is no margin left – unless advisers charge a minimum of £ 3,000 per individual. Thi is the REAL cost of the ” Retail Distribution Review “, what is more like the Retail Destruction Review “. The destruction of advice – brought about by insurance company and others sponsorship – to destroy the business of advisers . . .to lay the blame on advisers . . .for the inept and incompetent running of the Monopoly of insurance companies – who have destroyed Trust as a consequence . . . .and destroyed advisers businesses – to form one large insurance conglomerate . . . where advisers need to ” Buy In “, to pay those at the top of the insurance company pyramid . . . . . . . and where service disappears down . . . . .one of Edinburgh’s . . . . . many famous . . . . Black Holes

  16. If the FCA and potentially FoS are going to hold me to the regulators definition of what constitutes ‘advice’ or ‘guidance’ then i think i am well within my rights to require Mr Osborne and the powers that be stick with that very same definition.

    One point that everyone, including Keith Richards, seem to be agreed on is that the public need to be educated about what exactly constitutes ‘advice’ or ‘guidance’ and what protection etc comes with each. The government, MAS and now industry spokesmen happily interchanging the two terms does nothing at all to educate the public, in fact it does the complete opposite and further muddies the water.

    The FCA must, in my opinion, make clarification of the ‘advice’ or ‘guidance’ argument a priority before April 2015 or there will be a lot of retiree’s finding out that the chancellors word is no good. Although, some may already suspect that.

  17. Now is all this advice about the subject of advice (or guidance) or just guidance I wonder. At least within this forum we are not subject to a compensation claim form someone for our opinions – or facts….

  18. I’m afraid Keith’s response is simply not tenable because it clearly cannot be applied consistently to other aspects of ‘what the client understands’.

    The most obvious example is independent v restricted. Most clients would ‘understand independence’ to mean that the adviser is not tied to a provider. As we know this actually means they advise across the full range of packaged retail investment products – with the exception of pension transfers, long term care, etc. And the fact that the ‘independent adviser’ doesn’t advise on shares, corporate bonds or other non-packaged investments (except investment trusts) is neither here nor there presumably? But can the restricted whole of market adviser talk about being independent which is what the client understands? No, because we would be breaking the rules and no doubt accused of confusing the client on top.

    It’s precisely because there’s a mis-match between what clients understand and the reality that we have to work to that accuracy is essential.

    I’d like to be clear about whether my doctor, accountant, solicitor and financial adviser were giving me advice or guidance thanks very much. And I don’t want their professional bodies patronising me and being condescending.

    For the record I’m a member of the CII/PFS (20+ years) and CISI.

  19. @Harry – Perhaps Keith Richards would care to comment on here, you can’t have it both ways.

    Authorised REGULATED advisers stance on this is clear and the PFS hierarchy needs to get in FRONT of it’s members and not have to be forced in front from behind.

  20. Can I comment on grey area’s last post when he said he wanted to be sure his doctor was giving advice or guidance. Some years ago I had heart problems. My cardiologist outlined two options, stenting or having a by-pass. She outlined the pro’s and cons of each but told me that I had to make the decision which one to have. Was that guidance or advice?

  21. @Traynor John
    Sounds like guidance but that’s the point – which is it? On the other hand if they write a prescription the it’s pretty clear cut.

  22. In reply to grey area. My cardiologist would be upset if I told her she hadn’t advised me. Her point would be that whilst she had given advice the decision had to be mine. In the same way if you asked a solicitor for advice on taking civil action they would explain the legal position and what had to be proved for my claim to succeed. They would give me an assessment of my chances of winning and would then ask me if I wanted to proceed. Of course once instructions had been given the solicitor would act in my best interests.

    My belief is that the concept used by the regulator that advice = recommendation is flawed. If there is more than one option and the outcome cannot be predicted telling the client that we can identify the best one is in itself misleading. We can put as many caveats around that recommendation as we like but the client will still be aggrieved if it turns out that another option would have been the better choice.

    It is better, and may I say more professional , to explain that we cannot identify the best course of action but that we can help them make an informed decision. We advise but the client decides.

  23. I was in the pub last night ! I asked the barman which beer he recommended – he gave a bit of thought and described each beer – and confirmed he preferred Charles Wells. I had a pint and it was delicious.
    Was that a recommendation – it did the job – it was enjoyed – if it was not of good quality it would have been replaced – immediately. He asked me if I thought the new Pensions Auto Enrolment was a good idea – I told him it is forced enrolment. He asked which funds I thought he should have ? I told him there was a range of funds – just like his beer . he asked me which one I preferred – I told him . He said he will look into this fund. Was that Advice ? or was it Guidance ? or was it an opinion ? So many advisers work with their opinions – none are wrong – the end objective will be achieved as a result of following so many different routes. The trouble is this FCA and this Government are not aware that so many different routes are available to achieve an objective. These individuals are so stupid – they are so thick – they do not understand such a simple system. But them we must realise like warmonger Tony Blair – none of the cabinet had military experience – and had no thought for the loss of life – which continues under Cameron. The lack of any knowledge – or background in business by MP’s is one reason UK Plc is in a mess. MP’s are now agents for gathering sponsors, for gathering funds for their party ( and themselves see newspapers today ) – rather than providing support, or knowledge or service to their constituents – their communities – their businesses. For the record Anne Main MP refuses to provide any help or service toward persuading the Chairman of BT to provide any reasonable working telephone service – or BT Infinity ( since 26th July 2013 ). I now operate form the local Library as a consequence of poor business relationships – with a ” communications company “. Sir Michael Rake Chairman Gavin Patterson CEO and their B.T. putting the ” British ” into British Telecom – yet continuing to advertise cheap BT deals ? Well anyone can advertise cheap deals – when they cannot provide a service . . but like insurance company executives – they refuse to act with any conviction – and ” conviction ” of one kind or another should follow !

  24. Philip Castle 23rd May 2014 at 2:34 pm

    @ Trayner John | 23 May 2014 11:43 am – I entirely agree, that is how I (try) to work.

    @Ian Lees – Sorry, correct me if I am wrong, but you chose to cease to be a regulated adviser?

  25. I prefer the phrase ‘we need to help the public understand…’ rather than ‘we need to educate the customer…’ which is often used and a caveat emptor cop out as I see it. Joanna Public is well confused… Why can’t the insurance industry get its act together and just tell her whether advisers/brokers are independent or not and how you earn from giving her advice. In my humble opinion, if you want her business, rather than her buying from PCWs perhaps, she should be able to judge whether she trusts you/wants to do business with you on the basis of your customer service. Not umming and ah-ing about who pays etc. The insurer winning the business should, surely?

  26. Clearly it is the lack of education in basic reading and writing in the English Language – which allows advertising such as ” Independent “, or ” Advice ” or ” Restricted ” – that the English language has such a broad spectrum of usage – and such miss usage by insurance companies and Banks in their advertising – without any controls from Advertising Standards Authority or other any other regulatory bodies.
    Insurance companies and banks have to engage in misleading advertising – to attract a client – which demonstrates the lack of trust consumers have in their bank and the sloths at insurance companies – and the depths of depravity – into which they have driven into. Lemons . . cliffs . . .and dodgy advertising – which costs vast fortunes to shareholders – mainly investment houses . . . The investment houses have the opportunity to control these – but are failing their clients i.e those who invest in these investment houses. . . . . .by selecting a good investment manager – who is committed to looking after clients money and managing it accordingly .. .they can provide more security – something that the passive investment industry can not achieve – nor do they wish to . Such is the nature of the cheap beast – you purchase – you go with the winds of change – and you go up in good times and down at other times . . . .

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