Advisers have called for a simpler term for advice, given the public’s poor understanding of the term ‘financial advice’ and the services advisers are offering.
Philip Wise, managing director for Spofforths Financial Planning highlighted that terminology around the financial advice sector should be simplified in order for consumers to understand different products on offer to them.
He said: “It is easy for an adviser to confuse the term ‘advice’ with ‘regulated advice’. The latter involves a product recommendation, and is defined by the FCA, but consumers often define and understand the concept of advice as telling some-one what they should do. “
According to Mr Wise, using simpler terms would be one solution to the problem. He said: “terms need to be used, which fit with consumers’ understanding of advice. The FCA should clearly define advice, and it should not be influenced by those with vested interests.
“The FCA should be accountable for this, but it and its predecessors have failed to define advice appropriately in all their years of existence. It would probably be better for another body to define advice. The FCA is too close to the sales people, and too easily influenced by them, to be able to come up with a satisfactory definition”, he said.
The news comes following research from Aegon UK earlier in November, which found that 76 per cent of consumers were unable to differentiate between financial advice and guidance.
Some 75 per cent of consumers feeling that there should be clearer communication as to the different types of planning available.
Earlier this year, HM Treasury and the FCA launched its Financial Advice Market Review, which will look at the advice sector.
Right to reply
A spokesman for the FCA, said: “We are currently - with the Treasury - reviewing the advice market and one of the issues that will consider is whether there are any barriers consumers face in seeking advice; the value they place on it and how easy it is to understand where advice can be found and what it means.”
