The market should adopt a single consistent set of consumer-friendly explanations for ‘advice’ and ‘guidance’ to improve outcomes, according to an official report.
A study by the Financial Advice Working Group (FAWG) has found that providing clear, consumer-friendly explanations for ‘advice’ and ‘guidance’, rather than changing their definitions, will make the most difference to consumer understanding of the services.
The recommendations follow research showing many consumers – particularly younger ones – have conflicting views on advice and guidance, often tending to transpose their meanings.
As a result, they tend to have little awareness of the protection available if something goes wrong.
The FAWG recommends that the market adopt a single consistent set of consumer-friendly explanations for “advice” and “guidance”, which should be used by all bodies regulated by the Financial Conduct Authority.
In addition, the explanations of advice and guidance should be displayed side-by-side to allow comparisons to be made between the two services by consumers, and the use of the explanations by providers should follow a clear set of principles.
The single set of explanations adopted should be substantially similar to those in the following table, according to the FAWG:
FAWG explanations for “guidance” and “advice” (developed through consumer research)
Guidance | Advice |
| Guidance is an impartial service which will help you to identify your options and narrow down your choices but will not tell you what to do or which product to buy; the decision is yours. | Advice will recommend a specific product or course of action for you to take given your circumstances and financial goals. This will be personal to you, based on information you provide. |
| Providers of guidance are responsible for the accuracy and quality of the information they provide but not for any decision you make based on it. | Advice will be provided by a qualified and regulated individual or online by a regulated organisation. |
| Guidance is free unless your provider clearly tells you otherwise. | Providers of advice are responsible and liable for the accuracy, quality and suitability of the recommendation that they make and you are protected by law. |
| It will suggest what you could do. | You will usually pay a fee for advice. Fees will be disclosed before you are asked to commit yourself. |
| It will recommend what you should do |
simon.allin@ft.com
