Tony HazellSep 20 2017

Finding the line between advice and guidance

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Where does guidance end and advice begin? This old chestnut cropped up in relation to the Financial Guidance and Claims bill.

The bill introduces a new body to replace Pension Wise, The Pensions Advisory Service and the Money Advice Service – all guidance services. It will not define the difference between guidance and advice, which appears to have concerned some people.

But why should it when we already have a clear definition of financial advice and very good guidance as to what constitutes advice?

If you call a client to remind them that they have not opened an Isa this year, no one is going to think that is advice

In February this year the Treasury published amendments to the definition of financial advice. This will, from January 2018, create a single interpretation of advice by bringing the Financial Services and Markets Act in line with MiFID.

I sometimes wonder if the confusion over the line between advice and guidance sits more in the mind of the financial adviser than of the consumer.

If you call a client to remind them that they have not opened an Isa this year, no one is going to think that is advice. If I receive a list of funds that might be generally decent for a range of investors, I would regard that as guidance. But if I parted with hard cash after a one-to-one discussion on the merits of various investments, I would regard that as advice.

Two of the three organisations being merged are all ones that generally give out guidance and attempt to point consumers in the right direction. The Pensions Advisory Service does rather more and I hope it is able to continue this excellent work in the new guise. But none of them come close to the role of a financial adviser with their – hopefully – long-term one-to-one relationship with each client. None takes money from consumers and none will point them directly to a particular investment.

The biggest danger with this new organisation will relate to training. Those working for it will need to know when to say: "No – this is not within our area."

Financial advisers, meanwhile, must stop quibbling about what constitutes advice and what constitutes guidance and just get on with doing their jobs well.

Where were you then?

The run on Northern Rock 10 years ago was one of those "where were you?" moments in personal finance.

Personally I was having a relaxing walking weekend around the Allendale area with a few mates. We were heading to buy a packed lunch in a small town when a friend pointed to a rather large queue outside a Northern Rock branch. Sadly there was no George Bailey to climb the desk and hand out his honeymoon savings as in It’s A Wonderful Life.

It was also pre-iPhone so I struggled with my Blackberry before phoning the office. Everything seemed to be under control so I just carried on walking. It even provided a bit of dark humour banter at the expense of one friend who had most of his savings in the stricken bank.

The following years brought dark times for savers strung up by the hubris of bankers who were far less clever than they thought they were.

On the bright side it did bring us one of my favourite football chants as Aston Villa fans taunted Newcastle, who bore the Northern Rock logo on their shirts, with chants of: “Banked with the Woolwich, you should’ve banked with the Woolwich.” 

Charities should not target the old

During 11 to 17 September it was Remember a Charity in Your Will week. In the past I have given frequent plugs to this initiative. It is a tax-efficient way to give to a good cause without any financial hardship for the donor.

This year it even had a “pirate” radio station broadcasting at various locations around the country manned by Emperor Rosko and Tony Prince – both former Radio Caroline DJs and, in the case of Rosko, a mainstay of Radio 1 in the 1970s while Prince was at Luxembourg.

This year, however, I still have a sour taste in my mouth for the rampant abuse of elderly people. Earlier this year I managed to cut my wife’s aunt’s outgoings by £150 per month by raking through the myriad charities she had been persuaded and sometimes bullied into supporting.

She still made donations to her favourite three.

Imagine my surprise when I spoke to her recently to discover three had become four after another had phoned her despite all my efforts to get her off every mailing list.

It is difficult to support organisations that target ladies in their 90s, no matter how worthy their cause.

Tony Hazell writes for the Daily Mail's Money Mail section