Department for Work & Pensions  

Lords accuse Gauke of misleading public about guidance

Lords accuse Gauke of misleading public about guidance

David Gauke, secretary of state for work and pensions, has been accused by a member of the House of Lords of accidentally misleading the public over what they can expect to receive from the new combined guidance body.

In a debate last night (5 July), the Lords tackled the two-topic Financial Guidance and Claims Bill which proposes replacing the Money Advice Service, the Pensions Advisory Service and the Department for Work & Pensions’ Pension Wise service with a single guidance body and making the Financial Conduct Authority responsible for regulating the claims management industry.

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Liberal Democrat Lord Sharkey said there was a clear need for complete clarity over what is guidance and what is advice, plus a statement of what is being offered in what circumstances. 

Lord Sharkey: “It is very easy to confuse the two and thereby accidentally to mislead. Even secretaries of state get this wrong. 

“The FT(Adviser) reports that, when David Gauke, a former regulatory lawyer, addressed the Association of British Insurers conference, he twice confused guidance and advice and called the new guidance body an “advice body”. 

“If the secretary of state can make that confusion, how easy it is for lots of other people to make the same mistake?”

Baroness Ros Altmann, former pensions minister, said she was concerned the wording of the Bill would unhelpfully prolong a major misconception in personal finance that has permeated the industry for years but could at last be addressed. 

She said: “I am talking about the use of the word ‘advice’. For far too long there has been a public perception that this thing called ‘financial advice’ is free. In the past, of course, it often was apparently free because so-called advisers were being remunerated by a financial company for selling its products. They were not really advisers; they were salesmen. 

“This commission-driven culture caused many scandals, and it incentivised behaviour that was not in the customers’ best interests. Rightly, the regulator has tried to clamp down on such practices. It now insists on a stark differentiation between what can be called ‘advice’ in personal financial services and what is merely guidance, information or sales. This is not a minor technical point; it is a fundamental issue. Indeed, we need a proper definition of what constitutes guidance, which I do not believe we yet have.

“There has been much misuse of the word ‘advice’ for so long, even at the top of government. When (then) chancellor George Osborne announced the pension freedoms, he said the government would also ensure that members of the public would have access to free impartial advice. What he meant, and what was introduced, was free guidance, not advice. 

“Indeed, the helpful briefing from the House of Lords for today’s debate talks about merging three existing advice channels into a single body, yet those three bodies do not give advice even though their names misleadingly suggest that they do. The Money Advice Service and the Pensions Advisory Service do not actually give financial advice.