Personal Finance Society  

PFS calls for safeguards on Treasury advice definition

PFS calls for safeguards on Treasury advice definition

The Personal Finance Society has backed HM Treasury's plans to redefine financial advice.

But it has also proposed some safeguards to protect consumers from the proposals, which involve extending unregulated guidance.

The Treasury's proposal would bring the definition of advice in line with the Mifid definition and would effectively mean that only advice which makes a personal recommendation to the individual would be regulated.

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In its submission to the Treasury's consultation, the PFS has proposed that guidance services should only be offered by authorised firms committed to standards such as treating customers fairly.

Keith Richards, the chief executive of the PFS, said: "Extending the scope of guidance to address entry-level or less complex savings and investment needs will help consumers make better informed decisions, and protect them from the increasing risks of mis-buying and scams.

"However, as the prevalence of scams continues to rise, consumers must be able to rely upon minimum standards from any firm or individual offering financial guidance, coupled with appropriate levels of protection.

"The measures we have proposed should mitigate the risks of firms attempting to use guidance series to distribute products without being subject to regulation."

The PFS has also proposed a broader review of the labels used in the financial advice profession.

It has suggested that these be removed in favour of new "advice" and "guidance" labels.

Meanwhile the PFS has also urged the government to broaden access to the proposed Pension Advice Allowance in the Treasury's consultation on this.

The current proposals mean consumers can only use the allowance to seek full regulated advice, but the PFS has said advisers should be allowed to determine the most appropriate service for the client, whether it involves a personal recommendation or not.

Mr Richards said: "Many individuals simply need a retirement income 'options report' or some form of extended guidance or awareness of tax treatment, and so we would urge the government to consider extending the PAA accordingly."

He also said the Treasury and Financial Conduct Authority should encourage pension providers which don't offer adviser charging to facilitate transfers to products which do.

HM Treasury has admitted that the £500 allowance may not be available to everyone because some providers and trustees do not offer adviser charging by customer-agreed remuneration.