Trade bodies have welcomed HM Treasury’s new definition of financial advice.
The new definition will mean regulated advisers will only be giving financial advice when they provide a personal recommendation.
But HM Treasury has said the definition will only apply to regulated firms in order to stamp out fraud.
Charles McCready, director of trade body Tisa, said the new definition was a “significant step change” towards helping the financial services industry support consumers.
He said: “We are pleased to see that the Treasury is aligned with Tisa members’ preference for adopting the Mifid definition of financial advice which helps to clarify what is advice versus guidance.
“Tisa members were very keen to broaden the availability of guidance to the mass market, as well as protect consumers.
The new rules will mean unregulated firms will still be giving advice without proper authorisation if they “advise on investments” as set out in the Regulated Activities Order.
Liz Field, chief executive of the Wealth Management Association, said: “This is an important decision for the industry and its clients: consumer protection, proportional regulation and clarity are essential tenets and this move enables firms to deliver to individuals and families the best possible financial advice so they can confidently plan for the future.”
HM Treasury reviewed the definition of advice after committing to do so in the Financial Advice Market Review.
It found some companies were less willing to offer less expensive guidance services because they were uncertain about what regulated advice - where the adviser accepts liability for a recommendation - consists of.
Under the current rules, set out in article 53 of the Regulated Activities Order, for advice to be regulated it must relate to a relevant investment, be given to a person in their capacity as an investor or potential investor and must relate to the merits of them buying, selling subscribing for or underwriting the investment.
Under the new definition advice must be a recommendation made to a person in their capacity as an investor or potential investor, the recommendation must be presented as suitable for the person to whom it is made and it must relate to taking certain steps in respect of a particular investment.
The new definition will come into effect on 3 January 2018 after the FCA has consulted on, and published, new guidance.
damian.fantato@ft.com
