HM Treasury has rolled out the new advice definition for regulated firms, in keeping with the recommendations made by the Financial Advice Market Review. Set to become active from 3 January 2018, the new definition stipulates that regulated firms will only be giving advice when providing a personal recommendation.
Unregulated firms, on the other hand, will still be bound by the wider Regulated Activities Order definition of advice – “advising on investments”. The new advice definition is in line with that proposed by Mifid II, the European regulation also set to take effect on 3 January 2018.
Tony Catt, IFA at TC Compliance Services, was sceptical about the definition’s capacity to encourage consumers to take up guidance services. “They do not know or care about the difference between advice or guidance. This is almost an internal industry struggle that is important to advisers, but not so to consumers,” Mr Catt said.
The Treasury has suggested a “dual approach” to advice definitions for regulated and unregulated firms will serve as a deterrent for scammers, as unregulated outfits will not be permitted to provide the same guidance as regulated businesses. It may also act as a guide for firms looking to offer simplified or robo-advice services.
The FCA is to consult on the resulting changes to its handbook later this year.