Financial Advice Market Review  

Providers shun FCA guidance opportunity

Providers shun FCA guidance opportunity

Pension providers have said they are not interested in taking advantage of the new guidance definition, which will come into effect in January.

Last week the Financial Conduct Authority confirmed it would change the definition of financial advice so that only advice which offers a personal recommendation will be considered regulated.

This means that from Wednesday 3 January any service a regulated firm offers which does not offer a personal recommendation will be considered guidance.

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Steven Cameron, pensions director at Aegon, said: “We see this as an opportunity for adviser firms to innovate, rather than for providers to move into this space.

“The hope is that clarifying ‘advice’ will allow adviser firms to offer additional non-advice guidance services to their current and future clients, plugging the ‘advice gap’ in its widest sense.

“However, customers will only benefit if this new technical definition can be turned into practical solutions which create a wider range of support services.”

Meanwhile David Stevens, LV’s life advice director, said it would focus on providing regulated advice through its Retirement Wizard service and its telephone advice team.

He said: “We welcome a single definition for regulated advice as this should help remove complexity for providers and advisers on the boundary between guidance and advice.

“However, in isolation, this change will likely only make a marginal difference to customers and presents some potential risks.

“For example, we’re concerned that unscrupulous firms could use this as an opportunity to begin creating low quality guidance to draw consumers into using their products.”

The new definition of advice and guidance came about as the implementation of one of the changes proposed by the Financial Advice Market Review.

This was because the review found many firms were unclear about the boundary between what constitutes advice and guidance and, as a result, limit the amount of information they give to consumers.

Earlier this year Aviva said the current rules mean the company is forced to sit by as their clients make bad decisions for fear of straying into offering financial advice and it has expressed disappointment about the upcoming change to the definition of advice.

A spokesman said: "We are on record as saying we had hoped FAMR would explore the definition of guidance, which could potentially lead to better outcomes for customers, but this was not forthcoming."

Meanwhile Prudential called for a new category of guidance including a personal recommendation to ensure people who need help with their retirement planning were not missing out.

In response to the new advice definition, a Prudential spokesman said the company welcomed the change and the "additional flexibility" it provides but did not say it would be changing the services it offers.

Earlier this week robo-adviser eVestor said providers should give their consumers advice on what to do with their pension money in retirement, saying guidance was an "unnecessary distraction".