People may confuse financial guidance with advice and mistakenly believe they have received help from financial firms specific to their needs when they haven’t, the UK financial regulator has heard.
The Financial Conduct Authority (FCA) is consulting on the financial advice sector and AJ Bell, an investment platform in the UK retail market, says in its response that the distinction between financial advice and other information or guidance services has become “blurred”.
This leads to the danger that people may think they have received advice specific to their needs when they haven’t; or that people will fail to understand the value of advice and guidance and do nothing about their finances, the firm says in its response.
Billy Mackay, marketing director at AJ Bell, says the FCA must address the lack of distinction between advice and guidance to improve consumer engagement with both options.
“The current system is anything but simple. The various regulatory concepts or labels that govern financial advice are unnecessary and just create complexity.”
The FCA launched its Financial Advice Market Review in August, partly with the objective of examining the “advice gap”, whereby people with lower incomes may not receive financial help.
The review must identify a clearer definition of what consumers can expect from financial advice relative to guidance services, says MacKay. He argues that two simple definitions for advice and guidance need to be mandated by the FCA for use across the industry and all existing definitions should be removed.
AJ Bell is partly owned by its management, Invesco Perpetual, Seneca Investment Managers and Woodford Investment Management.
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