Advice or guidance? It’s all the same isn’t it?
Deciding how, where and when to invest money (or an asset such as a pension) is complicated, especially for those not immersed in the financial services industry. There are myriad products and countless
‘experts’ keen to assist, making a veritable minefield of financial products and investments with no sure map to the other side.
For this reason we turn to industry professionals for help (advice and guidance), only to learn that there is yet another confusing differentiation: receiving advice and receiving guidance are different things! In February 2018 the Financial Conduct Authority published information about the difference between advice and guidance. The FCA notes:
“…term ‘advice’ to mean a recommendation of what you should do…personal to you. It will be based on your specific circumstances and your financial objectives. Only a firm that is authorised by us can provide this kind of advice”. You can see if someone is authorised on the FCA website here.
“Guidance is a much broader term and includes more general information about financial products…will not recommend a specific course of action to you or give a personal recommendation about how you should invest.”
Overall, the key difference is advice should only be given by those on the FCA’s approved list and it will be detailed, specific to you and will take into account your attitude to risk and your base knowledge of the sector. Guidance can be given by anyone; it is likely to be broad and applicable to the general public rather than tailored to an individual. It is also often free. Conversely, it is rare to find free advice so if you do, be on alert.
The benefit of an authorised adviser is that the advice is more likely to be in accordance with the regulatory rules and therefore suitable for your purposes. If the advice turns out to unsuitable you may have recourse through the financial ombudsman (who can order the regulated adviser to pay compensation) or, if the adviser has disappeared or gone bust, through the financial services compensation scheme.