One recommendation made by FAMR, for the working group to publish a shortlist of potential terms to describe “guidance” and “advice”, was scheduled for the second half of 2016, but it has yet to materialise.
Mr Freeman acknowledges that the definitions have proven to be “a much harder thing to define than we thought, especially for younger consumers” who “look at guidance and advice very differently to [those of us] who have been in the industry and are used to the term”.
FCA chair John Griffith-Jones also acknowledged the difficulties in a speech in February, saying the distinction between advice and guidance “once reasonably clear, has become much greyer with the advent of platforms and the potential of robo-advice”.
The Treasury launched a consultation on the subject last September, proposing to amend the definition so it is consistent with the terminology used by Europe’s Mifid II regulation, which is due to come into force on 1 January 2018.
The consultation closed in November, but HMT is yet to announce its next steps. This may be a sign of the difficulties it is facing.
Billy Mackay, marketing director at AJ Bell, believes the complexity of the topic is being overplayed. Mr Mackay says: “I don’t think [the definition] is that difficult to pin down. In the Treasury’s March paper, they committed to saying that they would provide a definition, that it would be in line with Mifid and it would be based on requirements to provide a personal recommendation, so they’re already three quarters of the way down the path.”
But some advisers, such as Mr Webster, don’t agree. “There is huge confusion in the marketplace about the boundaries of regulated advice. And no wonder because politicians do not join the dots.”
The FCA has already tried to delineate guidance and advice once before, in a paper published in 2013, but its proposals were criticised for not being sufficiently clear. Perhaps with one eye on this, the Treasury’s September 2016 consultation said it would provide “illustrative case studies” to help advisers aid consumers who wish to make investment decisions without a personal recommendation – in other words, to provide guidance rather than advice to those consumers.
Other plans
But the use of illustrated examples has been derided elsewhere. FAMR also recommended improving and condensing suitability reports as a means of making them more accessible to consumers. Although an enduring issue for firms, some have questioned why the recommendation did not make mention of key features illustrations (KFIs), which often present difficulties for clients because of their complex format.
“Why would you pull one away from the other? I would have thought that if you are dealing with advice, you have an aim of trying to provide people with information that allows them to make an informed decision,” says AJ Bell’s Mr Mackay.
