I have in my hand a little A5 leaflet from the Pensions Advisory Service , entitled Advice and Guidance ; Recognising the difference. I will try to get an electronic link to it but for now you’ll have to take my word for it that it’s key points are
- People use the terms of “advice” even when they understand that they are receiving guidance as “guidance” is not a familiar word used by people.
- People do understand that “guidance” does not provide a definitive course of action and report a high level of satisfaction with guidance
- There is little to be achieved in redefining the terms especially as customers understand then a guider says “we cannot tell you what to do”.
- Over 34 years, The Pensions Advisory Service has not had any issues with customers claiming that it had given advice showing that customers do understand the difference.
- The scope of guidance that is delivered by an independent & impartial organisation can take people up to the “decide and buy” moment,
- There are issues with access and trust in regulated financial advice
Reading this – it is quite obvious that the public see financial advice and guidance as exactly the same thing – and a good thing. The public see the selling of financial products disguised as advice or guidance as a bad thing and as mutton dressed as lamb.
Organisations that have no product to sell , such as TPAS, MAS and the yet to be created Single Financial Guidance Body, will be the better trusted for it.
Mutton dressed as lamb
I have in my other hand, an article in Financial Adviser containing a question from Mr Hill of Hargreaves Lansdown to the Pensions Minister.
“We see a number of employers now care a lot more about the financial welfare of their employees.
“With the introduction of the Lifetime Isa we now see companies thinking beyond auto-enrolment and thinking about that option as well.
“As things get ever more complicated, you mention guidance and not advice.
“With the Financial Advice Market Review there was a lot of talk about guidance rather than advice.
“We for one would love to help a lot more people engage with their savings but the regulatory environment is very much geared towards advice. It doesn’t allow us to have that sort of conversation.
“What role do you think the Department for Work & Pensions can play in engaging with that debate so when people ask us questions we can really, really help?”
I have a great deal of sympathy with Guy Opperman for being flummoxed by this question. He batted it away with some tosh about further consultations and the get out of jail card.
“At the moment it is probably best to describe that it is a guidance body rather than specific advice.”
But let’s look at this question for what it is, an attempt by Hargreaves Lansdown to get the Pensions Minister to sanction selling of an HL product (lifetime ISA) to employees – as an alternative to workplace pensions, under the guise of “financial guidance”.
What HL want to do in the workplace – and what most financial educationalists do – is to provide a veneer of guidance and then flog you a financial product. Typically this is a SIPP into which you can tip all your pension savings but it could be all kinds of stuff that pays the financial educationalist an annuity income stream through some kind of profit share from the member’s pot or premiums.
This is not advice or guidance – it is selling. It is financial mutton dressed up as financial lamb, precisely what the RDR was designed to get rid of and precisely what vertical integration allows. The longer that firms such as Hargreaves Lansdown sell advice, guidance and education and deliver wealth management products, the public will rightly be confused.
As far as I can see, Guy Opperman is a man of the people, for he knows nothing – and knowing nothing – doesn’t trust HL one inch.
I had the great pleasure of being on the golf course yesterday , with my colleagues from First Actuarial and some of our clients, it was indeed the First Actuarial golf day. I will not let the opportunity go by to praise myself for winning the tournament with 37 Stapleford points.
Going home on the train, I discovered 71 tweets on my timeline moaning about yesterday’s article which praised Paul Lewis for rubbishing the artificial distinction between guidance and advice in exactly the terms of the TPAS leaflet (see above).
Of course Paul, who is rather more experienced than our Pensions Minister (and would make a good Pensions Minister), was rather more incisive in his comments. He knows very well that “advice” is a word that has been purloined by financial advisers to provide them with a commodity that they can sell. Not only can advisers charge for providing a definitive course of action but they can scream at anyone who dares to advise people about money. It’s very “get off my land!”
The arguments were of the “would you trust heart surgery to a hospital porter” variety , with the implication that anyone wanting to know their financial options were in imminent danger of a pecuniary heart attack. Sorry guys- this doesn’t wash. The great unwashed – of whom I am one – want simple and easy advice on what I can do with my money , what the tax implications of those decisions are and what the costs of using advisers, fund managers and other financial intermediaries are likely to be.
Once we have this sort of information , we can “decide and buy”. The precise decision on what we buy may well involve Hargreaves Lansdown, we may want some of the information from Hargreaves Lansdown, but I suspect most of us are sensible enough not to put our heads into the lion’s mouth until we are quite sure the lion is a tame and benevolent lion. Asking a lion if he or she is benevolent may solicit a positive response, but that trust is not always to be trusted.
It’s not advice v guidance that bothers us, it’s advice v selling
It’s a lot simpler to someone outside the advice/guidance loop than to the likes of Chris Hill of HL.
Until the sale of advice stops being cross-subsidised by the sale of vertically integrated product, financial advice/guidance/education will remain sullied. Those organisations who charge for guidance are really giving advice and vice-versa, as long as no product is involved, it really doesn’t matter what we call the service.
But whether we are charging or not charging for advice/guidance/education and being compensated by the revenues from the products we recommend, we are not advising, we are selling. That is why Chris Hill is wrong and Paul Lewis is right and why The Pensions Advisory Service should be handing Guy Opperman a copy of “Advice and Guidance; recognising the difference”. It is a very subtle piece of work.