11 Mar 2015
Guidance Vs Advice – how can you get information on your pension?
Within the financial advice industry, there are large and important differences between what is considered to be ‘guidance’ and what is considered to be ‘advice’. We have spoken to financial adviser Richard Rogers to help navigate the differences between financial “advice” and financial “guidance” and what they might mean for you and your business.
‘Guidance’ is the provision of information to aid a customer’s understanding, whereas ‘Advice’ is an in depth analysis by a regulated and qualified adviser of a customer’s personal and financial circumstances, goals and aspirations followed by the recommendation of specific products, services, or a course of action.
‘Pensions Guidance’ as defined in the Pension Schemes Bills “guidance given for the purposes of helping a member of a Defined Contribution pension scheme to make a decision about what to do with the cash balance benefits or other money purchase benefits that may be provided to the member”.
‘Regulated Advice’ as defined by the financial services regulator, the Financial Conduct Authority (FCA) – Advice relating to a particular investment given to a person in their capacity as an investor or potential investor (or their agent) and relates to the merits of them buying, selling, subscribing for, or underwriting (or exercising rights to acquire, dispose of, or underwrite) the investment.
The new pension regulations will be some of the biggest changes to pension rules the UK has ever seen.
The Government has launched the ‘Pension Wise’ guidance service, which is in partnership with the Citizens Advice Bureau (CAB) to help people understand the changes. This service offers ‘face to face’ guidance from an “impartial guidance specialist”. The government has promised those providing the guidance will be “highly trained”.
The FCA and the Treasury have claimed the guidance given through ‘Pension Wise’ will differ from financial advice given by financial advisers, and that it would be incorrect to call the two services identical.
Financial advisers will continue to give guidance and advice to clients in relation to their pensions as before, however it will be illegal for advisers to claim that they are giving advice as part of the ‘Pension Wise’ scheme, and they could face up to 51 weeks in jail if found guilty of doing so.
The FCA has published a guidance paper on advice firms’ understanding of their responsibilities when making investment recommendations, and the FCA’s expectations of this same process.
So, in regards to Pension Wise, it seems that they will be offering all retirees guidance on what options are available to them in regards to their pension now. It will explain products available and the benefits of them, but will not recommend or decide on a specific product for the consumers. Financial advisers can still provide advice, but can not suggest that a client does not need the guidance offered by Pension Wise.
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