The government has opened its consultation on amending the UK definition of financial advice. This is apparently so that firms can develop better and more tailored 'guidance' services so that customers can make better decisions.
Yet again the Government is moving around the deckchairs. Consumers are still struggling with the old version of guidance v advice and that has taken at least a decade to just about come to terms with.
We know from endless research that the consumer does not want to pay for advice. And yet the Government in its wisdom thinks the consumer might pay for guidance. Why? What evidence does it have that the consumer will even contemplate this? Plus the main targets for this 'amplified guidance' are those with smaller retirement pots and investments. Exactly the people who are reluctant to spend money on anything they consider unnecessary or where they cannot see the immediate benefits.
The consultation period is for 8 weeks after which it will go through various legislative processes and an order under the Financial Services and Markets Act 2000 followed by secondary legislation.
Surely it would be better to spend the money destined for an expensive legislative process on creating better awareness and education around financial services. In this way people would understand why they might need a helping hand with their financial planning and see it as a benefit?
I cannot see how more legislation is going to benefit consumers who are already overwhelmed and overburdened by the choices they have to make on their financial decision making journey. Deciding between advice and guidance and now 'amplified guidance' just makes it more complicated.
The policy objective is " to provide firms with clarity so they can be confident in developing guidance services which can be applicable to a range of consumer needs." This seems to suggest that the guidance currently available is not fit for purpose and needs legislation to make it so.
I am not sure whether that policy objective is actually achievable.
"The change will enable firms to increase the supply of financial guidance and provide more support to customers at a relatively small cost. The main costs are likely to be adjusting systems and processes." Combined with the savings made by the second group, it went on, the government argued the change presented "a net benefit to firms in general". The paper added: "As this proposal will allow firms to better support consumers in their financial decision-making, the government believes that the change will have a significant benefit to consumers. Currently, very few firms charge consumers to use their guidance services. With the ability to provide more advanced guidance, some firms may begin to charge for the use of such services."