Polarisation risk
We need a shortlist of potential new terms to describe ‘Guidance’ and ‘Advice’
Some industry experts have suggested that this is a waste of time. Given my earlier comments it is perhaps already clear that I potentially disagree, at least in general terms.
It seems from the FAMR report (and other recent developments that I will mention later) that the future of personal financial planning may well be polarised into:
– “Advice” – fully regulated with various consumer protections in place, and
– “Guidance” – potentially unregulated with little or no consumer protection other than against fraud and deception.
This is the “caveat emptor” (buyer beware) scenario of most residential property markets – that is not necessarily a problem in itself, as long as the buyer knows that they need to be aware!
If this polarisation does develop, surely the consumer needs to be very clear as to the difference. We may not need new terms – on reflection, “advice” and “guidance” are reasonably clear – but we do need to stress exactly what the differences are between these two terms and in the service the investor is really receiving from each.
If this difference is not clear some entities may seriously abuse this “loophole” to “sell” inappropriate products to an unsuspecting public. I haven’t mentioned the banks but some might suggest them as an example at this point.
Commissions
No return to commission. This was actually a non-recommendation, in other words it was not mentioned in the report. For the UK market this is probably a sensible approach – going “backwards” in this regard was potentially fraught with problems and dangers.
Perhaps that in itself is a lesson for other countries – once you ban commissions, there may not be any way back to them if things don’t go to plan?
