Guidance, advice - what's the difference?

You’ll often hear the terms ‘guidance’ and ‘advice’ bandied around as though they were just different ways of saying the same thing – but they really aren’t. Let’s start with guidance. In financial services language, this is help based on providing details about the choices you have, rather than suggesting which of those choices may be right for you as an individual. More on this later.

Guidance from the government

The government provides a basic level of guidance free. If you are a complete beginner, or are just bamboozled by financial matters, this is the best place to start. You do need to bear in mind that guidance and information services don’t provide advice; they won’t tell you what is the most suitable course of action for you.

The Money Advice Service provides online guidance which covers all financial issues, including debt and mortgages as well as pensions and insurance. Despite its name, the Money Advice Service doesn’t give advice. But their website does contain a wealth of information providing useful background, whether you decide to organise your own finances or seek help from a regulated financial adviser.

> Pension Wise is a newer service, set up by the government in 2015, to help people navigate the complex choices they face at retirement. Pension Wise also provide personal appointments to discuss your retirement plans, either over the phone or face-to-face. Again, these meetings won’t provide personal recommendations, but they can be helpful to clarify the basics.

The Pensions Advisory Service is a government-funded service providing online information and guidance on pensions, as well as personalised assistance by telephone.

Although not qualified to the same standard as regulated financial advisers, the guidance is provided by well-trained staff, many of whom have worked elsewhere in the financial services industry. It’s also impartial, so you could look on it as a ‘no regrets’ introduction to the issues you’ll need to grapple with in making a decision.

Unlike regulated financial advisers, guidance services do not provide a personal recommendation. Guidance bodies can discuss the choices and the issues you face and help you focus on what is important, but they won’t say you should choose this product rather than that one, or invest in this particular fund.

Guidance vs regulated financial advice: the main differences

 

Guidance

Advice

Free to use

Yes

No

Impartial

Yes

Yes

Service delivered by people qualified to a minimum level

No

Yes

Protected by the Financial Services Compensation Scheme if guidance/advice turns out to be wrong

No

Yes

Personal recommendation given

No

Yes


The different types of financial advice

If free government guidance doesn’t help you make the right decision, then consider taking regulated financial advice. But do remember that all advisers are not the same. You should also remember that financial advisers usually charge a fee for their services.

Advisers tend to fall into four broad camps:

> Mortgage and protection advisers

As the name suggests, these advisers specialise in recommending and arranging house purchase loans. They can also help you take out life cover, to ensure that the loan is repaid in the event of death, or additional life insurance to provide for your loved ones.

> Pension and investment advisers

These advisers focus on tax planning, including choosing tax-efficient ways to save, or to access investments (such as ISAs). They also help people make the right choices at and throughout retirement, as well as providing advice on estate planning, investments and inheritance tax.

> Later life advisers

These advisers focus on financial needs in later life, such as equity release loans and ways to fund care home fees. Like wealth advisers, they can also help with making the right savings and investment choices and estate planning.

> Corporate advisers

These advisers specialise in advising business owners. They cover issues such as setting up a pension scheme for staff and pension planning for the business owners. They can also advise on specialist life insurance to cover loans, or agreements to transfer shares in the business in the event of death.

When you approach an adviser for help, they will tell you whether they are able to help you or if you would be better speaking to another adviser who specialises in the type of advice you require.

Independent or restricted?

As well as specialising in different types of advice, advisers can also be classified as independent or restricted.

Independent advisers will generally provide a holistic financial advice service covering all of your financial needs and wants. They also help with choosing investments and tax-efficient ‘wrappers’, such as ISAs and pensions, from all those available in the market.

Restricted advice can mean a number of things:

• The adviser has chosen to restrict the advice service they provide to one specialist topic, such as estate planning.

• The adviser cannot provide advice on all products or all areas of advice.

• The financial services firm for which the adviser works only recommends investments and ways to access them (such as ISAs) from a limited range of product providers and, in some cases, only products and services provided by the firm that employs them.

We’ve included a table, compiled by the Financial Conduct Authority, summarising the key differences between independent and restricted advisers:

Independent vs restricted advice: the main differences 

 

Independent

advisers

Restricted

advisers

Will consider all retail investment products

Yes

No

Can focus only on a particular market

No

Yes

Can consider products only from certain product providers

No

Yes

Has to explain to you the type of advice they offer

Yes

Yes

Can use ‘independent’ to describe the advice they offer

Yes

No

Incentivised to recommend one product over another

No

No

 

You might also be interested in...

> How to find the right financial adviser

> Advisers: what they charge, and how you pay


 

AR01982 04/2017

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