A consultation paper on amending the definition of financial advice so consumers only receive regulated advice when they are offered a personal recommendation for a specific product has been launched by HM Treasury today.

The document seeks views on the costs and benefits of the change in definition and follows on from The Financial Advice Market Review (FAMR) which suggested people would benefit from "high-quality and more specialised and detailed guidance services".

Barnett Waddingham senior consultant Malcolm McLean said the change is "absolutely necessary" and is "long overdue".

“There is still in the minds of many otherwise experienced pension providers, employers and others, a good deal of confusion as to the difference between guidance and advice, where the boundary lies between the two and how far they can go in seeking to provide help and support to individuals in this important area.

“This is particularly relevant in relation to major take-up initiatives such as auto-enrolment where workplace talks and the like about pensions and their importance can often be instrumental in encouraging employees’ engagement with any available pension scheme. And yet most of the communications employers receive from regulators, for example, seem to be directed at their not being seen to influence workers rather than providing positive support and guidance for them to proceed in a more positive direction.

“I have long thought we are missing a trick here in not making it crystal clear what counts as advice and what doesn’t. A cleared definition hung round the 'personal recommendation for a specific product' strapline would also help promote better consumer understanding of the advice/guidance options and what they mean for them. For the vast majority of the population advice and guidance are currently probably one and the same thing."

To access the consultation click here

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