The journey starts with a ‘need’, ‘I need to know whether I’m saving enough to retire on’, ‘Can I afford to go part time?’, ‘How much should I save for a deposit on a house?’. These are all typical questions people have about their finances but they don’t necessarily know where to go or whether they’re in need of advice or just guidance.
Every adviser will tell you that the starting point is about understanding an individual’s own personal situation and looking at their goals. Whether the best course of action is advice or guidance, it’s all about the customer.
There are important differences between guidance and advice that are often misunderstood, and regulation has been blamed for over-complicating this.
Advice and guidance definitions:
‘What you should do’
Specific product recommendations
‘What you could do’
Giving you options
Put simply, guidance doesn’t recommend a specific product or tell a client what to do.
For those who are confident they don’t need advice, they can take in all the information they need to educate themselves and make an informed choice. Advice is a specific, personal recommendation made by a regulated financial adviser once a customer’s needs, priorities and objectives are fully understood.
Guidance and advice can often overlap; customers should be able to do their own research on products and services available and transact if they feel confident enough, whilst receiving any help and guidance along the way.
The regulatory landscape
We have seen regulation in the form of the Retail Distribution Review (RDR) in 2012, and the 2015 Financial Advice Market review (FAMR) which are both being evaluated in 2019 by the FCA. These reviews aim to help the market develop an advice or guidance service that would facilitate better decision-making by consumers.
Financial organisations try to ensure their propositions are clear to customers so offer their products and services through various channels to ensure reach and engagement. However, it’s obvious that consumers are still confused about the difference between guidance and advice. If we want customers to find the most appropriate pathway to better finances, then we need more clarity.
Can technology help the situation?
If we want to benefit as many people as possible, the solution to helping clients understand how guidance and advice fit together has to be digital. In an age where everything is researched online, a user-friendly digital triage service which weighs up the client’s needs and leads on seamlessly to the most suitable option for the client could be the answer.
We’ve developed a digital financial advice engine called Turo. Its flexible technology is specifically designed to help financial services organisations deliver guidance and regulated, automated financial advice.
The ‘Holistic Guidance and Triage’ module sits at the front of Turo’s current suite of digital advice products and can be integrated with other modules if required.
It has the benefit of looking at a person’s financial priorities, focussing on identifying an individual’s needs when it comes to their financial situation. Integrating a digital solution makes the advice process more cost-effective and enables the customer to complete part of the fact-find in their own time.
To make the difference between guidance and advice clear, organisations need an end-to-end process that steers the customer through the whole journey. Ultimately, so that the client gets the best outcome possible.