Consumers ask for advice or guidance on financial matters at different times and for different reasons. Some want to make their own investment decisions, and guidance would help. Some need limited advice on a particular issue, and others need advice that covers all of their financial arrangements.

This can create practical difficulties for advisors and consumers. Regulated advice can be disproportionately expensive if the consumer has a modest amount to invest; or only needs guidance, not advice. Some advisors would like to provide low cost guidance, but they worry about crossing the line between providing information (which is not regulated) and providing advice (which is) … a surprisingly easy line to cross under the current law (see Section 5.8 of the FCA’s Perimeter Guidance manual, which explains some of the issues.)

HM Treasury has just opened a consultation on a change in the definition of “financial advice”, which it hopes will solve these problems. The consultation is in response to the final report of the Financial Advice Market Review. FAMR was published in March 2016, and recommended a change in the law with these ends in mind.

The government is proposing to amend article 53 of the Regulated Activities Order (Advising on investments) so that it’s more closely aligned with MiIFID. As the consultation notes, this “is not without risk” because it will “enable some firms to provide guidance … for which they currently require authorisation, without being authorised“.  There is also “a small risk that unscrupulous firms may attempt to use guidance services to distribute products, without being” regulated.  The government isn’t troubled by any of this: “regulated firms providing guidance [and] regulated advice … will continue to need to act in the client’s best interests and provide information that is clear, fair and not misleading. Their customers may also have access to the [FOS] and [FSCS].Furthermore, where “guidance … is related to a regulated product, there are already regulatory restrictions in place to prevent consumer detriment …” The government believes “these restrictions [will] limit the potential commercial benefit to unregulated firms [of] providing guidance on regulated products [and] give the FCA powers to take action against unscrupulous firms” as well.

(Although it’s not immediately clear from the consultation paper), if the government’s proposals are implemented, article 53 of the Regulated Activities Order will be amended to become (where underlining shows an insertion, and scoring through shows a deletion):

“(1) Advising a person is a specified kind of activity if the advice is a personal recommendation.

(1A) A personal recommendation is:

(a) given to the person in hisa recommendation made to a person in that person’s capacity as an investor or potential investor, or in histhat person’s capacity as agent for an investor or a potential investor; and

(b) advice on the merits of his doinga recommendation that that person does any of the following (whether as principal or agent):

(i) buying, selling, subscribing for or underwriting a particular investment which is a security or a relevant investment, or

(ii) exercising any right conferred by such an investment to buy, sell, subscribe for or underwrite such an investment; and

(c) a recommendation that is:

(i) presented as suitable for the person to whom it is made, or

(ii) based on a consideration of the circumstances of that person.

(1B) A recommendation is not a personal recommendation if it is issued exclusively:

(a) through distribution channels; or

(b) to the public.

(4) In this article:“distribution channels” means channels by which information is, or is likely to become, publicly available;

information is likely to become publicly available” means information to which a large number of people have access;


The government’s consultation closes on 14 November 2016.  As part of the consultation process, the government will hold “targeted roundtables for representatives of affected parties“. The government has not said how long it is likely to need to consider responses to the consultation, when it expects to lay any new legislation before parliament, or when that legislation might reasonably be expected to come into force.