Read time: 2 mins Financial Advice

Advice vs guidance: What’s in it for you?

  • What’s the difference between financial advice and guidance?
  • Why should I seek advice before investing?
  • What are the two types of financial advice?
  • Should I speak to an independent or restricted adviser?

Unless your name is Warren Buffet, it can be useful to seek expert help before investing your hard-earned money.

Expert help about financial products generally falls into two main categories – financial advice and financial guidance – and these differ significantly.

In this article, we explain how to distinguish financial advice from financial guidance and give you a quick overview of the pros and cons of each.

How is advice different from guidance?

The Financial Conduct Authority (FCA) defines financial advice and financial guidance as follows*:

If you are only given general information about one or more investment products, or have products or related terms explained to you, you may have received guidance rather than advice....

The main difference between guidance and advice is that you decide what product to buy without having one or more recommended to you.

A road with signs pointing to this way and that way

Typically, a qualified financial adviser delivers financial advice by assessing your financial situation and investment goals and making a recommendation. You are receiving a personal recommendation on what to do with your money and the adviser/company takes the liability for the advice.

This contrasts with financial guidance, which may provide you with a product recommendation, generated by inputting three or four financial details and objectives into an online tool. With guidance, you personally take the responsibility for any decision/investment made

4 benefits of advice over guidance:

  1. All financial advisers are approved and authorised by the FCA, meaning they must comply with the FCA’s Statements of Principle and Code of Practice. You can check an adviser is regulated by the FCA by referring to the FCA register.

  2. You may benefit from a higher level of protection on your funds should things go wrong via the Financial Ombudsman Service or Financial Services Compensation Scheme.

  3. Advice will take the form of a specific product recommendation after an in-depth assessment of your current financial situation and commitments, your attitude towards financial risk and your investment goals. It’s then your choice to decide whether to go ahead with the recommendation.

  4. A financial adviser will answer any questions you have about investing, challenge your thought processes and clear up any misconceptions about the options available to you – only then will they recommend a product.

Three people looking at a piece of paper

Restricted vs independent advice

Another distinction to be aware of when thinking about getting financial help is between restricted and independent advice.

Per the FCA, “[an independent financial adviser] is able to consider and recommend all types of investment products that could meet your needs and objectives.

These recommendations will include investment “products from all firms across the market”.

By contrast, “a restricted adviser or firm can only recommend certain products, product providers, or both”.

Independent advice can be useful if you have a large investment portfolio or want to consider your financial situation, but it may also be more expensive and time consuming than restricted advice.

If you aren’t planning on becoming a professional investor, you may only need a much simpler range of products and the cost of paying an adviser to research and sift through all the options might not be necessary for your circumstances.

Here at evestor, we can offer you advice on our pensions, our ISAs and our general investment accounts. We can even review your existing products to see if you would be better off investing with us. If we’re not for you, it’s no problem, we won’t charge you for the advice you’ve received from us.

Next steps

For more advice about investing for your future speak to one of our dedicated financial advisers. Register with us now to begin the process.