I’ve written on more than one previous occasion about this industry’s weird obsession with the word “advice,” and how we insist on using it in all sorts of ways that confuse the hell out of our poor old customers.
For many years there was just one, big, single confusion – we used “advice” and “adviser” as euphemisms for “sales” and “salesman.” But since then, and especially since the regulator got in on the linguistic act, it’s got a lot more complicated.
The underlying source of our present confusions is still, ultimately, a single point, albeit a different one: that according to the FCA’s definition, financial advice means a financial recommendation or proposal that is specific to the circumstances of the individual. Saying that it’s a good idea to have some money in income stocks these days is not advice. Saying that it’s a good idea for you to have some money in income stocks these days is advice.
At least two nonsenses flow from this, one a year or so old and one very new. The older one relates to Pensions Freedom, where we’re now in a situation where people coming up to retirement can go to Citizens Advice or The Pensions Advisory Service and get…
…you guessed it, not advice. Neither of these organisations with the word “advice” in their names has a process which allows them to give advice. Since they can only make recommendations in general terms, they can only provide guidance. (By the way, the same has been true for rather longer of the Money Advice Service, which also can’t give advice.)
We must just pause for a moment to acknowledge that to the poor bloody consumer aiming to make sense of all this, it is absolutely preposterous that the three consumer-facing financial organisations with the word “advice” in their names are all, equally and totally, entirely forbidden from giving advice and would be in terrible trouble if they ever did so.
But now we have a new nonsense. The phrase that has spread like wildfire across the industry in the last few months is the expression “robo-advice.” I don’t think I’d heard it six months ago, and now I hear it ten times a day. But looking at it from a consumer perspective, with horrible inevitability robo-advice doesn’t involve anything recognisable as advice, and doesn’t involve anything like a robot either.
The term is used to describe online investment services where you fill in a fairly brief questionnaire, and are then offered a fund or portfolio or whatever that will be suitable for you. It’s “advice” in the way that providing your collar size before you buy a shirt leads to “advice” when you’re only shown shirts available in that size. You, as a customer, think that what’s happening is that you’re buying a shirt, or making an investment. The shirt retailer thinks that it’s selling you a shirt. Only the stupid old investment company, knowing that the regulator won’t allow it to offer you a specific investment unless it conforms to the regulatory requirements involved in giving advice, thinks that it’s giving you advice – and “robo-advice” because it’s delivered digitally, not by a person.
So a service that people might actually want and quite enjoy, if they understood it was a nice simple low-cost online way of putting money into a suitable investment, is presented in a way that sounds scary, strange and alarming, and, all in all, thoroughly off-putting.
Brilliant, financial services industry trying to get through to the mass market and regulator trying to help consumers get good outcomes, just brilliant.