What’s The Difference Between Advice And Guidance?

Most of us don’t know the difference between pension advice and pension guidance and rely on talking to the wrong people when we make important financial decisions.

Three out of four retirement savers didn’t know there was a difference between advice and guidance, according to a new survey from pension giant Aegon.

As a result, many missed out on pension features and benefits that could have made their retirement easier.

The importance of the distinction is highlighted by a massive lack of confidence most pension savers have about making financial decisions.

The research revealed only one in five know how to access cash from their pension under flexible access rules and just one in eight feel they can review the performance of their pensions or investments.

Taking advice from a financial expert

But instead of turning to an expert, they take what they believe is financial advice from friends, family and bogus salesmen posing as genuine financial advisers.

Only a qualified and authorised independent FA can give professional financial advice.

Advisers working for banks or financial firms are ‘tied’ and can only advise about products offered by the organisation they are tied to, such as a bank manager.

Consulting an IFA about savings and investments, ranging from offshore savings to Qualifying Recognised Overseas Pension Scheme (QROPS) for expats, means the security of knowing that if everything turns sour, some independent framework is available to do with complaints and even pay compensation.

The Aegon survey highlighted many pension savers thought what they read in a newspaper, in a forum or heard from a friend was financial advice.

Well-meaning but misinformed guidance online

It’s not. However well-meaning and clued up the person offering guidance may be, they are not regulated IFAs and their knowledge is likely to be sketchy or out of date.

Even information offered by the government’s Pension Wise service is guidance and not advice.

Aegon’s Steven Cameron said: “Pension savers have lots of choices about finding out information to help them make decisions about their finances, but the problem is they have too much choice and can be confused by the information they are given.

“The financial industry needs to show people the difference between professional advice backed by ombudsman and compensation schemes and the rest so people can access the support they need knowing they have some come back if the advice turns out to be wrong.”

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