Do you know the difference between pensions advice and pensions guidance? If not, or you're under the impression that they're the same, then you're not alone, as research from Aegon UK has revealed that many consumers are baffled by the division – and some aren't aware that a difference exists at all.
According to the figures, three-quarters (76%) of consumers don't know the difference between financial advice and guidance, while a similar number (75%) think that there should be clearer communications about the different types of financial advice and guidance available to them.
The confusion is particularly worrying given that only a small minority of people are confident in making financial decisions regarding pensions and investments themselves – just 20% would be confident deciding how to access their pension, for example, while only 12% were confident about reviewing the performance of their pension or investments – which means that many could benefit from suitable support.
But just what makes people so confused when it comes to advice? Well, part of the problem seems to stem from people's relatively loose conception of what constitutes financial advice, it said in the report. For example, 27% believe that a recommendation from a friend can be financial advice, while 26% also view information on online forums as advice and 22% feel the same about information they read in their morning newspaper.
These are worrying figures as none of these things can actually be called advice, and it underlines the pressing need for greater clarity on what advice actually means and the provision of more information about what benefits consumers should expect from financial advice.
If you're not sure of the difference between financial guidance and advice, it's time to find out, particularly if you're dealing with complex financial planning issues. In a nutshell, guidance provides a generic overview of certain financial concepts and options, while financial advice involves the provision of support that's been tailored to your own individual circumstances.
For example, guidance will give you an overview of different investment products, while advice will suggest the product that could be best suited to your own financial requirements. Quite simply, if you want to make sure you're making the right financial decisions for your individual needs, seeking – and paying for – regulated financial advice should always be considered.
Steven Cameron of Aegon commented: "People are being presented with choices not only regarding how they access their savings at retirement, but also around how they seek help. There are lots of ways of [doing that], whether it's through regulated financial advice, guidance via Pension Wise, or information from their pension provider. The problem is that people are confused by what they get under each of these options and if that's not clear, how can we expect them to make an active choice?
"The industry needs to work hard to explain how professional advice differs from guidance in terms of the responsibility advisers assume and also around access to compensation schemes if things do go wrong. We need to reduce levels of confusion and get more people seeking the right form of support for them."
If you're approaching retirement age, contact Pension Wise for an overview of your income options and ideas of where to get advice
Want to make more complex investments? Start the process by reading our investment guides or finding out more about self select or stocks & shares ISAs
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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