The Role of Generic Financial Planning: Understanding the Difference Between Information and Advice

When it comes to financial planning, not all advice falls under the regulation of the Financial Conduct Authority (FCA). In fact, many financial planners offer generic advice that focuses on helping individuals explore their options without recommending specific products or solutions. While most people are familiar with regulated financial planners who offer tailored advice on particular investments, the distinction between generic financial information and generic financial advice is often less clear. So, what exactly does this difference mean for both financial planners and clients?

The Scope of Generic Financial Planning

Generic financial planning can be defined as offering broad, general information or advice on financial matters, helping people understand their financial situation, set goals, and explore strategies. When it doesn’t involve recommending specific products or investments it remains unregulated; that is, outside of the Financial Conduct Authority’s perimeter guidance.

For instance, a financial planner might help someone understand the difference between a Venture Capital Trust (VCT) and an Enterprise Investment Scheme (EIS) or compare the general pros and cons of a Drawdown Pension versus an Annuity. In these cases, the advice isn’t tied to a specific product or provider, and the planner isn’t recommending one over the other for purchase or sale.

While this type of advice is valuable for education and decision-making, there’s a critical point where generic advice can carry added liability—especially if the advice is unsuitable for the client’s individual circumstances, even if no specific product is mentioned. For example, recommending an annuity as a general strategy might be inappropriate if a client’s situation would foreseeably benefit more from a drawdown pension. In such cases, the liability risk remains, even if the advice is not regulated by FCA.

Unregulated Information vs. Unregulated Advice

To further clarify, generic financial planning generally falls into two categories:

1. Unregulated Information: This involves providing factual, unbiased data. A financial planner might explain the features of different asset classes, such as stocks, bonds, or real estate, or outline retirement options without steering the client towards one option. The client is free to interpret the information and decide on their next steps without feeling pressured toward any particular action.
2. Unregulated (Generic) Advice: Here, the financial planner offers general advice on broader strategies, like the merits of investing in property versus stocks or the tax efficiency of different financial instruments. The adviser takes control of the process, guiding the client on what factors to consider before entering a transaction, but not a specific transaction. The client is left to their own devices to choose a specific transaction, perhaps based on the results of a publicly available survey, such as those provided by Which? Money. While this advice helps clients understand their options, it remains general, and avoids crossing the line into specific product recommendations.

Simply put, advice cases are those where the adviser takes control of the process, guiding the client on what factors to consider before entering a transaction. In these cases, the adviser is liable for all foreseeable losses if things go wrong. On the other hand, information cases occur when the professional’s role is limited to providing specific facts or data. In these situations, the professional is only responsible for the financial consequences directly linked to that incorrect information.

The beauty of generic financial planning lies in its ability to empower clients without overwhelming them with product recommendations. It also is helpful where alternative options unrelated to product purchase are being considered, e.g. making gifts. It’s about education, transparency, and offering clients the tools they need to make informed decisions on their own terms.

Let’s break down the concept of unregulated (generic) advice and its nuances when it comes to personalised generic advice versus generic advice:

1. Personalised Generic Advice Without Specific Product Recommendations

In this scenario, a financial planner offers advice that is tailored to the client’s specific circumstances, but stops short of recommending any particular financial product. For instance, if a client has a shorter life expectancy due to ill health, the planner might advise that annuities—usually designed to provide a steady income over a long retirement—may not be the most appropriate option, even when considering impaired life annuities. Instead, the planner might explore general strategies, such as a drawdown pension, that could be better suited to the client’s situation.

Even though no specific annuity provider or drawdown product is mentioned, the advice is personalised to the individual based on their unique circumstances, like health or financial goals. While this advice doesn’t require regulatory approval, it still carries an element of responsibility, as it’s crafted around the client’s personal situation.

Key Point: This form of advice remains unregulated because it does not relate to a particular product. In this case, the planner takes into account personal factors (such as ill health) to guide the client toward a better general financial strategy. While no specific product is named, the advice is still highly individualised and carefully considered based on the client’s needs.

2. General Advice Not Personalised to Client Circumstances

Here, the advice is more broad and generic, and doesn’t account for the specific client’s personal situation. For instance, the financial planner might explain the differences between investing in property versus stocks or discuss general tax efficiency strategies without factoring in any individual’s health, income, or life expectancy.

In this scenario, the planner is purely providing unregulated generic advice to help clients understand different strategies available to them, but without tailoring the advice to their unique circumstances. The planner isn’t guiding the client based on personal details but instead offers general financial education. The client is then left to decide which course of action suits their personal circumstances.

Key Point: This form of advice remains unregulated because it’s not personalised, and does not relate to a particular product. The planner helps the client understand financial concepts without diving into their specific situation. It’s purely educational and helps clients broaden their knowledge of financial strategies.

Why This Distinction Matters

Understanding the difference between personalised generic advice and generic advice is crucial for both clients and financial planners. Personalised advice, even without specific product recommendations, still carries a degree of liability. If a strategy is unsuitable for a client’s unique situation (like recommending an annuity to someone with a shorter life expectancy), the planner could be held responsible for negative outcomes.

On the other hand, general advice that isn’t tailored to a client’s specific circumstances comes with far fewer risks, as it remains purely educational.

Benefits of Understanding These Distinctions

• For Clients: Being clear about the type of advice you’re receiving helps you take control of your financial decisions, knowing whether the advice is personalised for your situation or simply educational.
• For Financial Planners: Recognising these distinctions ensures you can manage liability and offer advice that aligns with both your expertise and your client’s needs.

At the Academy of Life Planning, we specialise in offering unregulated generic advice that educates and empowers clients. Whether you’re looking for broad financial education or need advice tailored to your personal circumstances (without specific product recommendations), we’re here to help you understand your options and take control of your financial future.

Let’s build a financial strategy that works for you, with clarity, support, and guidance.

The Benefits of Generic Financial Planning

Generic financial planning services can be invaluable for individuals who are looking for guidance without the pressure of product sales or specific investment advice. Here’s why this approach can be so beneficial:

• Empowerment Through Education: Instead of being told what to do, clients are given the knowledge and insight they need to make their own choices. This builds confidence and financial literacy for you to “Be Your Own Financial Adviser“.
• Transparent and Unbiased: Because generic financial planners aren’t tied to recommending specific products, their guidance can feel more transparent and trustworthy. The focus remains on what’s best for the client’s situation without any hidden agendas.
• Reduced Pressure: With generic advice, clients don’t have to worry about being sold something they may not need. Instead, they can explore different strategies in a relaxed, educational environment.
• Clarity on Financial Options: Generic financial planning allows clients to understand the landscape of financial options, such as different tax strategies, asset classes, or retirement paths, without feeling overwhelmed by technical jargon or specific product details.

Navigating Liability in Generic Financial Planning

Despite the benefits, financial planners must remain mindful of potential liability risks when offering generic advice. While generic financial planning is unregulated by the FCA, advising on a particular strategy that turns out to be unsuitable for a client could still create legal exposure. For instance, if a planner recommends a general approach, such as leaning towards annuities over drawdown pensions, and the client’s circumstances would have benefited more from the latter, the planner could still face liability even though they haven’t suggested a specific product.

This is why it’s important for financial planners to:

• Stay clear of recommending specific products unless authorised to do so.
• Clarify the boundaries of the advice being given and make it clear to the client when they should seek more tailored, regulated advice.
• Be aware of insurance coverage to ensure they are protected when offering generic advice that could still impact a client’s financial outcomes.

Moving Forward: Keeping It Simple, Transparent, and Empowering

At the Academy of Life Planning, our goal is to provide clients with clear, actionable insights that help them build financial security—without crossing into the complexities of regulated advice. We believe in educating individuals to make informed decisions, giving them the confidence to navigate their financial futures on their own terms.

Our approach ensures that you’re empowered, educated, and fully supported as you explore your financial options. By focusing on generic advice and education, we keep things simple, transparent, and ultimately more empowering for you.

Let’s work together to explore the best strategies for your financial future, while keeping things clear, understandable, and firmly within your control.

Disclaimer:?The Academy of Life Planning provides education and guidance on financial planning matters. Our financial planners do not give specific product advice. For regulated product guidance, please seek a financial adviser.

Addendum: Relevance of Case Law to Generic Financial Planning

When considering the boundaries between information and advice in generic financial planning, the case law we referenced—BPE Solicitors v Hughes-Holland and Manchester Building Society v Grant Thornton LLP—offers important guidance. While these cases primarily dealt with professional negligence, their principles around the distinction between advice and information are highly relevant to financial planners operating outside FCA-regulated activities.

The Case of BPE Solicitors v Hughes-Holland

In this landmark ruling, the court made a clear distinction between advice cases, where the professional assumes responsibility for the entire decision-making process, and information cases, where the professional only provides a limited contribution to the client’s decision. This case is crucial for understanding the scope of liability in generic financial planning. Even though you may be offering general advice without recommending a specific product, if you guide a client towards a particular course of action (e.g., choosing between a drawdown pension and an annuity), you could still be held liable if the advice is unsuitable for the client’s circumstances.

The Case of Manchester Building Society v Grant Thornton LLP

This case further highlighted that liability can arise when a professional’s advice leads to financial loss, even if the advice was given in a broad, non-specific manner. The courts ruled that if a financial planner offers generic advice about strategies (like tax-efficient investments or retirement options) and it leads to a poor outcome due to negligence, they could be held responsible. This reinforces the importance of ensuring that generic advice, while non-regulated, must still be suitable for the client’s overall situation.

Practical Implications for Financial Planners

For financial planners, these cases illustrate that while generic financial planning does not fall under the same regulatory framework as specific product advice, there is still a duty of care to provide suitable guidance. It is vital to remain clear about the boundaries of your advice and ensure that your services are properly insured to cover any potential liability.

At the Academy of Life Planning, we encourage all planners to offer transparent, responsible guidance that empowers clients without crossing into areas of significant liability. By focusing on education and ensuring that generic advice is appropriate for each individual’s circumstances, you can protect both yourself and your clients while delivering valuable financial support.

By understanding these legal principles, you’ll be better equipped to offer advice that empowers your clients while also safeguarding your practice from unnecessary risk.

Questions & Answers

Q: What is the difference between unregulated information and unregulated advice in financial planning?

A: In generic financial planning, unregulated information refers to providing factual, unbiased data without steering clients towards any particular decision. For instance, explaining the differences between asset classes like stocks and bonds is informational. Unregulated advice, on the other hand, involves offering general guidance, such as discussing the benefits of property investments versus stocks, but without recommending a specific financial product. Both remain unregulated because no specific financial products are promoted or advised upon.

Q: Can a financial planner face liability for giving generic advice?

A: Yes, even though generic advice is unregulated, financial planners can still face liability if the advice they give is unsuitable for a client’s particular circumstances. For example, suggesting a general strategy like opting for an annuity over a drawdown pension without considering a client’s situation could lead to financial loss. Liability arises because, even if no specific product is recommended, the advice itself might result in poor outcomes for the client.

Q: Why are insurers more comfortable covering information-based services but hesitant about advice?

A: Insurers see information-based services, such as education and factual explanations, as lower-risk because they don’t influence specific financial decisions. However, when it comes to generic advice, even though it’s unregulated, there is a higher risk that the advice might lead to financial loss, making insurers more cautious about covering these services. Generic advice could still guide a client’s actions, which brings potential legal risks if the advice proves unsuitable.

Q: How can financial planners protect themselves when offering generic advice?

A: Financial planners can protect themselves by clearly defining the scope of their services. It’s important to avoid recommending specific financial products unless authorised to do so and to ensure that any advice offered remains general and educational. Planners should also ensure that their clients understand the boundaries of the advice given, and they should consider having appropriate insurance coverage to mitigate liability risks.

Q: How do cases like BPE Solicitors v Hughes-Holland and Manchester Building Society v Grant Thornton relate to generic financial planning?

A: These cases highlight the distinction between advice and information, which is directly relevant to generic financial planning. In BPE Solicitors v Hughes-Holland, the court emphasised that a professional could be liable if they guide the entire decision-making process (advice). However, liability is more limited when a professional simply provides factual information. In generic financial planning, offering unsuitable advice, even without recommending a specific product, could lead to legal consequences if it results in financial loss for the client. Understanding this distinction helps planners manage risk more effectively.

Q: What are the benefits of generic financial planning for clients?

A: Generic financial planning empowers clients by providing education and broad guidance without the pressure of sales or specific product recommendations. This approach helps clients understand their options, make informed decisions, and feel more confident about managing their finances. It also offers transparency and a clear focus on the client’s needs, without the influence of particular financial products.

These Q&As provide clarity on the distinction between unregulated information and advice, and the importance of managing liability while offering generic financial planning.