How to give advice without giving ‘Advice’

[MyNameIsUrl]

I get asked for advice on financial matters such as pensions, ISAs etc (not that I’m an expert, more of a one-eyed man in the land of the blind). I’m aware that giving Financial Advice is regulated and there could be legal consequences if people act on what I tell them. There is also the issue that if people act on anything one says they may be dissatisfied later.

How do others deal with this? I’ve found if I explain that I’m not giving formal advice it just goes over their heads. If I make a hint or suggestion (have you thought about premium bonds, they’re tax free) then a year later I feel open to criticism (I took your advice, bought premium bonds, and they haven’t won).

I could just refuse of course. However, I know people who need very basic help. For example, one person was worried about the amount of their state pension but didn’t know about the Government Gateway which gave them full details. I didn't worry about giving that 'advice'.

I do feel I am knowledgeable enough to help friends, and I want to help. I expect many people on these boards are in a similar situation. How does one help without overstepping into potentially difficult areas?

[UncleEbenezer]

I think you could get away with advising them to subscribe to Lemonfool.

Apart from that, talk generalities. Risk/reward, and how to look out for it. Perhaps your own investments: I have my money in X and Y, which I think suits my personal circumstances A and B, but of course if A and B were different then I'd probably hold something else. The object of the exercise is to give them food for thought and help them get started.

[kempiejon]

I explain to people what I have done or might do in similar circumstances or how I understand how certain parts of the system work - I know 2 people who in the past few years have been surprised and delighted when I said they can get the extra tax back on contributions to their SIPPS. I sometime caveat with "advice is a regulated activity" so we're just chatting. What we all do on here from day to day could be construed as advice. It isn't, it's just discussion and opinion.

You can fall foul of them taking on board what you said and not liking the outcome, if that really worries you don't do it. Perhaps point them to some learning for themselves. When I've asked people where their pensions are invested and how much it costs them those that don't know should go and find out. I have shown people the graph of a global tracker before. I remember when I told my dad how I invested he was horrified and said I'd lose all my money on the stock market and it was just gambling. He wouldn't have listened to my advice. When it came up I told him I was still being lucky.

[stevensfo]

I get asked for advice on financial matters such as pensions, ISAs etc (not that I’m an expert, more of a one-eyed man in the land of the blind). I’m aware that giving Financial Advice is regulated and there could be legal consequences if people act on what I tell them. There is also the issue that if people act on anything one says they may be dissatisfied later.

How do others deal with this? I’ve found if I explain that I’m not giving formal advice it just goes over their heads. If I make a hint or suggestion (have you thought about premium bonds, they’re tax free) then a year later I feel open to criticism (I took your advice, bought premium bonds, and they haven’t won).

I could just refuse of course. However, I know people who need very basic help. For example, one person was worried about the amount of their state pension but didn’t know about the Government Gateway which gave them full details. I didn't worry about giving that 'advice'.

I do feel I am knowledgeable enough to help friends, and I want to help. I expect many people on these boards are in a similar situation. How does one help without overstepping into potentially difficult areas?

There is also the issue that if people act on anything one says they may be dissatisfied later.

Like, if you advise to always stop at a red light? They do so and a car hits them from behind?

Yes, Financial advice is regulated, but unless you're actually an IFA, work in a bank or employee in the financial industry, I don't think you could get into trouble.

Don't call it advice. Just give them ideas. Oh and make them do some work and read up on it.



Steve

[SalvorHardin]

I think you could get away with advising them to subscribe to Lemonfool.

Apart from that, talk generalities. Risk/reward, and how to look out for it. Perhaps your own investments: I have my money in X and Y, which I think suits my personal circumstances A and B, but of course if A and B were different then I'd probably hold something else. The object of the exercise is to give them food for thought and help them get started.

That's what I do. Generalities, ideas and what I am doing.

Of course things can go wrong and it can get awkward. From experience advising friends and relatives, occasionally if an investment doesn't do well it is cleaely my fault, but if the investment does well then it wasn't my idea in the first place.

I know someone who, when asked by a relative about shares, gave them a list of all the shares that they owned with reasons, yield and potential pitfalls. 36 shares in total. The relative split everything they had to invest between the two highest yielding shares on the list. They got a bit upset when there was no capital growth.

Many of us have met them; the clueless friend or relative who believes that there really are risk-free investments offering something like double the yield on long gilts and decent capital growth prospects as well.

In theory there is the risk that you could be liable for negligent advice, even though you aren't getting paid.

[the0ni0nking]

Yes, Financial advice is regulated, but unless you're actually an IFA, work in a bank or employee in the financial industry, I don't think you could get into trouble.

Don't call it advice. Just give them ideas. Oh and make them do some work and read up on it.

Steve

So - I work in Financial Services and I'm a chartered account (without a practising certificate). Additionally, due to the area in which I work, I'm subject to both a general anti-market abuse/insider dealing policy and a personal account dealing policy i.e. I can't deal in some shares, I can deal in some shares but need to notify the business that I intend to before hand and get clearance, and in all cases I need to notify the business after the event if it doesn't fall into one requiring advanced notification. There are also restrictions placed on close family members IIRC).

I've worked my entire life in industry and never in an accountancy practice. So anything I know around personal taxation is either things that I learnt to pass the two exams I needed to back in c2005 or from my own experience of taxation due to self assessment/personal circumstances.

And yet invariably I always get asked about tax (and to a lesser extent general financial/investment) matters. Indeed, quite often when I then state something along the lines of "I'm not a tax specialist" or "I've never worked in private practice" the response invariably seems to be "Yeah, but you're an accountant so you must be able to offer some insight".

I think it's slightly different with investment conversations but in the case of my scenarios, I'd normally respond with either a "If this were me and admittedly my financial circumstances are unique to me and may not apply to you but I'd consider doing ....." or if's way out of my comfort zone I invariable start with "This is not an area I've had any involvement in .....".

I did once get dragged into a conversation by an IFA friend of mine with a (relatively) well known celebrity who was having some issues with HMRC. Suffice to say I wasn't particularly impressed with my IFA friend for doing so but that highlights the common mis-conception that all accountants cover all areas of finance!

That doesn't answer your question but a response could be framed in a similar way. I'm always clear that none of it constitutes formal advice (and I'd hope that if it ever were to get to the stage that someone complained to my accountancy body about it then the fact no $ changed hands further supports it was "advice" as a friend as opposed to professional advice).

[SalvorHardin]

This thread has remindd me of the old joke about the man at an evening dinner who finds out that he is sitting next to a Doctor. He spends quite a bit of time talking with the Doctor about his various ailments, asking for advice. A couple of days later he gets a bill from the Doctor.

The same evening he's at another formal dinner and finds out that he is sitting next to a Solicitor. He tells him about the Doctor and the bill. The solicitor says that the Doctor is entitled to do that. Two days later a bill turns up from the Solicitor.

Anyway, LexisNexis has an interesting article about "The Dangers of Giving Informal Advice" for solicitors

https://www.lexisnexis.co.uk/blog/wipit/the-dangers-of-giving-informal-advice

[stevensfo]

This thread has remindd me of the old joke about the man at an evening dinner who finds out that he is sitting next to a Doctor. He spends quite a bit of time talking with the Doctor about his various ailments, asking for advice. A couple of days later he gets a bill from the Doctor.

The same evening he's at another formal dinner and finds out that he is sitting next to a Solicitor. He tells him about the Doctor and the bill. The solicitor says that the Doctor is entitled to do that. Two days later a bill turns up from the Solicitor.

Anyway, LexisNexis has an interesting article about "The Dangers of Giving Informal Advice" for solicitors

https://www.lexisnexis.co.uk/blog/wipit/the-dangers-of-giving-informal-advice

Are you thinking of the old joke:

Man meets famous lawyer at a party. "Hi, is it true that you are the most expensive lawyer in town?"
-- I am.

"Er, is it true that you charge $10 000 for three questions?"
-- Yes. What is your third question?



Steve

[Niksen]

I’m aware that giving Financial Advice is regulated and there could be legal consequences if people act on what I tell them. There is also the issue that if people act on anything one says they may be dissatisfied later.

I am not aware of any legislation that covers one individual giving financial advice to another if it is not done for money or the person giving the advice cannot benefit financially as a result of the advice, in which case the person giving advice should likely be regulated in some way - but happy to be corrected on any of that.

However I can see if the person giving advice was in a finance related industry, then even if there was no fee or financial benefit then it is possible that someone dissatisfied could make life awkward by making a complaint to the advice giver's employer or a professional body if they belonged to one, so in those circumstance it is probably wise to tread very carefully indeed.

Likewise if the advice receiver is a colleague at work in any industry, particularly if more junior than the advice giver, since if things went wrong then it could be awkward or even lead to some sort of disciplinary action.

And if none of that applies and it is just friends and family, the risk is that they are dissatisfied and take it up with you personally - a punch on the nose if it went very wrong!

Personally I am of the 'don't get involved but if forced then keep it very general' viewpoint.

[DrFfybes]

I tend to specify that it is a suggestion, not advice as I am not qualified to do that.

I also often point out that the information provided is worth exactly what they paid for it.

Paul

[Gerry557]

in the military it was frowned on to be in financial difficulty. I think it was partly a security issue as you might be black mailed. I think part of their wages were "saved" for them but should a young lad get into debt often the NCO's would take control, help them sort out the debts and just provide them with "pocket money" until they were back on track. They would then guide that person on how to manage their affairs.

I think this was stopped a while back as the NCO's were not trained or IFA's. The upshot was that all their collages could see when someone was having issues but they could only watch as the person spiralled out of control. When this was serious it could lead to them being kicked out.

I suppose it called common sense or experience.

I often get called on for advice and not just finance. A stuck radiator valve was a recent one. I'm not a plumber but can talk about the process and issues I've come up against. I also found out about a purpose built drain container so much better than a plastic container. So we can all learn.

With finance I tent to mention options available, experience and pitfalls I've come across and hope the person picks the right option for them. I also come here on occasion just in case there is something I've missed or its an area that I'm weak on. I might also point to the many websites with useful info.

[bungeejumper]

I spent much of my career in the financial media, and for much of that time I was subject to the rules on insider trading and the bans on certain trades. For a while I was also involved in the preparation of regulatory statements for listed companies, which could sometimes be quite sobering.

I was often asked for advice, but stuck to generalities to stay on the safe side. Which didn't mean I couldn't make a difference. On one occasion, I dissuaded a friend who told me that his IFA had told him to buy a lot of "precipice bonds" that offered an attractive 10% return (or thereabouts), on condition that none of a bunch of European banks' shares dropped by 10% during the next 24 months. In which case they'd get 15% lopped off them instead.

The year was 2007. He owes me!

BJ

[Grumpsimus]

This is an odd thread where the subject is a paradox. You can't of course give advice without giving 'Advice'.

I think the whole subject is confused because of the existence of "Regulated Financial Advice" in the UK. If you are involved in this you will know all about the rules. It doesn't cover informal advice between friends/family etc and I have never heard of anyone being held liable for such advice.

This became very clear to me when I was a volunteer at the CAB and we had a staff meeting about financial advice. One or two people thought we shouldn't be discussing it because this was regulated by the FCA. I was clear that they thought advice was recommending specfic products ie shares etc. It was pointed out that the CAB was one of the largest providers of financial advice in the country. I lot of it was about debt, but it also covered mortgages, credit cards, tax etc. It was not about recommending specific products, but advising people generally on what to do and sometimes referring them elsewhere.

A case I recall is an elderly lady coming in with a cheque for nearly £150,000, the proceeds from the takeover of shares owned by her late husband. It was clear she had very little idea about tax. I outlined how CGT worked, suggested she deposited the cheque in an account that paid interest and go to a firm of Accountants to ask them to deal with the CGT on her behalf. Clearly this was financial advice.

[Alaric]

I think the whole subject is confused because of the existence of "Regulated Financial Advice" in the UK. If you are involved in this you will know all about the rules. It doesn't cover informal advice between friends/family etc and I have never heard of anyone being held liable for such advice..

This all goes back to the mid 1980s and the Financial Services Act of 1986. I think there was attempt by those who were essentially salesmen for insurnace company financial and investment products to upgrade themseleves to "financial advisers". In the Act and the rules surrunding it, there was a presumption of sorts that these advisers should be given a monopoly on financial commentary. There was even an exemption for journalism. Within five years arguably the nascent internet torpedoed any attempt to monopolise such discussions.I don't think the FSA or its precedessors ever made any serious attempt to shut down financial websites such as TMF notwithstanding their frequent commentary and discussion on personal financial issues.

[Dod101]

I am intrigued. How does anyone identify a relatively experienced investor to ask for advice? Do you people that are asked for advice wear a badge or something\? I never speak about investments or investing to anyone except occasionally to my nearest and dearest and thus am never troubled by that sort of thing.

Dod

[DrFfybes]

I am intrigued. How does anyone identify a relatively experienced investor to ask for advice? Do you people that are asked for advice wear a badge or something\? I never speak about investments or investing to anyone except occasionally to my nearest and dearest and thus am never troubled by that sort of thing.

Dod

I think retiring to a large house in the Country at 52 was a hint to my family

I think the family knew we were natural savers and investors, Dad had always played with shares, I inherited his interest, so when he died I sorted the Estate and just took over mum's assets as my sister had no interest. I instigated JISAs for the family rather than mum giving the greatgrandshilder cash each month, but it isn't really anything we discuss.

With friends they're mainly a similar age and those wondering about their options obviously notice my life of leisure and those who want to chat about it do. Often it is limited to pointing them towards Moneyhelper, or explaining how to open a SIPP or ISA as they often say "I have Barclays ISA" and then I ask what it is invested in and they look a bit blank.

[SalvorHardin]

I am intrigued. How does anyone identify a relatively experienced investor to ask for advice? Do you people that are asked for advice wear a badge or something\? I never speak about investments or investing to anyone except occasionally to my nearest and dearest and thus am never troubled by that sort of thing.

Dod

I get asked occasionally because some people locally know of my past as an Actuary, but moreso because I used to do work for a major professional services firm (and a local Solicitor, and Accountant).

Also because it is known in these circles that I have a Law degree (and got halfway through a Masters before giving up due to boredom), I sometimes get asked about boundary disputes, contracts, etc.

For example; a few years ago, through a friend, I was asked to give a second opinion on a final salary pension split due to divorce. I was 15 years retired and whilst final salary valuations was my main field of work, I was very rusty.

My skills were good enough to analyse the work that had been done, but I would have struggled mightily to produce it in the first place. I made sure that the person knew my situation and I got them to sign a statement to that effect.

It's one thing to give some basic advice at Citizens Advice level, quite another thing to go much beyond that.

One group of friends know my situation (very early retirement) and they are moderately active investors and are knowledgeable. We often have detailed discussions, far beyond what I post on TLF. Some of them lurk on TLF (I got them into Soco in 2000 and out later long before things fell apart).

[yorkshirelad1]

I've only done it with a few people, and tried to give pointers and information and so they make their own decisions.
I recommend TLF.
I have talked about shares that I have (esp collectives).
I have given a nephew funds each year for a LISA as he has a house but no pension and we have discussions about how he might invest.
Phrases like: "don't invest money you can't afford to loose", "aim for a 5-year horizon on investments", "if it sounds too good to be true, it probably is" crop up from time to time. Costs and providers get mentioned for things like ISA and investments and pensions. Also challenger banks for better savings rates. And checking Nat Ins contribution history.
I've given my godson some Premium Bonds (and it's fun watching the prize draw of his newly purchased holding vs my anciently-purchased holdings!) as a bit of a start to dealing with money.
Very general. I have no qualification with the legal, accounting, or financial professions. And I try to make that clear.

[Dod101]

It rather annoys me that my sister in particular seems to think that my money grew on a tree somewhere and pays for very little when I am around. I still have a photograph I took many years ago with a £20 note sticking out of each ear. My daughter and her family are good with money and we talk about it from time to time but that is about all. Otherwise I never speak about it.

Dod

[Lootman]

. I still have a photograph I took many years ago with a £20 note sticking out of each ear.

Come on, let's see it!