25 years: Wealth and risk management specialist
In this video, Faisal explains investment advice in more detail in a wealth management context by exploring the difference between "investment advice" and "investment guidance." He also takes us through some specific regulatory requirements that those providing clients with investment advice are subject to and how these have been impacted by the 2018 changes made to regulation.
In this video, Faisal explains investment advice in more detail in a wealth management context by exploring the difference between "investment advice" and "investment guidance." He also takes us through some specific regulatory requirements that those providing clients with investment advice are subject to and how these have been impacted by the 2018 changes made to regulation.
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5 mins 58 secs
Although the term “advice” is used extensively within the financial industry, in the Wealth Management industry it is important to distinguish between what is considered “Investment Advice” versus mere “Guidance”. Investment advice is a personal recommendation of what a registered advisor thinks a client should do when weighing up their investment options, whereas investment guidance is more general information about financial products. It is essential to understand the specific regulatory requirements that apply to investment advice and specifically those introduced through MiFID II, including the client suitability and appropriateness tests.
Key learning objectives:
Understand the key differences between Investment Advice and Investment Guidance
Understand MiFID II Investment Advice Requirements and when do they apply
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Investment advice is a personal recommendation of what a registered advisor thinks a client should do when weighing up their investment options, whereas investment guidance is more general information about financial products. As advice is specific and actually tells the client what to do, any recommendation that the advisor offers are subject to the following conditions:
Investment advice is regulated by the Markets in Financial Instruments Directive (MiFID II), specifically through a section called the ‘Client Suitability and Appropriateness framework’
MiFID II introduced requirements for Investor protection which are as follows:
A deep understanding of the financial situation of clients is essential, this includes investment knowledge, experience and investment objectives. This insight requires frequent interaction with clients to ask them for information, including career history or trading experience.
This content is also available as part of a premium, accredited video course. Sign up for a 14-day trial to watch for free.