It is a recurring debate within most financial services companies to ask "does this constitute advice?'. Advice in financial services is highly regulated as a result of Financial Services somewhat chequered history on the matter. You don't have to go very far back in history to find repeated examples of sharp sales practices masquerading as advice. My main 'stuck record' when talking to FS companies is to try to convince them that such practices reflect their own skewed view of the world and have very little to do with the meaning and value of advice in society at large.
I have come across this problem in a related field, namely social care; specifically regarding the advice given by professionals such as GP's, and the perceptible shift in the definition of advice away from common sense or normal cultural praxis and towards something which is rooted in the theme of rationality and evidence led policy thinking which has dogged so much of what purports to be innovation in the public sector.
This is more than just a philosophical debate, although policy wonks and practioneers need (and I think this would be a good thing) to be more philosophical about the nature of advice (and information) if we are not going to see the dysfunctionality of advice in the financial services industry repeated in other sectors of public good - such as health, social care and sustainability.
So lets look at the 'facts'. Facts are the holy grail of policy making and service design in the public sector. We treat facts as 'real' and they always trump a good hypothesis or theory. One of the projects of the solid modern world is to make sure that all information is produced in the form of facts - or perhaps more accuratedly, every thing is/can be reduced to a fact. We even call them 'hard facts'. A fact is a self contained statement - i.e. all of the necessary the meaning is contained within it. The value of a fact is that it is an objective bit of stuff (or content) which can be 'transacted' repeatedly between the state/institution/professional and the individual.
Facts do not refer to or require context to be understood. Facts are supposed to make things plain and simple so that people can make decisions without any undue influence. Introducing context about the product or even asking about context (either of the product or of the individual) constitutes advice.
In Financial services I can only use facts unless I want to start giving 'advice' (and enter a painful world of costs, risks, liabilities, authorisations and bureacratic box ticking).
Advice in the solid modern world is enacted by introducing some element of context or personal details. I can identify that I have back pain to my GP or savings that I want to put in an ISA but the GP/FS salesperson will avoid moving to context of that condition/decision for fear of entering the realm of 'advice'. In the case of a GP it turns a 10 minute consultation into an hour's conversation, and in the case of the FS salesperson (who is not 'trained in advice") it turns a harmless conversation into a regulated transaction of advice. Advice is about more than the facts about a thing, it involves the application of some contingent context in which the thing will be purchased, used or chosen over another option.
I am sure that a philosopher would have something to say about this (or would assert the limits of what could or should be said), but understanding the gap between the way we define advice in theoretical and policy terms and the way advice is consumed in reality is fundamental to understanding why both the State and financial services are so poor at giving advice which is actually heeded and acted upon by its citizens/customers.
Of course, consumers in reality are less than comfortable with the idea that all they can have are facts about a thing; they are desperate for some context (theirs or someone like them) so that they can make a decision based on what they would define as evidence (i.e. experience). They don't see the exchange as a finite transaction (one which will not be remembered the next time they interact with that insitution as this would constitute advice) but rather as part of the to and fro/reciprocation of a relationship building exercise.
It is like purchasing a work of art, such as a painting, without being able to know anything beyond what it is a painting of, what paints were used in its creation and what someone else paid for something very similar. Information about the artist, and the fact that he / she may have painted similar works, constitutes advice. And advice is to be avoided. We are left in the rather post modern state of being when the meaning of a thing is entirely constructed and enacted by the audience and the authors retreat behind a wall of facts about their work. It is perhaps ironic that much of the rhetoric of the Big Society against the "Big State" is based on the falacy that the state was somehow interfering in everyday life. The experience in many areas has been akin to the retreat of the financial services from our communities and high streets, i.e. the Big State has become obsessed with presenting only the facts and left the consumer to fend for themselves via choices. Of course, as you often find when marketing financial services products, the way you frame the choice (number of choices, use of brands and other symbols of trust, etc) can control the decision of the individual in much the same way as advice and this constitutes a much more insidious interference in many respects - an interference which could be framed as 'when nudge turns to prod'.
In fact, we are now faced with a system where even advice itself has been reduced to a transactional commodity, valued in temrs of work done to establish the context of an individual and recommendations (or at least priorities established) such that a decision can be made. The problem is that the costs of this advice are so prohibitive that it is only worth seeking if you have sufficient money to afford it from the investment decision you are about to make. Essentially the single digit percentage of the population with 100k + of net worth (not counting illiquid assets like houses).
And perhaps we come to the nub of the problem with my last post but one about the Big Individual. Liquid Modernity delivers freedom for those with the resources to generate their own advice (technological, economic, social, cultural capital) while many are cast adrift in a sea of choices with little or no supply of such capital to navigate their own choices in any meaningful sense, recoursing instead to superstition (picking the third one in the list, picking the middle one) and habit/apathy (making no choice).
So perhaps it falls to researchers to stop selling the (mass) production of facts and start selling the search for meaning? We only have to look at the essentially irrational behaviour of equity markets to realise the risks of relying purely on the production of facts to make sense of the world and decide how we are going to invest our increasingly finite resources. We don't need States to assume that Google is all the meaning we need to make decisions. There must be a billion facts on Google which purport to be the 'meaning of life' each one, taken by itself, as useless as the last if you actually want to live that life.
Addendum:
This response from the Sustainable Development Commission to a request for evidence about Behaviour change seems to endorse the importance of changing contexts rather than changing minds and also points to a lack of research resource to understand the impact of interventions and policy changes.
True, but the biggest reason those restrictive rules exist is pension mis-selling in 80s.
There's a strange economics to misleading advice. The small firms I've worked for live in terror of even being accused of being misleading, but are reasonably relaxed about chatting to customers. Common-sense survives as the overhead of setting complex rules is too high.
A big corporate might have millions of procedures about what they can/can't say to customers, but ultimately they can make $Y out of a bad recommendation and budget 7% of that for the fines/compensation. To a large organisation, the cost of self-insuring deceptive behaviour (like PPI sales) is cheap.
I think consumers have always been on their own. Maybe the FSA should just spend it all on billboards saying "Sales people are evil and should not be trusted." :-)
Posted by: Thomas Barker | October 20, 2010 at 10:18 PM