# Central Bank regulation of online advice (from other thread)



## rainyday (22 May 2002)

BarryH

All  I would like some investment advice for a sum of €30,000
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 I have recently retired and have some spare cash, approx €30,000 which I would like to invest. I have already signed up for the SSIA so would like other investment suggestions. Ideally, I would like a continual flow of income rather than investing in something which will tie up my cash longer term (say 5-10 years). Can anybody advise me what to do? Thanks 

MyAdviser

Investing for an Income
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 BarryH, one suggestion would be to invest your money in a with profits bond and set it up to withdraw the bonuses each year (4%-5% net return). The underlying investment is typically in a diversified fund containing mainly equities but also gilts, cash and in some cases property. 

The advantage over direct investment in such assets is that the with-profits funds are designed to smooth out the year on year returns thus making them less volatile.

The advantage over investing in guaranteed products like deposits is the potential for a reasonable income and the possibility over say 10 years of additional bonus on your capital.

The disadvantage is that you don't know for sure what the income rate will be until the start of each year. This type of investment would be cautious but may suit your needs. 

Whatever you do give yourself a boost by buying your investment after checking out all the alternative providers some are more expensive than others and get discount on the entry charges.

Hope this helps.

Regards Michael
www.myadviser.ie 

Mithrandir

Oh oh
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 Listen, Michael, this raises hackles every time its raised, and I don't necessarily agree with it, but the Regulator insists that financial advice may not be given by any intermediary without first 'knowing the client', i.e. fact find. This I've learned long time back includes ones website, hence web based advice is also covered.

The above exchange is just the type of thing the Central Bank is looking for. The advice they will point out is given without any knowledge of the consumers overall financial strength, targets, aspirations, and risk tolerance. You've advised With Profit investment in a vacuum, they will argue. Please, please don't take my word for it, check it out yourself.

The CB guidelines are adding to the cost of advice clearly, in an effort to impose an advisory process standard. The result is that websites from commercial operations cannot give recommendations. The technology to automate financial planning leading to web site advice is still raw. Sorry for the bad news. Barryh needs to be first quizzed on his position, age, and all that kind of stuff. 

Hawkwing

Baloney
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 MyAdviser was not giving investment advice other than the recommendation to shop around and get best discounts. Surely the CB is not going to clamp him in irons for that!

The rest of the post was merely describing a certain product and contained no advice element; it’s up to BarryH what to make of it.

That fact that the description omitted to point out that these products are seriously underwater at the present time is a more serious regulatory breach, not of the CB intermediary framework, but of the Trade Descriptions Act (if we have such a thing here). However, MyAdviser would have the defence that the product providers do not reveal this information in the first place. 

Mithrandir

Advice
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 Sorry Hawkwing but the above constitutes advice. I've openly and publicly debated on this matter from the same platform as the Central Bank, and that's my opinion based on that experience. 

There are two things, Advice & Information. The above is advice. Barryh, sought advice on income generation, My Advisor, advised With Profits. No talk of Deposits, Corporate Bond Funds, European Government bond funds, other smoothened funds etc. Just With profit, hence it’s a straight sector recommendation.

Hawkwing, a word of advice - learn the difference between giving information and giving advice under the IIA. Better to learn it right, than to learn it during a CB audit. 

Liam D Ferguson
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 Surely giving an opinion to an anonymous poster on a public access website such as this would not be deemed "advice" in the same way as sitting down with a client in a professional capacity? I know Brendan Burgess has sought clarification from the CB about the regulation of AAM and while I don't know what the response was, I'm sure that if the CB had told Brendan to stop any area of AAM, he would have moved swiftly. 

Mithrandir

AAM and Advisors
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 The IIA is light on AAM, it appears to shade the exemption as a publication, so Brendan is fine. But firms like you, and MyAdvisor who, are not anonymous and are acting commercially, i.e. self promoting and who are regulated entities under the IIA are an entirely different matter. The IIA requires the CB to ensure that all advice produced by regulated firms complies with it.

It doesn't matter if you're giving the advice 'free' on AAM or 'free' on the street, at the office etc. It still is giving advice. The lack of response to AAM may indicate that the CB ain't too concerned, or it may simply be that it hasn't decided to act on AAM yet. As for getting as definitive position in writing from the CB on AAM, I'd say forget it. The CB prefers to act stealthily, quietly and confidentially. If any regulated firm provides advice without fulfilling the requirement to know your client, i.e. fact find, the firm leaves itself exposed to the CB.

AAM contributors that are not anonymous will be regarded as acting as an extension of their business activities on AAM. Hence published advice like that above is just the same as advice on file at the office. There is no difference. 

NotMyAdviser

CB
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 He's an unregistered user. How could the CB prove that the advice actually came from MyAdviser or Michael in this instance. 

Mithrandir

Good Point
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 You've raised an interesting point about evidence. I'm stumped, gotta admit. But the IIA is very clear on the issue raised. Since my last post I've treble checked and the position is clear, firms who use AAM openly are engaging in advertising and giving advice and the CB rules on the advice process apply. 

MyAdviser

Advice - Get the Facts before
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 Mithrandir, you seem very concerned that Central Bank rules and the IIA are implemented and I commend you on that. I agree that all advisors on AAM should be careful about the difference between advice and information. That said, I don’t agree with your interpretation of that difference. The CB and IIA rules must be implemented and both Liam and I are clearly doing so. To suggest anything else is wrong.

After a conversation with the CB this morning they seem happy that the provision of general information about product types/groups/sectors (I used this particular with profits example) is OK once a particular product is not recommended. In this example there are other investment types that could suit BarryH’s needs and thank you for mentioning some of them.

All I was doing was making one suggestion that he could consider not a product recommendation. I think the idea that an advisor cannot speak to a person about general issues on investment, protection or pension, without meeting the full fact find, terms of business etc is of no benefit to consumers. And the regulations would seem to back that up.

Where a person asks specific questions about a particular product, then these can be clarified by an advisor once no opinion or recommendation is given about the suitability of that specific product.

The IIA, under the definition of Advice (page 7 &  , specifically excludes from its definition

“advice given in a newspaper, journal, magazine or other publication, including electronic publications, where the principal purpose of the publication taken as a whole is not to lead persons to invest in any particular investment instrument or deposit or to deal with any particular provider of investment business services.”

I am happy to register on AAM and will do so straight away because any inference that I am using that to hind behind is misplaced. I am though concerned that Mithrandir is in some way involved in speaking on the topic of what is and is not advice – clearly you need to get your facts straight before your next engagement. The medium by which advice is given is irrelevant, the key issue is - has advice been given. Quite clearly the rules allow AAM to continue and professionals like myself and Liam are free to help people as best we can to be aware of their options. 

I hope this clarifies the point but if not maybe this issue can be taken out of this area and continued elsewhere.

BarryH, there are other options to generate an income including direct investment in equities and take the dividend or buy into a high dividend fund which does the same thing (pretty much) but allows smaller investors access to a much wider spread of equities. Both of these options will deliver an income but the income will fluctuate and your capital is not guaranteed. Best of luck with your investment.

Regards Michael

myadviser.ie


NotMyAdviser

Advice
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 Hi Michael,

Just to be clear, I wasn't suggesting for a minute you were unregistered for any ulterior motive. I simply asked, given that that was your status, how the CB (if it wanted to) could categorically attribute the offending "advice" to you.

In fact I agree with the line taken by both yourself and Liam. I see little or nothing on either of the threads to which Mithrandir has taken exception (i.e. got on the high horse about) that would constitute "advice". 

Mithrandir

CB Give Conflicting Information
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 Listen I'm not on any high horse. The first time I raised this, and related issues in December 2000, as a projection on how the CB would apply the IIA in 2001, it caused consternation. But the predictions were proved correct, particularly on the S10 vs. Restricted demarcation. I didn't do so to prevent anybody doing their thing.

Instead I had pre-knowledge for the very simple reason that I too argued the position unsuccessfully in 97' and was forced to seek a Section 10 authorisation. What's disturbing about your post is that giving advice has been perceived by you as being linked to a product selection. That's the very ground upon which I lost the argument. See it isn't. 

You gave a recommendation. That's advice. If it wasn't you could provide a generic estimate of the current value of, say, pensions held at different IRR% into the future, and even estimate potential income drawdowns, and say, Hey I didn't recommend a product. You could tell a consumer to but geared property funds instead of large stock European trackers, and say Hey I didn't recommend a specific product. That's bollox of course, because advice under the IIA has been given nonetheless.

Much depends on who one speaks to at the CB, how you word your question, and if their prepared to put the opinion in writing it seems. But the reply you've given is directly opposite, not to replies I've got, but direct action by the Bank. 

MyAdviser

  Re: CB Give Conflicting Information
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 Mithrandir, you are wrong and your continued tone and lack of desire to stick to the written word of the IIA never mind its intent is a disservice to this forum and to the consumers who derive value from it. 

That said, I would be happy to continue this discussion on a separate thread so that those who are interested can contribute. If any of the moderators are following this would it be possible to open a separate thread?

NotMyAdviser, no offence taken - I just wanted to make sure my actions could not be misunderstood.

Regards Michael

www.myadviser.ie 

Mithrandir

No Problem
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 Myadvisor, I actually wish I was wrong, but as recently as this week I spoke to very senior CB sources, and had the issue reconfirmed. I've no problem in fleshing the issue further, but please, only where we stick to the substantive issue. 

(Your last post implies an unacceptable motive to my comments, and suggests its anti-consumer behaviour, clothes I think that hardly fit. So please let’s try to help each other understand the position?)


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## Zidane (22 May 2002)

*IIA*

<!--EZCODE QUOTE START--><blockquote>*Quote:*<hr> “advice given in a newspaper, journal, magazine or other publication, including electronic publications, where the principal purpose of the publication taken as a whole is not to lead persons to invest in any particular investment instrument or deposit or to deal with any particular provider of investment business services.”<hr></blockquote><!--EZCODE QUOTE END--> Surely this says it all.  AAM is an electronic publication which <!--EZCODE BOLD START-->* taken as a whole*<!--EZCODE BOLD END--> is not leading persons to invest in any particular investment or with any particular provider.  (Except, maybe the preoccupation with recommending Quinn Life negates that.   )  

Take the Indo last Saturday, very strong (and misleading IMHO) advice to invest in a Candad Life GIP, but <!--EZCODE BOLD START-->* taken as a whole*<!--EZCODE BOLD END--> the Indo is not a promoter either of this product or of Canada Life.:rolleyes


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## MyAdviser (22 May 2002)

*Re: IIA*

Mithrandir, can you clarify where exactly it states that having a discussion (without a factfind etc) with a person about a product class/sector/type is in breach of IIA or CB guidelines. As per Zidanes last comment, I cannot find anything wrong in what I and others have been doing. 

Where in the IIA does it even loosely prohibit this activity? This might help me understand the basis for your very strong opinions. 

(I am happy to have a debate here and excuse any misplaced inference but I do not know who you are or who you may represent)

Regards Michael

www.myadviser.ie


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## MyAdviser (23 May 2002)

*Re: IIA*

Mithandir, as a slight addition to my last post 

I think you are being a bit disingenuous by staying anonymous and given a recent quote (see below) you made on another thread EH would probably agree with me!

“Anybody who read The Paper today will recognise that the fountain of all wisdom, EH, strongly admonishes this Web based "advice". “

I feel this issue is very important and should be approached as honestly as possible for the good of the consumer and industry.

Regards Michael

www.myadviser.ie


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## Mithrandir (30 May 2002)

*AAm and open advertising*

The section quoted above are from the IIA, and are entirely accurate, and cover AAM. But firms openly acting on it are seen by the CB as advertising at the very least, and giving advice as well. Hence the IIA applies in full to you, but not to anonymous posters. Simple as that.

As validation the CB will not allow you to have a website yourself that lets punters download or read specific selections for specific queries - without a fact-find. I had to stop a website development because of this rule, before which I checked with three different sources at different levels within CB. I lost money on the development.

Your activity on AAM is exactly the same. Sorry if it's not what you want to hear, but the IIA is a barrier to non-rules websites.


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## Su (30 May 2002)

*stifle*

Sounds like a crude attempt to stifle of competition to me.

Su


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## MyAdviser (30 May 2002)

*Re: Advice v's Information*

Mith, Where does it state or where is it indirectly covered that the "CB will not allow you to have a website yourself that lets punters download or read specific selections for specific queries - without a fact-find."

Also are you trying to say that professional advisers cannot advertise without a fact find?

Can your sources tell you where in the AA handbook or in the IIA that prohibits this activity? As I mentioned already what facts/rules other than conversations with the CB back up you argument? 

Regards Michael

myadviser.ie


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## Mithrandir (30 May 2002)

*CB Rules*

Firstly I don't own the argument, and have no motive other than passing on my experience.

The 'Know your Client' rules are issued by the CB under S37 of the IIA. The requirement is quite specific before ADVICE may be given. See your guidelines issued under S37 section Four.These apply whether on websites or directly. 

There is only one exception, 'Execution Only', the complete absence of advice.

Until, and unless Websites governed by the IIA can implement a rules based advisory process that works, ie advises a consumer through the process of a fact find, and to the specific advice matched to the consumers position, Websites must adopt the execution only mode it seems.

Say, you've a site that gives your best selections from the investment pyramid, from Safe to High risk, and, after reading it, a consumer rings and says "I want that one", the CB argue that you must go through the 'Know Your Client' steps. So its ok to get the info / advice it seems from one website, but to go execution only you must use another!!!


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## Doris (30 May 2002)

*CB Rules*

Would the 'decision tree' process, that is used on alot of UK sites in relation to Stakeholder Pensions, help the Advisors cause?


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## Mithrandir (31 May 2002)

*CB*

Dorris, I dunno, but I'd say that's feasible, provided it fits section 4 of the guideline. 

MyAdviser, the rules on advertising are different. But advertising isn't interaction with a consumer, sorry I missed that question.

Before I aborted the website, I had intended a punter to visit a diagram, and based on the risk/reward area selected, let him or her download a generic advisory document, plus product picks from the market. Transactions would then be discounted since travel, research, fact-finds etc would be by-passed. As far as I was concerned that was a non-advisory sale. Not so the CB advised, later when it published the guidelines ie a fact-find ie Know Your Client process still needed to be completed, essentially defeating the whole idea commercially.

What's left is pure execution only transactions, the complete absence of advice. 

As for CB sources, I don't intend naming people, as that would be a breach of their privacy, but those were the interpretations transmitted to me, in crystal clear terms.
Advice on AAM by named intermediaries is exactly the same.


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## Dogbert (31 May 2002)

*Punters*

Bet the CB wouldn't like to hear you calling them "punters" either, Mith.


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## Figo (31 May 2002)

*What a load of nonsense*

All this Best Advice, Know Your Customer (KYC) stuff is such nonsense that it plays right into the hands of AAM.

Under the anonymous cover of AAM, product descriptions, recommendations, advice of the various products on the market can be made available to punters <!--EZCODE BOLD START-->* free of charge*<!--EZCODE BOLD END-->.  This ain't rocket science, despite the outrageous fees/commissions charged by so called independent advisers for the same info.

It's up to the punter whether to avail of this anonymous advice and purchase on an execution only basis - <!--EZCODE BOLD START-->* there is no hard sell on AAM*<!--EZCODE BOLD END-->.

Ok, so the CB may make a swoop raid and grab hard discs to see whether advisers have in fact been making advice through AAM under anonymous cover without the full KYC compliance but fearless advisers like myself will risk this threat. 

If AAM is providing advice without KYC, yeah that's illegal.  It's an absolutely wonderful, free, service and long may it survive, despite the purist onslaughts of <!--EZCODE ITALIC START-->_ Mith_<!--EZCODE ITALIC END--> etc.:rolleyes


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## Mithrandir (31 May 2002)

*Chew a bone*

Figo, It doesn't appear you've read the thread. AAM is fine, just perfect. But professional advisors who openly provide advice on the site is the topic, and by extension other commercial sites. Once again we're straying from the subjective matter.

Assigning some kind of a conspiracy thing isn't accurate, and was also done in Dec to feb 2000 and 2001 when I first brought the impending apllication of the IIA to insurance intermediation to the attention of users. Having a go at me may satisfy some urge you have, but it is a distraction from the substantive issue.

Finally your views on all advisors points to a prejudice, unreflective of how much of the market, and I mean consumers chose to do their business. Your implication is that, empowered like you are they too will be equally as enlightened, and that by extension they, lacking intelligence on the matter, are not getting value from their advisors. That's blind thinking I'd suggest.


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## MyAdviser (10 Jun 2002)

*Re: Advice v's Information*

Mithrandir, may I suggest first off that you do own this argument, as you have raised it (not for the first time) and you are the only one arguing your side of the debate. I will take your word that you are just trying to help and in that light I would make the following points;

** It would seem that what you tried to do in your last project was to create an on-line low cost advice service.  Obviously I do not know the details of what you did, but based on your description you seem to have tried to give consumers the wherewithal to go through a series of steps after which they would have been guided or advised to buy a particular product. This in my opinion would be within the definition of advice as laid down by the IIA and therefore you would need to know your client before hand.

** The cornerstone of why I believe that professional advisors can provide information and discuss with the public the pros and cons of various types/groups/sectors of financial products (not specific products) without doing a fact find is based on the IIA definition of advice. Once what we provide does not constitute advice then the “know your client” rule does not apply.  The definition of advice is as follows;

"investment advice'. means the giving, or offering or agreeing to give to any person advice on the purchasing, selling, subscribing for or underwriting of an investment instrument or on the making of a deposit or on the exercising of any right conferred by an investment instrument to acquire, dispose of, underwrite or convert an investment instrument or deposit or the giving, or offering or agreeing to give to any person, advice on choice of a person providing investment business services, but does not include any of the following: 

(a) advice given in a newspaper, journal, magazine or other publication, including electronic publications, where the principal purpose of the publication taken as a whole is not to lead persons to invest in any particular investment instrument or deposit or to deal with any particular provider of investment business services. 

(b) advice given in a lecture, seminar or similar event or series of such events, where the principal purpose of the event or events taken as a whole is not to lead persons to invest in any particular investment instrument or deposit or to deal with any particular provider of investment business services and where persons engaged in the organisation or presentation of such events will earn no remuneration, commission, fee or other reward as a result of any particular decision, by a person attending such event and arising out of such attendance, in relation to investment instruments or deposits or in relation to the choice of a person providing investment business services. 

(c) advice given in sound or television broadcasts where the principal purpose of such broadcasts taken as a whole is not to lead persons to invest in any particular investment instrument or deposit or to deal with any particular provider of investment business services. 

(d) advice to undertakings on capital structure, industrial strategy and related matters and advice relating to mergers and the purchase of undertakings. 

(e) advice given by persons in the course of the carrying on of any profession or business not otherwise constituting the business of an investment business firm, where the giving of such advice is a necessary part of other advice or services given in the course of carrying on that profession or business, and where the giving of investment advice is not remunerated or rewarded separately from such other advice or services.

** If what you have said is true then professional advisers could not have a conversation with anyone about the business and the type of services we provide. It would be impossible to explain how products work and the general benefits that the potential client may receive should they be interested. For example, to explain the benefits of a pension would seem to be within your understanding of giving advice, although no specific product has been mentioned and therefore it would be impossible for a consumer to take that information and to their detriment buy a pension. 

** The IIA, in my opinion is not light on web based services and it’s definition clearly applies and makes common sense to me. It covers all advisors whether they remain anonymous, like you have chosen to be, or make their position clear like MyAdviser.ie or Ferga.com. If anything were true I think that advisors who have chosen to remain anonymous are by definition hiding something – but as you have admonished other for straying off the point I will stop there.

In Summary
The provision of advice only occurs when an advisor meets the definition of advice. The contributions that I have made to this site and through my own on-line brokerage have not strayed from the IIA definition. Your argument relies on the over riding requirement to know your client, but you seem to seem to have ignored the definition of advice.

Regards Michael

www.myadviser.ie


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## Referee (10 Jun 2002)

*Great Match!*

MyAdviser 2  Mithrandir 0

I hope this is only half time.


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## toby (1 Sep 2002)

*investing 24000*

go to your usual bank.  tell them you have money to invest.  they tell you an interest rate .  tell them no its not enough.  I want .... whatever you want.  They say no.  You say ok,  give me a bank draft for the amount{you lodged it there for safe keeping in a current account}  They offer you more.  Tell them you'll think about it and then go to every other bank and ask do they want that money there the next morning.  if YOU GET A better offer ok.  You will.  Then tell your bank you have a better offer.  They will match it or not.  There u go. If they don't, change your money to the highest interest rate.  Don't mind the grumpy faces,  they still have your current account, and the possibility of future business.


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## The Gambler (1 Sep 2002)

*Investing 24,000*

Have you tried this tactic which such a relatively modest sum in recent years ?  Would be interested to know which Banks were prepared to offer better than their published interest rates for a new customer.


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