Out-Law / Your Daily Need-To-Know

Out-Law Analysis 3 min. read

Financial advisers will be crucial to local authorities' provision of social care funding advice, says expert

FOCUS: The UK government is developing the rules that will govern local authorities' provision of advice on adult social care. Financial advisers should play an important part in this.

The Department of Health (DoH) has been consulting on the rules and guidance that local authorities will have to abide by when they undertake the duty outlined in the Care Act to provide information and advice on adult social care in a bid to help people take control of and make well-informed choices about their care and support needs.

The draft guidance says that local authorities must “establish and maintain a service for providing people in its area with information and advice relating to care and support for adults and support for carers”.

The local authority must ensure that the information and advice services they establish cover more than just basic information about care and support. The service should also address prevention of care and support needs, finances, health, housing, employment, what to do in cases of abuse or neglect of an adult and other areas where required. Local authorities must also identify who amongst those that contact them will benefit from independent financial information and help them to access that advice.

The consultation process on the guidance asked whether it is clear enough about the role that local authorities should play in helping people to have access to independent advice, including regulated financial advisers, and asked for examples of best practice and tools that would be helpful to local authorities in meeting their obligations.

The new rules will come into force at the same time as the pensions guidance guarantee, but they are being implemented in different ways, using different definitions of 'advice'. There is not the same emphasis on the difference between information and advice as in the retirement guidance guarantee.

In places the guidance referred to ‘independent’ financial information or advice which means services independent of the local authority, not independent financial advisers. The guidance also refers to ‘regulated’ financial advice which means advice from an organisation regulated by the FCA which can extend to “individual recommendations” about specific financial products.

There is a slight mismatch between the terminology used in the guidance and how the financial advice market is regulated by the FCA. It would seem to be quite easy to mirror each other’s terminology and it is hoped that the two government departments will work towards this aim to avoid any unnecessary confusion in the future.

The local authorities will have an important role in facilitating access to independent financial information and advice, where it would not be appropriate for a local authority to provide it directly. Local authorities are unlikely to provide regulated advice directly, so how they connect with and hand over to independent financial information and advice providers is going to be vital if the process is going to be a success and people are going to be prevented from falling through the cracks in the system and not being advised.

As the guidance recognises care decisions are often made quickly and at a time of crisis, and decisions can often involve family and friends, the local authority must carefully identify those who might benefit from independent financial advice or information as early as possible.

As well as providing access to financial advice and information, local authorities will be required to raise awareness about how care and support is funded. Local authorities will be expected to raise awareness amongst those with care and support needs and their carers, family and friends, and to inform that group about the benefits of financial information and advice.

Though local authorities will provide information on free, fee-based and regulated advice there is no mention in the consultation of use of the Money Advice Service or the Pensions Advisory Service, and perhaps there should be.

Local authorities will have to make people aware that some independent services will charge for information and advice. The guidance says local authorities may not wish to make a direct referral to an individual independent financial adviser but it is difficult to see how this process is going to work without referrals to independent financial advisers who are trained in advising on the needs in later life. Certainly some of the options currently being considered by the advice market, such as simplified advice and execution-only platforms, would seem to be inappropriate tools for this group to use.

The DoH consultation closed in August and more information is expected in October, with the publication of final documents to allow local authorities six months to prepare before the Care Act comes into force in April 2015.

This article first appeared in a white paper by Pinsent Masons addressing different aspects of the FCA's consultation. You can also see our analyses of retail investment advice; 'Project Innovate';  digital technologysocial media and financial advice, the barriers to simplified advicepensions product advice, the FOS as a barrier to innovation, and local authority duties to advise on social care funding.

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