An advisory firm says that a new definition of financial advice will fail to help people who cannot afford the level of service they require.

An HM Treasury consultation on amending the UK definition of financial advice closed yesterday.

Announced at Budget 2016, the government said it would give firms “the confidence to develop better and more tailored guidance services to help customers make informed financial decisions”.

It has proposed to amend the wording so that consumers only receive “regulated advice” when they are offered a personal recommendation for a specific product.

Ian Balgarnie, business development director at Ascot Lloyd, said: “The new definition of financial advice identifies that a personal recommendation is the key differentiator from guidance, but doesn’t bridge the gap for those that cannot afford the level of service they require.

“Many consumers will not appreciate the difference between guidance and regulated financial advice, even with this new definition. Consumers may be disappointed to find that after receiving a wealth of generic financial information, most of which is already available from the internet, they cannot be told which actions to take.”

He called for more action nationally to raise standards of financial literacy.

He said: “Unfortunately neither education, nor a new definition of financial advice, will address the price gap that exists for many looking for tailored recommendations on their financial affairs.

“The evolution of the financial services industry and accompanying legislation has led to a wealth of complexities governing savings and tax matters, increasing demand for specialists that can interpret rules and advise on an expanding product range.

“While the value of financial advice is well recognised within the industry, advisers must work with the Government to raise awareness of its value, and the associated costs, among consumers.”

The Government said, in introducing the consultation, that some consumers have “relatively straightforward financial needs or small amounts to invest” and for them, the cost of full regulated advice may outweigh the benefits, or it may be uneconomic for firms to provide them with regulated advice.