CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading in CFDs. You should consider whether you can afford to take the high risk of losing your money.

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EDUCATION CENTRE

28 July 2020

Is there a difference between Education and Advice?

Many trading platforms offer education as part of their service but this will not be in the form of investment advice unless they have the required authorisations and the staff qualified to do so. What is the difference between education/support and investment advice though?

Education/support

Education and support is often described as ‘Guidance’ by the FCA and is a much broader term which includes more general information about financial products, trading systems and trading strategies. There are a number of ways that Brokers can support and help educate investors. These include;

  • Explaining the workings and functionality of the trading system to assist the investor with the placement of their orders and the maintenance of their account.
  • Helping the investors understand the complexities of the financial instruments including the concepts of leverage and margin.
  • Making sure that investors understand the terminology around the placement of orders and such terms as Market order, limit order, stop loss etc
  • Explaining the different methods of charting and what certain patterns or occurrences are understood to signify.
  • Keeping the investors abreast of economic events, their significance and the accepted or traditional ramifications of these on global economies.

Advice

As mentioned previously advice can only be given by those authorised to do so and there is invariably a cost associated with the offering of this advice. Some of the characteristics which define whether the information is advice rather than education are:

  • The recommendation is personal to you;It will be based on your specific circumstances and your financial objectives;
  • It is a recommendation of what you should do;
  • It is a recommendation to buy or sell a particular investment;

The support element of the service from trading platforms differs dramatically from broker to broker. Some brokers rely on the impersonal call centre model through which an investor cannot be sure of speaking with the same account manager twice and will thus have to go through the familiarisation process for each call. A smaller number of brokers such as USG UK offer a bespoke personal service through which each investor is assigned their own account manager who will oversee the investors’ account. Apart from the obvious advantages of having a professional available to the investor at any time this service also includes calls to investors to warn of possible margin calls, notification of impending important economic events and any upcoming regulatory changes.

In conclusion and in general terms; Advice is specific to the investor, and in it’s intent is to tell the investor how to act. The provision of this advice invariably comes with associated costs to the investor. Education and support on the other hand is more general and comes as guidance to the investors to assist them in making their own decisions. This guidance is usually free of charge to clients of the broker although the level of the service offered varies from broker to broker and investors should make sure they will be receiving the type of service they require before selecting the trading platform.

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