What does guided mode do?

I get that it gives arrows that point to the next Moon, and during the story I guess that it is the next 'Storyline' Moon;

But when you are done with the main game, and it becomes a collect them all, what does Guided mode do? Does it point to the nearest moon? The next moon on the list?

Also, is there other advantages if you play in Guided mode?

The Assist mode basically helps your progress in the game by directing you to the main objective's power moon. You probably knew this, because you've finished the game. However, the other benefits still apply after beating the game. Mario has 6 health by default instead of 3, which can be increased to 9 after getting the large heart. In addition, a fall which would usually cause you to lose a life returns you to life at 1 hit point without losing any coins. Hope this helps.