Rowley Turton director, Scott Gallacher has questioned whether Hargreaves Lansdown’s cashback offer adheres correctly to the consumer duty rules.
Gallacher’s comments come after Hargreaves Lansdown announced a cashback offer which was touted as one of the biggest in its history with as much as £3,500 available.
However, Gallacher cautioned that, in percentage terms, the cashback sums involved are “rather modest” for investors, being equivalent to around a year of the company’s platform fees.
Therefore, Gallacher argued that it was "not really much of a giveaway".
“While the cashback deal may serve as a bonus for those already planning a transfer, I am concerned that vulnerable people might be tempted to transfer purely for the cashback,” he said.
He added that it could be a particular risk at this time of year due to “Christmas and the associated costs”.
“Consequently, I’d question whether or not this offer is in keeping with consumer duty rules, especially concerning preventing ‘foreseeable harm’.”
In response a spokesperson for Hargreaves Lansdown said the comment “shows a lack of understanding of how the offer works”.
But Gallacher was not the only adviser who had concerns.
The Orchard Practice owner and chartered financial planner, Joshua Gerstler, said the cashback deal could be “a nice little bonus” but did have some reservations of his own.
“Whilst there does not appear to be anything necessarily wrong with being offered cashback to move your pension, you should not move your pension for this reason alone.
“Your pension should be with a provider who gives you the best value for money and the best chance of achieving your retirement goals.
“A few thousand pounds now sounds nice, but you could end up paying much more than that in fees, lost investment returns or penalties to your existing provider if you haven’t looked into it properly.”
I’d question whether or not this offer is in keeping with consumer duty rules, especially concerning preventing ‘foreseeable harm’Additionally, R3 Wealth independent financial adviser, Riz Malik, stated the cashback offers often draw “significant interest”.
However, he emphasised that it’s important that individuals “aren’t so enticed” by the cashback that they overlook potential exit fees and the advantages of their existing arrangements.
“In this tiered cashback system, the top reward of £3,500 is exclusive to transfers over £1mn, while smaller transfers yield much lower cashback amounts,” he added.
In response, Hargreaves Lansdown’s spokesperson pointed out that the company is not the only platform to offer cash back incentives and that the vast majority of financial advisers will consolidate their clients’ assets to a platform of the advisers choice.
They added: “Cashback offers help to stimulate client engagement which in turn leads to better decision making and improved outcomes.”
Thanks to the Newspage community for sharing their thoughts with FTAdviser.
tom.dunstan@ft.com
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