Four in 10 defined benefit transfer advisers have raised their fees since 2018 as regulatory costs bite.
An exclusive survey commissioned by FTAdviser’s sister publication the Financial Times, found many advisers have given up their transfer permissions, but of those that remained in the market 40 per cent are passing on costs to their clients.
Of 1,049 advisers polled by the Personal Finance Society for the FT in February, 681 are still offering DB transfer advice. And of those, 384 have increased their fees over the past two years, mainly due to their fast rising professional indemnity insurance costs.
Of the 368 advisers that did not offer advice, 294 (80 per cent) had previously done so.
But the PFS told the Financial Times that many advisers were reducing costs in other areas, such as travel or by using technology, to stop passing on high PI costs to clients.
PI premiums have increased over recent years as insurers are concerned about high compensation claims from bad transfer advice.
PI premiums have been particularly affected by the Financial Conduct Authority's increase of the Financial Ombudsman Service’s compensation limit from £150,000 to £350,000 in April 2019.
Some advisers have seen their PI premiums increase by up to 900 per cent while others warned the PI market could close off to more advisers due to the coronavirus crisis.
Back in July, the industry warned the cost of advice was set to increase after advisers were forced to hike their fees in order to balance their books after regulatory bills had rocketed once again.
At the time, Peter Chadborn, director at Plan Money, said: “The biggest picture is that our costs will go up. The wider consequence is that the public will be priced out of getting good financial advice — that’s the real sob story here.
“We will have to put up our fees and we are at the lower end of the charging line, we’re a modest company. It is not good for the general public.”
The PFS survey did not show the levels of fee rises at advice firms.
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