The cut-price deal from the firm, a member of the Intrinsic network, gave savers a one-hour consultation in person or on the phone through website Wowcher.
An advert on the money saving website said: “If you want to make sure your future is bright, let the professionals give your pension plans a thorough going over.
“The financial advisors at Charles Derby group can give you a pension review by contacting your existing providers for information and giving your plan a good analysis.
“They will be able to take their expert eye and use it to suggest improvements so your best interests are kept at the heart of your plan.”
More than 250 people bought the voucher, according to the website. The deal has now expired and is no longer available.
A spokesperson at Charles Derby said the firm hoped the vouchers would attract people who would otherwise not consider seeking financial advice.
“Research has shown that people are unwilling to pay for financial advice, but once they receive it they acknowledge its value”, they added.
But financial advisers branded the ad ‘salesman tactics’ and no different from non-contingent charges, a way of charging for advice where the adviser only gets paid if a recommendation goes ahead which is currently under the scope of the Financial Conduct Authority (FCA).
The regulator published a consultation in March where it lays out its views on the practice of advice paid for by contingent charging, with several financial advisers supporting the idea of a ban.
Darren Cooke, chartered financial planner at Red Circle Financial Planning, argued that the cut-price deal must be costing Charles Derby, unless they are very confident of a bigger fee after the initial review.
He said: “The only way that they're going to make money is if they find something they can sell [to these clients].
“Either we are a profession and try to be professional, or we are salesman.”
Steve Carlson, chartered financial planner at Cardiff-based Carlson Wealth Management, said that “many firms offer low cost or free pension reviews, either to look at the pension in isolation and charge a contingent fee if the client transfers it, or as a door opener to more complex and holistic advice”.
He added: “Firms offer different levels of service and market themselves differently, but one thing is for sure – you can’t give unbiased advice that looks at the clients’ entire situation in one hour for £12!”
Martin Bamford, chartered financial planner and managing director of Informed Choice, this is “an interesting and innovative piece of marketing from Charles Derby”.
However, “what consumers using Groupon and other sites like this might not appreciate is this is contingent charging,” he argued.
He said: “There’s no way Charles Derby can cover the cost of providing the advice for £12, or probably even for £295, so they will be writing it off as a marketing expense and hoping they can implement enough pension transfer cases to make it profitable.
“The FCA has rightly raised some concerns about contingent charging in recent months, especially as this relates to pension transfer advice. If the fee structure incentivises an adviser to recommend a certain course of action, then consumers need to take great care only to action that advice if they are absolutely confident it is right for them.”
The FCA declined to comment on this matter.
Rachel Vahey, product technical manager at Nucleus, isn’t so critical of the firm’s marketing practice, as she believes that the industry needs to keep “striving to find different routes for people to access advice and to help them understand the value that it can bring”.
She said: “This means moving financial advice into the mainstream, where it is seen not as something different or unusual, but something most people could – and want to – use.”
Speaking specifically about the voucher, Ms Vahey said that “it’s certainly an alternative way of spreading the message of financial planning and engaging with pension saving”.
She added: “However, it seems to go against concerted efforts elsewhere to promote the value of advice, as well as ongoing efforts to encourage the public to see advice as a profession.”
The Charles Derby spokesperson said the firm's marketing costs for acquiring new clients are typically around £500 per client and discounting its initial meeting cost is seen as a marketing cost saving.
An Intrinsic spokesperson said that the network is aware of Charles Derby’s promotional activities, and that the voucher is in line with its current processes and controls on promotions and adviser charging.
She said: “We support initiatives that look to boost the take up of advice and fill the ever-growing advice gap. Advice on pensions cover a myriad of things and an initial assessment can help people with basics such as pension consolidation.
“Intrinsic has a robust and effective oversight framework, which ensures recommendations to change or adjust pension arrangements will be in the interests of the customer and will be suitable to their needs.”
maria.espadinha@ft.com
