According to Stewart Patterson, director of retirement at consultancy firm Willis Towers Watson, this is because, as the adviser's clients are all in the same defined benefit (DB) scheme, most of the work about the plan can be streamlined, and result in cost efficiencies.
He said: "If an individual contacts the financial adviser directly, and wants to receive advice from a defined benefit to defined contribution transfer, it would probably cost £3,000 to £4,000 for that advice, because the financial adviser has to do a lot of work to understand the specifics of the scheme that the member is currently in.
"In the exercises where the financial adviser is appointed by a defined benefit pension scheme, the per head cost for that same advice process is normally around £1,000, which is around 75 per cent lower.
"It is because that first piece of work understanding the specifics of the scheme only needs to be done once."
Consultancy LCP has experienced an even lower price pension transfer advice cost per individual.
Clive Harrison, partner at LCP, said: "In our experience, the majority of members do get a much better deal when the employer or scheme has appointed a financial adviser and we have many clients who have done just this.
"An initial setup cost would normally be paid but then the advice charges can be as low as £500 flat fee per case.
"This compares to a typical 'high street' IFA charging £3,000 or more (often calculated as a percentage of the transfer value) and possible ongoing charges on top."
The number of trustees and companies that are hiring IFAs to give advice to their members in increasing, as they are becoming more concerned about the quality of the advice after the British Steel Pension Scheme (BSPS) transfer scandal.
Since March 2017 until February 2018, BSPS trustees processed 2,600 pension transfers equating to a total value of £1.1bn.
FTAdviser reported in November that several steelworkers appeared to be transferring out their pensions after being lured by cheap deals by unregulated introducer firm Celtic Wealth Management & Financial Planning, which then referred the clients to advice firm Active Wealth.
Several financial advice firms have stopped providing DB transfer services after intervention from the Financial Conduct Authority (FCA).
According to recent research from Aon, one in 10 DB schemes in the UK has chosen to appoint an IFA for their members.
Mr Patterson explained that for trustees, appointing an adviser gives them comfort that "members are being guided towards someone who has been through a robust selection process, to make sure that it is an adviser who is credible, has the right arrangements in place, and the right governance structures”.
Keith Richards, chief executive of The Personal Finance Society (PFS), confirms that this practice results in a lower per-client average advice fee.
However, he argued there are arguments for and against this option.
He said: "Some schemes would prefer that members sought their own adviser to ensure impartiality and reduce the risk of them being implicated in any subsequent claim - should any member feel the advice fell short of expectations.
"Normal protocol is for providers, fund managers and trustees not to use a single advice firm because of these risks and instead signpost to a directory such as findanadviser.org.
"But whatever route is taken, it is incumbent upon every scheme member to agree their own terms with their chosen adviser."
Some consumers, however, "prefer to appoint their own adviser to guarantee that he or she is acting in their best interests, whereas scheme recommendations are sometimes perceived as regarding the trustees as their main priority".
He said: "At the end of the day, there are equal cases for and against for both options. The bottom line is that every customer must be dealt with according to their individual needs and circumstances."
Paul Gibson, managing director of Granite Financial Planning, argued reduction in costs of 75 per cent seems too high, since the adviser needs to consider the clients individual position and conduct cash flow modelling, among other analysis.
He said: "Hopefully this is not leading to factory production line advice."
The cost of advice has been a hot topic in the industry, with recent research from marketing agency Yardstick concluding that of the 300 adviser firm’s websites it examined, only 52 mention fees at all.
A data bulletin published earlier this month by the regulator shed some light on the fees structures advice firms are currently using.
Facilitated payments are the main way advisers get paid for their work, and they are becoming more popular. In 2017 they accounted for 83 per cent of adviser charges, compared with 79 per cent the year before and 77 per cent in 2015.
Most firms charge as a percentage of the investment, with 4,067 using this for the initial charge and 4,283 using this for the ongoing charge.
Fixed fees are the second most popular way of being paid, with 1,931 firms using this for the initial charge and 1,144 using this for the ongoing charge - though fees by the hour are also popular.
Average charges as a percentage of investment value for initial advice reported by firms are between 1 per cent and 3 per cent. For ongoing charges, the average rates are between 0.5 per cent and 1 per cent. These have remained unchanged from previous years.
In the meantime, HM Treasury has written to financial advice firms asking about the cost of providing advice, following last year’s change of definition.
HM Treasury wants to know whether firms have suffered additional cost or seen benefits from the new definition, as part of an ongoing review.
In early 2017 the Treasury rolled out a new advice definition for regulated firms, in keeping with the recommendations made by the Financial Advice Market Review.
Set to become active from 3 January 2018, the new definition stipulates that regulated firms will only be giving advice when providing a personal recommendation.
maria.espadinha@ft.com
