Defined Benefit  

FCA rules make contingent charging impossible

Added to this there is also the cost of updating processes for the suitability reports, a one-off expense, which the FCA estimated at £1,000 per firm.

Mr Percival said: “Advice firms will get more clients incurring the costs of the full advice process, but a smaller proportion who end up transferring.

“So therefore, if you work on a contingent charging basis, your costs will go out the window, and a natural implication of that is that you will have to charge more and revisit your charging structure, or of course move into a non-contingent charging basis."

When the FCA was asked to comment on suggestions it hadn't needed to ban contingent charging because it had made this method of payment no longer financially viable, a spokesman for the City watchdog was unable to comment.

Brian Hill, managing director and fiduciary financial planner at Jones Hill, argued that a financial adviser who doesn't already state how much it will cost the client to transfer, or provide full reports for recommendations to stay, "needs to take a long, hard look at their positioning and process".

He said: "Having operated non-contingent charging across the board for the last five years for 95 per cent of clients, it is vital advisers get their positioning right so that clients can see the value they are adding for the fee charged.

"In a post-Retail Distribution Review world we have seen good financial advice moving out of the reach of less well-off; a part of me wonders if in trying to, quite rightly, protect clients from a small number of unscrupulous advisers, a significant number of potential clients will now never benefit from the good that expert financial advisers do."

maria.espadinha@ft.com