The Work and Pensions select committee has reiterated that a ban on contingent charging would be the best way to protect customers after it completed its inquiry into the practice.
The committee had launched an inquiry into charging structures for financial advice on defined benefit transfers earlier this year.
In a letter to the Financial Conduct Authority published today (May 16) independent Labour MP Frank Field (pictured) wrote the committee had found no evidence that contingent charging does not result in some advisers being incentivised to give bad advice.
There were also no suitable checks and balances in place to prevent this, he added.
Contingent charging means a client only pays for the advice if they go ahead with the recommended course of action.
In the case of pension transfers the adviser won't get paid unless the pension is transferred, which is usually irreversible and likely to mean the client has given up valuable benefits which may not be in their best interest.
Mr Field added that much of the evidence received by the committee linked contingent charging to unsuitable advice and bad outcomes, but did not fully tackle the complexities of contingent charging or explain how to avoid unintended harm, particularly to vulnerable customers.
He said: "A number of submissions also highlighted the fact that contingent charging is not the only financial incentive which may lead independent financial advisers to give bad advice – an obvious example of this is ongoing fees following a pension transfer."
The FCA had already consulted the industry in 2018 on how these structures for pension transfer advice may cause consumer harm, and had decided against a ban in October despite finding widespread problems in the suitability of pension transfers.
Mr Field noted that he and his peers will consider any new evidence the FCA can come up with to support a different course of action than the ban.
He said: "We remain firmly of the view that urgent action is needed to protect pension scheme members from the scourge of contingent charging.
"If your evidence base suggests that an outright ban on contingent charging carries with it a credible and significant risk of consumer detriment elsewhere in the system, then we would be very open to looking at any proposals you might have for achieving the same outcome."
FTAdviser reported in April that the regulator will consult on this topic again if it considers that changes are needed.
In his response letter, Andrew Bailey, FCA’s chief executive, said "something further" on this topic will be published in the summer.
Paul Stocks, financial services director at Dobson & Hodge, noted that the arguments for and against contingent charging were well established.
He said: "Firstly, bad advice is bad advice irrespective of however it is paid for – noting that firms have to manage any conflicts of interest. We also need to be mindful not to conflate ‘bad transfer advice’ and ‘bad investment advice’ – these are two separate issues and can occur in isolation or both at the same time. The issues surrounding the British Steel Pension Scheme seem to have merged the two.