Tideway is ready to move to a non-contingent charging structure for pension transfers if the proposed consultations from the Financial Conduct Authority are introduced, its managing partner has said.
James Baxter told FTAdviser the firm will introduce a fixed fee for abridged advice, while it is planning to keep a percentage fee for the full defined benefit pension advice process.
He said: “From our perspective, it is much easier to change to that model than it is for companies which have been charging 3, 4, 5 per cent, we only ever charged 1 per cent.
“We will break that 1 per cent down into abridged advice and full advice, and make it non-contingent. It is a relatively straightforward process for us to change.”
Contingent charging means a client only pays for the advice if they go ahead with a transfer.
The FCA had previously decided against interfering with advisers' charging methods but in July changed its stance and proposed to ban contingent charging in all but a few pension transfer scenarios.
This was to reduce concerns about a conflict of interest in situations where an adviser would only be paid if they recommended a transfer.
Mr Baxter said he is in favour of abridged advice – a concept presented by the FCA in its contingent charging consultation.
This new type of advice is expected to include an introductory chat with the client, where the adviser can get some high-level information about their circumstances, and determine that the consumer isn’t a viable candidate for a transfer.
For instance, this will be the case when the client only has one pension, the individual isn’t financially experienced or has a low capacity for loss.
The result of abridged advice can only be not to transfer, and the adviser is expected to conduct a full fact-find and risk assessment, including an assessment of the client’s attitude to transfer risk in line with the FCA’s guidance on assessing suitability.
Mr Baxter said: “Abridged advice is a good way for us to say to clients ‘we don't think it is a good thing for you to do’, and we can usually tell that quite quickly in a combination of the maths of how generous the transfer offer is and the client's circumstances.
“And that is a lot easier for us to do than taking people through the full advice including an investment proposal, planning out withdrawals, all of those sorts of things that take a lot more time and effort.”
Mr Baxter believes if this new type of advice isn’t made available it would be more difficult to introduce a contingent charging ban.
He said: “The idea that people would pay £5,000, £6,000 despite if they are transferred out or not would be very impractical.”
Tideway hasn’t determined how much it will be charging for abridged advice.
He said: “We are waiting to see where the market is going and what competitors are doing, but I don't think it is going to change our fees a lot.
“We are typically charging £6,000 for a £600,000 transfer, those are our average numbers, and I don't think we're going to change the overall fee.
“The abridged advice will probably be a fixed fee, but the full advice we will probably keep on the percentage basis, but it will be closer to 1 per cent and probably capped, has we have done historically for larger transfer values.”
maria.espadinha@ft.com
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