Four in five advisers are worried a ban on contingent charging will reduce access to defined benefit transfer advice which could lead to savers turning their back on advice altogether.
Research from Aegon, published today (February 4), found out of 227 advisers, 84 per cent believed the Financial Conduct Authority’s proposals to ban contingent charging would reduce access to advice.
This is a significant increase from 2018 when two-thirds (67 per cent) of advisers agreed a ban would lead to a reduction in access to advice.
Four in five also thought contingent charging could encourage some advisers to give unsuitable advice.
Contingent charging means a client only pays for the advice if they go ahead with a pension 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.
Steven Cameron, pensions director at Aegon, said the regulator must take advisers' views into account before finalising rules in the next couple of months.
Mr Cameron said: “The FCA’s drive to make advice in the DB transfer market of consistent high quality should be fully supported and many of the proposals in its latest consultation are welcome.
“However, no matter how well intentioned these interventions are, advisers remain concerned over some of the measures, particularly as they carry the risk of dramatically reducing the supply of advice.
“We would encourage the FCA to take on board the concerns of advisers ahead of finalising their next set of rules.”
Mr Cameron added: “The market is divided on whether or not contingent charging should be allowed for advice on transferring from a DB scheme. But what is clear is the overwhelming majority of advisers feel a ban will reduce access to advice. The issue is that some individuals aren’t able to pay upfront for advice and without the option of contingent charging, won’t seek it."
The regulator wants to introduce a short form of abridged advice, allowing advisers to offer a cost-effective service to quickly identify and filter out individuals who should not be considering a transfer.
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.
But advisers were mixed in their responses as to whether this form of advice would work.
While 19 per cent thought it would not be effective in identifying clients for whom a transfer is not suitable, almost half (46 per cent) thought it would be effective.
Advisers were also split on whether the abridged advice process would save sufficient time, and hence money, to appeal to customers. About a third (36 per cent) agreed it would save time.
Tim Morris, independent financial adviser at Russell & Co, said: "I agree that a ban on contingent charging would further reduce access to advice. Those who offer a fixed fee, as we do, will likely have a minimum investment size.