Aegon’s pension director has urged advisers to check their charging strategies against the regulator’s definition of contingent charging sooner rather than later to avoid being caught out by the potential ban.
The FCA is ploughing full steam ahead with its crackdown on unsuitable defined benefit advice, having warned almost 80 per cent of advisers operating in the market about the practice last year.
This resulted in the regulator interfering with advisers’ charging methods and proposing 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.
In a video interview with FTAdviser Steven Cameron, pensions director at Aegon, warned advisers to check the FCA’s definition of contingent charging ahead of a ban.
Mr Cameron said: “All adviser firms should check to see how the FCA define [contingent charging] as they might find that they are caught even if they didn’t expect to be.
“For example if you initially charge everyone for advice but then charge an additional amount for those who do transfer then that is also caught by the ban so you will need to think about alternative ways of charging clients and to be ready for that as soon as the policy statement is launched.”
The pension’s director said he expects to see the policy statement published later this quarter, which will give firms more clarity on what the ban entails.
Mr Cameron added: “The FCA has said the ban will come in one week from publishing the policy statement so this is not a lot of time to get ready.
“The FCA has also said it will offer a transitional period for advisers who have already started an advice process.
“The test there will be if [the adviser] has issued a letter of engagement to their client. If so they need to make sure they have their paperwork sorted out so they are on the right side of the rules.”
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