He added that if the difference between full advice and abridged advice is not explained sufficiently then abridged advice could lead clients into a “false sense of security”.
Mr Richards said: “This middle ground between triage and full advice on defined benefit pension transfers is likely to confuse consumers about what kind of advice they are getting.”
“Over the past two decades regulators and financial services profession have worked together to introduce several different alternatives to full advice through simplified, basic, execution-only and non-advised to name a few, all of which have failed to be recognised by consumers as a distinct service, as has been evidenced by consumer research: ‘advice is advice’.”
On the other hand, Mr Harrington said he cannot see a reason why abridged advice will not work saying it provides a good solution to “the problems of pension transfer advice: it is expensive and the outcome is binary”.
He added: “The utility of abridged advice is that it allows advisers and consumers to reach a very narrow conclusion at a cost which should be affordable.
“If there are shades of grey and more advice is warranted then the success of that outcome will be measured on the quality of the full rather than abridged advice.”
How it will work
In its policy statement, published June 4, the FCA confirmed that a pension transfer specialist must give or check abridged advice.
The FCA stated: “As abridged advice could represent the first stage of full advice, we believe it is more cost-effective to have a consistent approach, using a [pension transfer specialist ] cross both abridged advice and full advice.
“We recognise that, while abridged advice will not appeal to all consumers, firms may be able to attract clients who would otherwise be unwilling to pay for full advice.”
Alongside abridged advice, the regulator is also introducing a ban on contingent charging from today.
Contingent charging means a client only pays for the advice if they go ahead with a transfer.
The FCA said introducing the ban will remove the conflicts of interest which arise when an adviser only gets paid if a transfer goes ahead.
Only consumers with certain identifiable circumstances, such as those suffering from serious ill-health or experiencing serious financial hardship, will be exempt.
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