Defined Benefit  

Contingent charging ban comes into force

Contingent charging ban comes into force

The regulator’s contingent charging ban on defined benefit transfers has come into effect today.

While some advisers believe it is a step in the right direction and will restore trust back into the market, others have been more skeptical.

At the time the ban was announced, Dominic Murray, independent financial adviser at Cameron James, raised concerns more clients would be determined to transfer following the ban. 

He said: "A ban on contingent charging will almost certainly reduce the number of unsuitable transfers and improve the quality of advice in the market.

“However, there is also a danger that a non-contingent charge could make clients more determined to transfer once a fee has been paid.”

Meanwhile, Alistair Cunningham, financial planning director at Wingate Financial Planning, has called the FCA’s proposals “flawed” and biased towards wealthier individuals.

Mr Cunningham said: “The FCA seems to be of the opinion that wealthier people are more likely to benefit from a transfer for inheritance tax or wealth management reasons."

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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