Data published by the Financial Conduct Authority on 25 May showed 80 per cent of payments to advisers were facilitated by a provider or platform.
But some in the industry have suggested this method of payment could be interpreted as being in some way contingent on the transaction going ahead, creating a conflict of interest.
One area of particular concern for contingent charging is defined benefit transfers.
Keith Richards, chief executive of the Personal Finance Society, said an ombudsman might not look kindly on a defined benefit pension transfer if the adviser appeared to have received a contingent payment.
He said: “Advisers should be increasingly aware that having their fee facilitated through a product or a platform potentially increases the risk of a conflict of interest.
“We are confident that the vast majority of advisers use contingent charging appropriately but they should be very conscious that it does potentially put them at greater risk.
“Increasingly we should develop a market where advisers separate their fee from the transaction as much as possible.”
The FCA’s data found the frequency of facilitated payments for one-off advice had remained stable.
It also found there was little difference in the frequency with which facilitated payments are used for one-off advice in the independent and restricted sectors.
It found 83 per cent of payments in the restricted sector were facilitated compared with 79 per cent in the independent sector.
Andy Sutherland, managing director of advisory services at consulting firm TCC, formerly known as The Consulting Consortium, said: "The fact that 80 per cent of clients are paying via this method is perhaps not a surprise behaviourally for the consumer but is more of interest as a potential cultural indicator on the part of the advice firms who may still be struggling to demonstrate the 'immediate value' of their services.
"One of the three key objectives of Retail Distribution Review was to remove the remuneration conflict between the adviser and the outcome of their advice.
"The issue therefore is not the way in which the advice charge is funded but rather that FCA still allows this conflict to exist by way of contingent pricing.
"They will therefore need to act sometime and whilst they keep making noises to this effect they have shown little appetite to intervene to date."
The FCA declined to comment on whether it had any data for how common contingent charging was in the advice sector.
Former FCA technical specialist Rory Percival said he was “fairly confident” the regulator doesn’t have this data.
He said: “It's not part of its routine data collection but could be included in other reporting such as advisers’ ad hoc data requests.
“It is very possible that this will be part of the work on adviser charging value for money but the meat of this won't be for some time.”
Data published by the FCA last year showed that the total number of requests for defined benefit pension transfers since pension freedoms were introduced had more than doubled from existing customers and more than tripled for new customers.
Scott Gallacher, director of Leicester-based Rowley Turton, said: "There is always going to be concern about contingent charging and facilitated payments but the reality is that it works for everyone.
"There is a conflict of interest there in a sense but it means that people without the cash upfront can get advice. We have already got an advice gap anyway and you would be saying to those people that they cannot get advice."
A spokesman for the FCA declined to comment on whether this type of charging was a conflict of interest.
On adviser charging, the FCA stated advisers need to provide their clients with a clear charging structure and clear information on their charges.
The FCA stated: "We do not set rules for what your charging structure should look like. Examples of charging methods include hourly rates, a fixed fee, percentage charges or a combination of these.
"You shouldn't charge different rates for different providers that could both be suitable for the customer’s needs."
damian.fantato@ft.com
