Retail Distribution Review  

How advisers are finding income post-RDR

This article is part of
Guide to Adviser charging

But there has been a substantial debate within the industry on contingent charging and the potential conflict of interest inherent in it, points out Gemma Harle, managing director of Intrinsic’s financial planning and the mortgage network.

Ms Harle says: “At Intrinsic we strongly believe that a ban on contingent charging would worsen customer outcomes because, in its purest sense, contingent charging means an adviser will only get paid if the advice is a recommendation to transfer.

“Given we already know that, in most cases, the advice to proceed with a transfer is unlikely to be the right advice, there is a potential conflict of interest that needs to be managed and we believe this is best achieved by separating the giving of the advice and the decision to proceed.”

She continues: “Some firms already implement a process that requires multiple approvals before a transfer is processed. So not only will a pension transfer specialist need to give advice, that advice will have to be checked by another specialist, giving the client confidence in the advice they are receiving is impartial and in their best interest.”

However, Ms Ingram says LEBC Group supports the WPSC’s recommendation to ban contingent fee charging because it throws into doubt the impartiality of advice to transfer.

She says: “LEBC also believes that the practice means that those who do transfer are subsidising those who do not and this increases the cost of advice and rejects the argument that a ban would mean that advice would be beyond the reach of many consumers.”

She continues: “More can be done via the workplace to provide guidance prior to pay for advice and use of the employer-sponsored tax-free £500 per year which each employee can use to access advice on pension transfers and other matters.

“Only charging those whose circumstances mean that a transfer is a viable option is not a sustainable business model, nor a fair pricing practice.”

While Steven Cameron, pensions director at Aegon, suggests it is important to offer consumers choices over how they pay for advice and has urged the FCA to continue to seek methods of managing any conflicts of interest.

He suggests: “The Personal Finance Society’s Gold Standards on pension transfers include many useful approaches here.”

He continues: “Aegon is particularly supportive of introducing a standard form of triage which would offer individuals some initial help to assess whether or not it is worth seeking advice on transferring.”

He adds: “A cap on the level of contingent charging is also worth considering. Aegon has concerns that a complete ban would make the ‘advice gap’ in this area worse and should only be implemented as a last resort.