Defined Benefit 

Richards warns ambulance chasers circling

Richards warns ambulance chasers circling

Keith Richards, chief executive of the Personal Finance Society, has warned ambulance chasers are circling as the Work & Pension select committee announced another review of contingent charging.

The committee launched its inquiry yesterday (January 7) saying it wanted to hear from anyone who has been affected by contingent charging and from others who have views on banning contingent charging.

The MPs are asking if there is any evidence of unintended harm caused by contingent charging when it is used for pension transfer advice.

Mr Richards said the increasing scrutiny of defined benefit (DB) transfers following the British Steel Pensions Scheme fiasco has thrust several important issues into the spotlight with some calling for a total ban on contingent charging.

But he pointed out it was only a minority of advisers seemingly putting their own commercial interests above that of the client.

Mr Richards said: "The separation of an initial review/recommendation fee from any dependency to transact is of course one way of recognising the potential conflict, as well as setting client expectations that a transfer may not be a suitable recommendation from the outset.

"If the recommendation is to proceed, however, contingent should remain an option as this is more often the preferred and most convenient for clients.

"Defined benefit transfers will remain an area of regulatory and media focus, so it is essential that the profession acknowledges and takes voluntary control of the unintended consequences of pension freedoms, negating the need for more draconian regulatory rules potentially impacting wider consumer choice.

"Professional Indemnity Insurers are alert to the issue and ambulance chasers have the ‘blue lights’ on, so we need to take control.

"Conflicts of interest will always exist, which is why it is important to demonstrate our acknowledgement and mitigation of the conflict to ensure we preserve appropriate client options for fee charging.

"We also have the opportunity to demonstrate that professional advice itself has evolved to be the product."