A survey of advisers has revealed that half still charge on a contingent basis for defined benefit pension transfers.
A poll conducted by AJ Bell shows that 50 per cent of advisers conducting DB transfers are getting clients to pay for them by paying a percentage of the transfer value, and only receive payment if the transfer goes ahead.
A quarter charge a fixed amount and 16 per cent charge on a time-cost basis.
Contingent charging, where fees are dependent on a product sale or particular recommendation, has been on the FCA’s agenda for a number of years. Figures including former director of long-term savings and pensions Nick Poyntz-Wright and chief executive Martin Wheatley both expressed concerns over the practice while at the regulator.
While the regulator’s current guidance says that contingent charging is a “higher risk” approach compared with time-costing, and that “firms operating contingent charging should ensure they have adequate controls in place to manage this risk,” it has not given any more specific instructions with regard to the potential biasing effect the practice could have on DB transfer recommendations.
At a conference organised on DB transfers yesterday, former FCA technical specialist Rory Percival said he would “seriously suggest” advisers move away from contingent charging models to those that charge for advice, not execution.
— GreatPensionDebate (@PensionDebate) June 19, 2017
— Peter Blackburn (@peterblackburn) June 19, 2017
- 67 per cent will only do so as part of a full financial plan.
- 89 per cent carry out an initial triage process to determine whether a full transfer process is appropriate.
- 99 per cent carry out a full attitude to risk/capacity for loss assessment.
- 76 per cent include cash flow modelling for the client as part of the transfer assessment.