View more on these topics

FCA contingent charging ban will increase advice gap, research says  

The FCA’s proposal to ban contingent charging will increase the advice gap, advisers say.

Research conducted by Aegon and consultancy Opinium sheds light on what advisers think of the watchdog’s proposals.

The regulator proposed a ban on contingent charging for defined benefit transfers in its latest attempt to stop unsuitable advice last month.

The decision to put forward a ban for consultation marked a change of direction for the regulator, which had decided not to tighten the rules on contingent charging in October last year.

It intends for a ban to apply “unless consumers have specific circumstances that mean a transfer is likely to be in their best interests”.

These specific circumstances are financial stress or ill health that can be used as legitimate reasons to charge on a contingent basis.

Aegon’s survey shows half of advisers who advise DB members are concerned that a complete ban on contingent charging would lead to a fall in demand for advice.

Only 21 per cent are confident a ban would not result in demand falling while 58 per cent say the lack of a triage facility is harming the market.

Aegon pensions director Steven Cameron says: “The FCA has recognised the difficulty some individuals will face if they have to pay for advice upfront and we welcome the proposed carve-outs for those with specific life shortening conditions or with significant financial difficulties.

“But this will only help a small minority. For others, the key may be to make the new form of ‘abridged advice’ workable.”

He adds: “Firms may offer this short form of advice and while it can only produce a recommendation not to transfer, it may help weed out those for whom transferring is unlikely to be suitable, saving them money and freeing up adviser time to spend on providing full advice to those more likely to benefit from transferring.

“We are keen to work with adviser firms to explore this approach including how to make it as streamlined and cost-effective as possible.”



7IM increases AUM to £13.3bn

Seven Investment Management has had a decade of continuous growth in assets under management as it reached £13.3bn last year. The total for the year ended 31 December 2018 was up 7 per cent compared to the previous year. Consolidated profit before tax also increased by 17 per cent to £10.5m in the period, while […]

Promotion of advice bamboozling clients

Product providers’ approaches to advertising advice vary too much from those used by financial planners themselves, making it onerous for prospective clients to choose an adviser, new research suggests. A survey conducted by consultancy Adviser Home found the availability of information to be a key reason behind the view that consumers are not able to […]

SFO charges second person in ethical investment probe

The Serious Fraud Office has charged another former director of ethical investment scheme Global Forestry Investments for alleged frauds concerning the company between August 2010 and December 2015. Omari Bowers has been charged with conspiracy to defraud, forgery, and misconduct in the course of winding up. He was charged by postal requisition with three offences […]

The death of retirement – a boost for protection?

According to our recent report on the death of retirement, changes in workplace pension provision mean that coming generations of retirees could have a radically different experience of retirement from their parents. The average contribution rate into an old-style final salary pension was around 20% of total wages, the statutory minimum for a new automatic […]


News and expert analysis straight to your inbox

Sign up


There are 15 comments at the moment, we would love to hear your opinion too.

  1. I think there is a big problem with FCA overstepping the mark, it may have the funding of a small country but someone should remind them that they are not the UK government.(Thank God)!
    1.The 2015 Pension Freedom reforms are government policy, FCA is openly discouraging individuals from considering a transfer, without £3,500 to pay for advice they cant have it.
    Maybe it should up to government to ban DB transfers if that is they want.
    2.Are FCA exceeding their powers in their approach to this issue?
    In a nutshell they are not Consulting properly, they are making many unproven assumptions and are intervening
    in the market in a heavy handed way.
    Reading their paper i see a regulator that doesn’t really understand the issue and is making a dogs dinner of the regulation.
    They should be held to account.
    This is what FCA are supposed to do;
    Our strategic objective is to ensure that the relevant markets work well. To advance our strategic objective we have three operational objectives[3]:
    Protect consumers – to secure an appropriate degree of protection for consumers
    Protect financial markets – to protect and enhance the integrity of the UK financial system
    Promote competition – to promote effective competition in the interests of consumers
    I have to say the consultative paper is half baked and nonsense.
    The only way out of this is for PFS or some to require a judicial review of the process.
    Ultimately FCA can do what they want and get away with it, not being responsible for any outcome.
    Mumbo Jumbo regulation!

    • No change there then from the FCA. They have already destroyed the regular saving market by their complete lack of understanding of how it should be paid for and the totally unreal growth assumptions that have been imposed on us all.they act like a bull in a China shop.

  2. Ban commission,introduce CAR fees and then ban contingent advice. Is Baldrick in the buiding?

  3. This looks set to run and run but ultimately the FCA’s view on it will prevail. Apart from the fact that only clients with relatively substantial free assets are likely to be able or willing to pay a non-contingent fee of several thousand pounds for a full analysis of their options, whatever its concluding recommendation may turn out to be, the tricky point is that, for the adviser, the risks and costs going forward will be considerably higher if they do proceed with a recommendation to transfer. The problem seems to be the FCA’s reluctance to allow a multi-stage process. Would it not be both practical and logical to start with pro’s and con’s guidance (basic fee), follow that with triage to establish potential suitability to transfer (a further fee) and conclude with a third fee for a full report to arrive at a firm recommendation one way or another, at each stage impressing upon the client that the recommendation may well be to stay put and that he can withdraw from the process at any time.

    Stage one ~ the client can decide whether or not the complexities and risks of transferring are for him and whether he wishes to proceed to Stage two.

    Stage two ~ transferring might ~ but only might ~ be viable/suitable but the client can decide whether he wishes to incur the further costs of proceeding to Stage three.

    Stage three ~ the concluding recommendation may be to stay put, so the client may feel that he’s wasted his money. But, surely, is this not in line with the FCA’s requirement that clients should be given sufficient information to reach a properly informed decision?

  4. This is getting silly.

    The bottom line is that those who are less well off can’t afford financial advice. No kidding!

    They also can’t afford BMWs, Château Latour, Holidays in the Caribbean or private medical treatment. Sad as that may be it is life.

    Of course the less well off should be catered for but that isn’t the province of advisers and probably the providers as well.

    Certainly savings need to be encouraged, but paying down debt comes first and then cash savings. Thereafter perhaps some life cover and then all the wonderful things that this industry has to offer – provided they intended recipients can afford it.

  5. The issue is the liability for advice, the adviser is being asked to forecast the future at a specific point in time and enter into an open ended liability if things turn out differently.

    For example, a healthy single life may be advised to stay in the scheme, then dies too soon and hostile heirs suddenly appear to claim their entitlement, backed by the ambulance chasers.

    Whatever system is decided upon should provide immunity for following the FCA starting point,whether triage or education process under Gold Standard, then we only have to justify those which were recommended, who should be a small minority.

  6. The FCA is basically saying, if someone does not have £3,000 available in a bank account that can be used to pay for advice, they probably need the guarantee of a DB scheme and shouldn’t be moving it. With the exception of those in ill health already been lobbied for in this article, I’m finding it very hard to disagree.

    • How true Lesley….. but ask yourself what is the FCA ?
      Is it right they (FCA) are allowed to cut large chunks of people out of the advice process, who are they to decide, who or who cant access advice ? irrespective on whether one thinks they need it or not.

      Think on what the FCA’s primary objectives are ?

      Is there a thin divide where the FCA are crossing over/crossed over from a regulatory objective, to one akin of a dictatorship ? and is this self driven or in the consumers best interests ?

      I believe Lesley (if you are an adviser) you need to be the one, passing judgement of whether a client needs the guarantee of the DB scheme and if it needs to move or not NOT the FCA ……. the £3,000 (or cost) you quote is a red herring, why not £10 ? that’s just the price you put on getting out of bed in the morning, like us all !

  7. Like everything that comes out of the FCA in regards to industry problems or should I say “perceived” problems, if the evidence is not founded the FCA try to pin the tail on the donkey.

    The FCA haven’t got a clue, they have no data to back up how many DB transfers have been conducted on a contingent charge basis, This has been confirmed by the FCA themselves.
    Some-one somewhere has uttered the words “contingent charging” and the FCA’s imagination has run wild, then there was a jerk of the knee, followed by cries of sales bias, miss-selling, and of course MP’s have latched on to this like a stubborn tick on the back of a dogs neck.

    I’m sorry but if there is no way of accurately establishing what % of DB transfers have been done over a given time on a CC basis, then analysed to give a bias, miss selling ratios, and by whom, then hearsay and guess work is the go to response for the FCA, this hardly promotes a profession ?

    Banning CCing will not solve the problem it will just exacerbate it, scammers will continue and scams increase ! because it just shuts out the good advisers, who will have clients who are not wealthy enough to pay, that cant justify the increases to their PI and the time spent on micro management from the FCA.

    I have said this many times before there is NO direct link to how an adviser takes his fees, to bias and or miss-selling, the link is tenuous to say the least ! bad advice is bad advice a scam is a scam, I would argue in both cases the perpetrator will not concern him or herself how they obtain the clients money, up front fee, hourly rate, contingent charge, percentage, ad volorem, or via a ponzi scheme.

    Financial crime is the problem, the FCA are lazy and inept, out of the 3,700 staff at the FCA Deborah Jones (FCA Director) has a full time team of 10 or maybe a 100 that dip in and out of her department to tackle this issue … one has to wonder, and i’m sure our clients would like to know (who pay good money for the FCA) are the FCA sincere in trying to tackle this or milking a situation to further themselves at our clients expense ?

    • Are any data available showing what proportion of transfers deemed unsuitable were transacted on a CC basis? If there are and the proportion is high, that might at least establish a quantifiable causal link. My guess is that virtually all transfers where the CETV ended up being allocated to junk investments were undertaken on a CC basis.

      As does Lesley James, I think the FCA’s stance on this is reasonable, notwithstanding that there’ll always be exceptions, but it needs to be backed up with some firm data.

      • Morning Julian, I believe it’s time the FCA is honest with the consumer, MP,s and the financial services industry and say, it has no evidence that any specific area is to blame for the DB transfer debacles, and more likely to be a combination of lots of different areas, and because of this we don’t know how to combat it.
        By simply banning different aspects (like CCing) it neither solves the problem, or slows it down, it just gets worse.

        Yes junk investments, and opportunist advisers are the problem….time and time again we read few advice companies or advisers selling on mass in a short space of time taking millions in funds.

        And I fail to believe CCing is to blame or indeed any ban will stop or slow this down.
        Why ….? …has the FCA come out and documented how they are going to “effectively” police this …..

        We know only to well honest advisers are honest, and the only thing you can trust with a dishonest adviser is they will be dishonest!

  8. No matter how much arguing to and fro takes place, the fact is that CC creates a conflict of interest that some firms manage less well than others and those who don’t manage it well are those that the FCA needs to identify. Perhaps, rather than a total ban on CC, a partial ban would be a more practical solution.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers. Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and thought leadership.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm