Investment fees campaigner Chris Sier says he is backing a ban on contingent charging.
His comments follow calls by work and pensions select committee chair Frank Field MP for the practice, where adviser charges vary based on whether a particular recommendation is given, to be prohibited.
In an interview with Money Marketing, Sier notes the issue of contingent charging is complex but that on balance it should be banned.
The committee first called for ban in February 2018 in a report examining how financial regulators have dealt with the British Steel pension saga.
Sier is a well-known transparency campaigner who led the FCA’s working group on the disclosure of costs and charges for institutional investors.
Last summer the group released its recommendations, including suggesting five fee disclosure templates.
Sier is currently chairman at technology platform ClearGlass that has grown out of FCA’s working group and aims to keep pressure on the asset management industry to disclose charges.
On the call to ban contingent charging Sier says: “Financial advisers used to earn through the backdoor via contingent charging but it never hit the consumers’ attention span. As soon as RDR came in the client was forced to pay an upfront fee.
“The trade-off is you get independence and remove backdoor charging, but you have to pay up front. That can be a problem for some people because how do they pay for that?
“Human behaviour is such that individuals do not want to pay up front and putting your hand into your pocket to pay for thousands of pounds of advice is complicated.
“Banning contingent charging won’t be a panacea but I am in favour of what Field is saying as transparency is the most important thing. The flip side of transparency is honesty, and this is uncomfortable.
“There are some uncomfortable things about honesty like you have to pay upfront but at least the market is open, honest and I am all for it.”