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MPs refuse to back down on contingent charging ban

Spotlight on charges 700x450.jpgThe work and pensions select committee of MPs has reiterated its calls for action on contingent charging after the FCA’s decision not to take up its recommendation and ban the practice for defined benefit transfers.

In a statement today, the committee says there has been “no change” in its view of the damage caused by contingent charging models.

Having rejected the committee’s calls for a ban last October, the committee and regulator agreed to gather more evidence.

This has now been published, and the committee has reached the conclusion that, if the FCA still decides not to ban contingent charging, it could at least place a cap on the fees that advisers are able to levy under that model.

In a letter to the FCA, committee chair Frank Field suggests the FCA further explore “the case for setting an upper limit, either in cash or ad valorem terms, for the
amount of a DB transfer fee which can be received via contingent charging.”

Field says: “The committee has received no…compelling empirical evidence that contingent charging does not result in some independent financial advisers being incentivised to give bad advice, nor that there were suitable checks and balances in place to prevent this…Much of the evidence linked contingent charging to unsuitable advice and bad outcomes.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Conflict of Interest, so great news.

    Shame that they are not so decisive on other matters

  2. So, here’s a prediction if a cap is set…

    Everyone will work to the FCA ‘sanctioned’ cap and there will be no competition over price. The bad advisers will continue to give bad advice to transfer but now under the legitimised cap regime. In addition, they will collect ongoing advice and management fees long term – which is where a big incentive exists to transfer longer term anyway.

    Depending on the size of the cap, those good advisers working on a contingent basis will be deterred from advice and complex cases will be excluded on economic grounds.

    Job done. Not.

  3. No Cap, no commission, no back handers, a separate adviser company for the DB advice and for the ‘ongoing’ if transfer is recommended. Yes it is difficult and I am only thinking about the value to the client.There is no cap for other industries; dental, travel, private doctors, builders, plumbers, etc. etc. People need to do their research and if they don’t then they may be charged too much by anyone

  4. Duncan Gafney 16th May 2019 at 4:14 pm

    I find the level of hypocrisy amongst MP’s these days to be utterly breathtaking.

  5. A cap on income but not on liability for advice.
    This will lead to the numbers of IFAs etc advising in the ytransfer market further reducing, which will in turn lead to fewer clients getting advice that may very well be in their interests. Even a STAY PUT is advice; far too many clients don’t grasp that, and want a quick sense check for no fee.
    And get upset when their request for charity is declined.

  6. Ok Frank ….if the cap fits …wear it !

  7. Julian Stevens 21st May 2019 at 11:47 am

    It will be interesting to see the outcome of this latest battle of wills between the FCA and the body to which it claims to be accountable.

    Surely, if the FCA is accountable to Parliament and Parliament says: This is what we want to see, the FCA must comply? For how much longer will Parliament allow the FCA to claim to have “taken on board” the recommendations of an outside body but, in practice, take not a scrap of notice of them? Will this case lead once more to Parliament having to threaten Andrew Bailey with formal contempt proceedings should he remain defiant?

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