The 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.”