The FCA should not be under the illusion a ban on contingent charging will necessarily improve the quality of advice, an adviser trade body has said.
The Personal Investment Management and Financial Advice Association warns any contingent charging ban could have unforeseen consequences.
According to Pimfa removing contingent charging could push consumers to either become non-advised or choosing the cheapest advice they possibly can.
Senior policy adviser Simon Harrington says: “We are not convinced that the removal of contingent charging will necessarily improve the quality of advice consumers will receive or indeed, improve their overall outcomes. Further, we would urge the regulator to consider the unintended consequences of imposing such a ban.”
Harrington adds: “Ultimately we do not believe that banning contingent charging is in any way complementary to the government’s stated aim of closing the advice gap.
“For many individuals, contingent charging is the only effective mechanism through which they can access quality advice due to the upfront costs involved.
“It is reductive to assume that contingent charging is both responsible for adviser conflicts of interest and indeed the only determinant of unsuitable advice.”
In its response to the FCA’s consultation on improving the quality of pension transfer advice which closes today, Pimfa add that the regulator should consult closely with the industry if it decides to go ahead with the ban.
The FCA must work with the industry on what alternatives could be put in place to help consumers address the sometimes high cost of advice, it adds.