The FCA has confirmed that it is considering a ban for financial adviser fees being contingent on a defined benefit pension transfer such as a final salary scheme.
What are contingent adviser fees?
It means that the financial adviser only gets paid their fee if a transfer actually proceeds. For example, many financial advisers charge a % of the value to be transferred. If the transfer does not then proceed, no fee is charged. This means that many pension transfer transactions may result in ‘bad outcomes’ for the consumer. In other words, the financial adviser may be tempted to push the transfer through even if it may not be in your best interests to ensure they still get paid.
Our approach is different:
We quote for defined benefit analysis and transfer in two stages. Stage 1 is the analysis as to whether is advisable for you to transfer or not and Stage 2 is the implementation of the transfer (if it is agreed that a transfer should proceed).
Stage 1 - Feasibility: Includes a full TVAS (Transfer Value Analysis) exercise as required by the regulator, where applicable. Where we conduct an initial review of your pension, secure all information from scheme trustees and establish the feasibility/suitability of the scheme for retention or using Pension Transfers as a solution and then advise whether it is in your interests to transfer or not. This will include critical yield returns, your health, longevity and other overriding factors that may influence the decision to transfer or not. If the final decision is to keep the pension as is then works stop here, if the final decision is to transfer out to another pension scheme then we move to Stage 2. but only if we believe it is in your best interests. Stage 1 fees are payable whether a transfer takes place or not – it is not a contingent fee.
Stage 2 - Pension Transfer Application itself (if it advised in your best interests to transfer): Where we conduct in depth research, advice and analysis for pension transfer in various types of pension scheme. It will include research and reports on suggested pension portfolio including pension transfer recommendations plus HMRC liaison and including fund sector recommendations and provider/installation and application to completion. Pension transfer and applications are handled by us.
We believe contingent fees do have the risk for poorer consumer outcomes. Equally though, they do have a place for people who perhaps cannot afford to pay upfront fees like our Stage 1 fee.