The FCA’s recent notice on new rules for defined benefit pension transfers regarding a ban ‘contingent charging’ i.e. adviser fees only paid if a transfer goes ahead meaning an adviser may be encouraged to recommend a transfer even if it is not in a client’s best interests looks likely to spill over to other areas of financial advice.
We believe that all financial advice should be non-contingent. If you want advice on a pension or investment, that fee should be payable whether you take the advice or advice when completed.
This should remove totally any bias in an outcome offered by an adviser. That said, it may be difficult for a client who is in poor health or in extreme financial distress to pay for advice initially, so some contingency should be allowed.
Equally, we expect move by the FCA to start banning % based ongoing advice fees. Just because you have £200,000 inside your pension or investment fund does mean that you should pay 1%pa i.e. £2,000 pa to an adviser when you neighbour has exactly the same pension scheme but a lower value of £100,000 meaning an adviser charge of 1% pa i.e. £1,000 pa. Why should the former pay double compared to the latter for exactly the same service?
The world of adviser fees may change dramatically for some over the coming years.