Clients for whom a pension transfer would be suitable will lose out under new rules proposed by the Financial Conduct Authority, a consultancy firm has warned.
The FCA had previously decided against interfering with advisers’ charging methods but in July changed its stance and proposed to ban contingent charging in all but a few pension transfer scenarios.
This was to reduce concerns about a conflict of interest in situations where an adviser would only be paid if they recommended a transfer.
Clive Harrison, partner at LCP, a consultancy firm which advises more than 40 per cent of the FTSE100 companies, agreed the current world of contingent charging isn’t working and “is resulting in significant losses for consumers”.
But he said a ban would mean some potential clients are put off transferring even if it was in their best interest, or be unable to find an adviser.
He said: “We support the consultation, but I do have concerns that the ban will severely restrict the availability of advisers and number of members taking advice.”
If the ban is introduced, the FCA estimates that those financial advisers that remain in the market are likely to be charging fees around £3,000 for this advice.
Mr Harrison said: “If a typical member was considering whether a transfer might be in their interest, it would seem unlikely they would be willing to commit to pay £3,000 unless they were confident a transfer might be suitable. Otherwise they might perceive taking advice as paying £3,000 to be told to do nothing.
“Therefore, it is likely only those members who are particularly keen to transfer, think that they are likely to be suitable and have sufficient disposable cash to pay the fees will generally take up advice. As a result, some members for whom a transfer might be suitable will lose out.”