FT Adviser (20/02/2019) – Pension scheme trustees and employers have revealed they are refusing to appoint financial advice firms who get paid via contingent charging.
Consultancy firms LCP and Willis Towers Watson, which help trustees and companies, told FTAdviser that due to this restriction, plus the need to be able to process a large volume of cases, there are less than 10 firms in the country suited to be hired by pension schemes.
Stewart Patterson, director of retirement at Willis Towers Watson, said: “I haven’t seen any pension schemes or employers initiated exercises go anywhere near contingent charging. It doesn’t even pass the sniff test.
“None of the firms that we put in front of our clients would be offering those sorts of fees.”
Contingent charging means a client only pays for the advice if they go ahead with the recommended course of action. In the case of pension transfers, the adviser won’t get paid unless the pension is transferred.
An outright advice charge, on the other hand, would mean the adviser gets paid for the advice regardless of the outcome.
Alan Chan, director and chartered financial planner at London-based IFS Wealth & Pensions, said: “Their stance does not surprise me given the issues recently with the British Steel saga where contingent charging was involved.
“I think it is the right approach and firms should not be giving this kind of advice for ‘free’ until a positive recommendation is made.
“Clients need to be aware that this area of advice is laborious and high risk both for the client and the adviser so a separate fee should be required for the advice and for implementation of the transfer.
“If the client does not wish to use the advice firm to transfer and just want the advice, the firm’s pricing structure should reflect this and more importantly be prepared to sign the adviser declaration too to confirm they have given the member advice, regardless of it being positive or negative recommendation to transfer.
“Currently, most firms do not sign this declaration unless the member also uses them to transfer which should not be the case.”
Full article link: https://www.ftadviser.com/pensions/2019/02/20/just-10-ifas-rated-ok-to-advise-on-pension-transfers/