PIMFA Calls for the Regulator to Raise The Bar
The Personal Investment Management & Financial Advice Association (PIMFA) has responded to the FCA’s pension transfer advice on contingent charging, asking for the regulator to ‘raise the bar’, in their pursuit to ban Contingent Charging.
The trade association for the personal investment and financial advice industry highlighted that the proposal would represent a significant intervention in the financial advice market, and as a result would expect the evidential bar to be set significantly higher, in order to justify the change.
PIMFA’s opposition to a ban is ultimately rooted in that ‘contingent charging may be a symptom to the provision of poor advice’, however it is not the underlying cause, as set out in the FCA’s original policy statement and in the consultation document, stating it is ‘difficult to prove a clear link between contingent charging and unsuitable advice’.
Simon Harrington, Senior Policy Adviser at PIMFA said, “It is unclear to us that the ban on contingent charging, will ultimately lead to an improvement of the quality of advice offered. If an adviser is assisting on a transfer in pursuit of payment, they are either not concerned by the regulatory constraints which are there to guide them or confident enough that the constraints will not be applied to them. Given the evidence presented by the Regulator, it remains unclear whether or not a ban is being pursued because the Regulator is confident it will work or because they hope that it might”.
In its response, PIMFA has suggested that the DB transfer market would benefit from targeted and more rigorous supervision of the industry.
“Without effective regulation and targeted supervision of firms in this area, many of the issues which are prevalent in this market will continue to be addressed after the fact. Implicit in the argument that poor transfer outcomes are a result of poor advice has to be a recognition that this has been allowed to be perpetuated by a lack of regulatory oversight”
Financial advice plays a valuable role in supporting people as they transition from accumulation into decumulation. This reliance on the advisory profession requires the consumer to invest their trust in them and unfortunately, a small proportion of advisers have abused this trust. The primary cause of poor pension transfer advice is that bad advisers continue to be allowed to give bad advice, not how they charge for it. This is particularly the case for implementation fees which are also caught by the proposals outlined in this consultation.
“Removing implementation fees will ultimately make the cost of advice more expensive for a number of savers. It is at odds with any pronouncements the FCA have made about a desire to close the advice gap and will ensure that pension transfer advice is solely the preserve of the wealthy. Banning implementation fees for the vast majority of clients will push the cost of pension transfer advice well beyond that”, continued Simon.
Notes for Editors
About PIMFA – the Personal Investment Management & Financial Advice Association
- PIMFA is the leading trade association for firms that provide investment management and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
- PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families, to charities and pension funds, all the way to trusts and companies. Associate members provide professional services to the PIMFA community.
- PIMFAleads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
- PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
- Further information can be found at pimfa.co.uk
- To become a member of PIMFA for access to training, benefits and discounts, please visit https://www.pimfa.co.uk/become-a-member or contact us directly at [email protected]
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