PIMFA Calls on Committee to Rethink its Conclusions on Contingent Charging
Thursday 31st January 2019
Responding to the Work and Pensions Select Committee’s inquiry into charging for pension transfer advice, PIMFA – the trade association for the personal investment management and financial advice sector – is again warning of the unintended consequences of a ban on contingent charging.
In its previous representations to the FCA, PIMFA has argued that a ban on contingent charging would not necessarily decrease the likelihood of conflicted advisers providing unsuitable advice, indeed, a ban could make the behaviour more prevalent.
PIMFA is today urging the Committee to consider what interventions it could make to improve the quality of pension transfer advice without increasing the likelihood of pushing people away from it or into the hands of the ‘vultures’ it seeks to stamp out.
Commenting, Simon Harrington, Senior Policy Adviser said:
‘Whilst we admire the Committee’s intentions, it remains unclear to us what they hope a ban on contingent charging will achieve.’
‘We have been very clear in the past that proposals for a ban on contingent charging should be made with a full understanding of the unintended consequences of such a ban. Whilst we are concerned that individuals who could reasonably benefit from financial advice will be excluded from it, we are equally troubled that a ban will reinforce the very behaviour the Committee is seeking to consign to history.’
‘We do not believe a ban will eliminate criminal advisers from the market – we believe it will push insistent, desperate clients towards them. As the Committee knows, major players in the British Steel Pension Crisis charged low fees, not contingent fees, on the promise of a transfer. This behaviour would, in our view, become far more prevalent in factory gating scenarios in the event of a ban. This is something we should do everything we can to avoid.’
‘It remains a source of frustration that the Committee continues to identify contingent charging as the main contributor to the events of the British Steel Pension Crisis. A proposal for a ban is a simplistic answer to a complex issue. It is also wrong.’
‘We would urge the Committee instead to consider how such scenarios can be avoided in future. We would point to recent proposals to allow individuals to access their DB pot to pay for advice or a softening of the triage process as potential solutions if they remain committed to a ban. However, without putting in place solutions to complex problems, it remains unclear to us what it is the Committee actually thinks they will achieve.
Read PIMFA’s response to Work and Pensions Select Committee inquiry into pension transfer advice here.
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 going back for 27 years – read more.
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