"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."
The Personal Investment Management & Financial Advice Association (PIMFA) has opposed the FCA's proposed ban on contingent charging, arguing that 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".
PIMFA says that while contingent charging may be a symptom of poor advice, it is not the underlying cause, as set out in the FCA’s original policy statement which stated it is "difficult to prove a clear link between contingent charging and unsuitable advice".
In its response, PIMFA has suggested that the DB transfer market would instead benefit from targeted and more rigorous supervision of the industry.
The trade association is asking the regulator to ‘raise the bar’ in its pursuit to ban contingent charging. It argues that the proposals 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.
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.
“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."