The UK parliamentary cross-party action group Work and Pensions Committee (WPC) has again urged to the UK financial services regulator "completely rule out" contingent charging.
The move follows on from previous calls by the WPC for the Financial Services Authority (FCA) to take action after the recent British Steel Pensions crisis.
The FCA has previously refused to rule out contingent charges - the fee a client pays for the financial advice they have received only if they decide to go ahead with their
"We recommended that this glaringly obvious conflict of interest should be tackled by banning this ‘contingent charging’" - Work and Pensions Committee chair Frank Field MP
adviser's recommendations - because, as Andrew Bailey, pictured below left, chief executive of the FCA, said previously, "the evidence it has seen does not show that contingent charging is the main driver of poor outcomes for customers."
In the most recent letter to Bailey, written by Labour MP Frank Field, pictured right, and WPC chairman, the committee said: "Our inquiry found that a supposedly independent financial adviser could be incentivised to give bad advice - i.e. suggest a DB transfer - because of the way their fees were structured: the adviser was only paid, or paid much more, if the person decided to take a DB transfer.
"We recommended that this glaringly obvious conflict of interest should be tackled by banning this ‘contingent charging'," the letter states.
The committee is now urging the financial regulator to take action on the matter. It agreed last October to assist the FCA in gathering further evidence - which has now all been published online - adding that it feels it is time for the "FCA to provide evidence of a convincing alternative to a ban".
WPC Chair Frank Field said: "The Committee has received no compelling empirical evidence that contingent charging does not result in some independent financial advisers being incentivised to give bad advice, nor that there were suitable checks and balances in place to prevent this… Much of the evidence linked contingent charging to unsuitable advice and bad outcomes."
In his reply to the committee, Bailey said that while the FCA shares the same concerns and objectives as the WPC it still but needed to carry out further work before "intervening in this market".
In the WPC letter, chairman Field notes that the Committee's work on the matter "developed from the scandalous mistreatment of members of the British Steel Pension Scheme. Our inquiry found that a supposedly independent financial adviser could be incentivised to give bad advice … because of the way their fees were structured: the adviser was only paid, or paid much more, if the person decided to take a DB transfer."
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