Half of advisers believe contingent charging ban would widen advice gap

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Half of advisers believe contingent charging ban would widen advice gap

Half (51%) of those who advise on defined benefit (DB) schemes believe the proposed ban on contingent charging would result in a fall in demand for DB advice, according to research from Aegon.

The life giant also found advisers believe a fall in demand for DB transfer advice would widen the advice gap. The research was carried out in the wake of the Financial Conduct Authority's (FCA) proposal to ban contingent charging.

In consultation paper CP19/25, which was published 30 July, the regulator expressed concern too many advisers were delivering poor advice - much of it driven by conflicts of interest in the way they are remunerated.

The FCA has recognised the difficulty some individuals will face if they have to pay for advice upfront and we welcome the proposed ‘carve-outs' for those with specific life-shortening conditions or with significant financial difficulties"

Aegon also found a fifth (21%) of advisers were confident a ban would not result in demand for DB transfer advice falling. More than a quarter (28%) of advisers meanwhile remained "neutral" on the question.

The platform and pensions company also found three-fifths (58%) of advisers arguing the lack of a triage facility was harming the market. This followed the regulator's confirmation it was unable to allow a more personalised approach to pre-advice triage on DB transfers because it would be classed as regulated advice.

'Particularly contentious'

Aegon pensions director Steven Cameron (pictured) said contingent charging for DB advice had proved particularly contentious. "Some argue contingent charging created unmanageable conflicts of interest, while others point to a ban making advice for some individuals unaffordable," he said.

"The FCA has recognised the difficulty some individuals will face if they have to pay for advice upfront and we welcome the proposed ‘carve-outs' for those with specific life-shortening conditions or with significant financial difficulties.

"But this will only help a small minority. For others, the key may be to make the new form of ‘abridged advice' workable."

 

This article was first published by Professional Adviser, a sister title to International Investment