The Personal Investment Management & Financial Advice Association (PIMFA) has responded to the FCA’s pension transfer ruling on contingent charging, and asked for the regulator to ‘raise the bar.’

PIMFA, 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.

The trade association’s opposition to a ban is ultimately rooted in its belief that ‘contingent charging may be a symptom to the provision of poor advice.’

It is not the underlying cause, however, as set out in the FCA’s original policy statement and in the consultation document - which stated it is ‘difficult to prove a clear link between contingent charging and unsuitable advice.’

PIMFA senior policy adviser, Simon Harrington, commented: “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.”

PIMFA has suggested the DB transfer market would benefit from targeted and more rigorous supervision of the industry.

Harrington continued: “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.”

PIMFA has also suggested the primary cause of poor pension transfer advice is that bad advisers continue to be allowed to give bad advice, rather than how they charge for it, and this is particularly the case for implementation fees.

“Removing implementation fees will ultimately make the cost of advice more expensive for a number of savers,” Harrington added. “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.”

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