New DB transfer data shows 'dramatic impact' of adviser charging structures

Pensions consultancy firm LCP used an FOI to find out whether clients whose advisers who used a contingent charging model were any more likely to transfer than those whose advisers charged on a non-contingent basis.

The data shows that 68.25% of clients transferred when their adviser used a contingent charging structure, compared to 27.97% whose adviser only used a non-contingent charging structure. The remaining percentage charged on a hybrid basis – part contingent, part fixed fee.

Contingent charging for defined benefit transfer advice was banned in October 2020.

Jonathan Camfield, partner at LCP, said: “For the first time, we can see the dramatic difference between advisers who charged on a contingent basis and those who did not. More than two in three members who were being charged on a contingent basis ended up transferring compared with less than one in three where the adviser was charging on a non-contingent basis.

"This is the strongest evidence to date of the potential for bias when an adviser gets paid more if a transfer goes ahead. Yet the FCA allowed contingent charging to continue long after concerns were raised by the Select Committee and others. It is vitally important that the interests of the member and the adviser are in alignment and it would appear that on too many occasions in the past this was not the case.”