Contingent charging is a “hangover” from commission and should not be used as a payment method, according to BBC journalist and money columnist Paul Lewis.
Speaking at The Great Pension Debate II in Port Talbot, the journalist said contingent charging is the equivalent of charging commission and throws up conflict of interest issues.
“[Contingent charging on defined benefit (DB) transfers] is commission to me,” he said. “If a client does one thing, you do nothing, if a client does another, you get paid – there is a conflict of interest from the start, it’s a percentage of the amount transferred, a percentage that you only get if they transfer, logically to me, that is indistinguishable from commission, whatever you might call it.”
Commission on the sale of investment products was banned as part of the Retail Distribution Review in 2012.
Lewis continued: “Banning commission improved financial advice, and the latest crisis with DB transfers comes from the fact that some advisers are now finding their way around this ban by calling commission a ‘contingent fee’.”
Back in March, following the peak of the British Steel pension scheme saga, the Work and Pensions Committee urged the Financial Conduct Authority (FCA) to ban contingent charging on DB transfers.
A month later, the FCA revealed it was considering a ban on contingent charging for this type of advice.
Elsewhere, Lewis revealed he looks for independence, a Chartered or certified qualification and upfront charging in pounds as opposed to percentages when he recommends an adviser.