The quality of DB advice has proven to be a bigger issue than contingent charging, Tideway managing partner James Baxter has said after advice giant LEBC stopped its DB transfer work.
On Monday (2 September) RP’s sister publication Professional Adviser revealed LEBC had stopped offering advice on defined benefit (DB) transfers after a review by the Financial Conduct Authority (FCA).
A note from LEBC seen by PA said the firm would not be tendering for new DB transfer projects, nor would it be able to complete existing transfer business. The national advice firm has been a consistent advocate for one of the most controversial topics surrounding DB transfers: a ban on contingent charging.
The firm welcomed the Work and Pension Select Committee’s recommendation to ban the practice back in May, arguing contingent charging throws into doubt the impartiality of advice to transfer.
In July, the FCA began consulting on plans to ban contingent charging. In its consultation paper it described contingent charging as “an obvious conflict of interest” and, as such, argued the practice should be banned for all – except from specific groups of customers with “certain identifiable circumstances”.
Baxter’s firm Tideway, meanwhile, uses contingent charging for its DB advice. However, the managing partner said LEBC stopping DB transfers highlighted a “case in point, which is that contingent fees is one issue, but it’s clearly not the only issue and the quality of advice is really what counts.”
Baxter said he believes the FCA is set to ban the charging practice but that Tideway would embrace the change and “get on with it”.
He added the FCA’s involvement with LEBC did not concern Tideway because it had already been visited by the regulator in 2017 and altered its DB transfer service as a result. He said the FCA did not “particularly criticise” the firm for using contingent charging.
Baxter continued: “The FCA is slightly caught in a rock and a hard place in that, if they don’t ban it and something comes up from somebody who is charging contingently, they’re just going to get egg all over their faces, so I don’t think it’s a reason not to follow through with a contingent charging ban.
“I think it highlights that it is not the only issue, and the bigger issue, frankly, is the quality of advice.”