Tougher regulation of defined benefit (DB) advice could result in a “sharp shrinkage” in supply leaving consumers more vulnerable, Aegon has warned.
The provider made the comments in its response to the Financial Conduct Authority’s (FCA) consultation Pension transfer advice: contingent charging and other proposed changes (CP19/25) which closes today (30 October).
The FCA wants to ban contingent charging when dealing with DB transfer advice to stop “poor advice”.
However, Aegon pension director Steven Cameron said while the FCA had intensified concerns that contingent charging creates bias “but a cause and effect link to poor advice has not been proven”.
“We continue to believe an overall ban on contingent charging will reduce access to advice and that the industry and FCA should be able to come up with a robust means of managing conflicts of interest.”
Aegon said it did back the proposed ‘carve-outs’ put forward in the consultation.
“More consideration is needed on how and where individuals will obtain evidence of specific life-shortening medical conditions,” added Cameron. “Similarly, we’ll need an objective but not unduly prescriptive definition of ‘financial hardship’ to make that carve-out workable.”
The provider said while it fully supported the FCA’s drive to make DB advice consistently high quality there was some risk that some, when added to an already stringent regulatory regime, could lead to a sharp shrinkage in the supply of advice.
Cameron commented: “This is a critically important market and without access to advice, individuals can’t explore their statutory entitlement to transfer.
“The FCA’s approach has been influenced by supervisory checks and a belief that too high a proportion of individuals who seek advice are being recommended to transfer.
“While the FCA accepts those who seek advice here may not be representative of the general DB member population, we believe self-selection could be having a greater impact than the FCA allows for and this may be prompting stronger interventions than may be necessary. This, in turn, could discourage even more firms from advising in this market.”