The number of pension transfer specialists in the market is expected to decrease due to the regulator’s new qualifications requirements, a trade body has warned.
In its 58 page-long policy statement, titled Improving the quality of pension transfer advice, the Financial Conduct Authority (FCA) announced pension transfer specialists have until 1 October 2020 to obtain a level four qualification for providing advice on investments if they want to continue to offer their services.
Simon Harrington, senior policy adviser at the Personal Investment Management & Financial Advice Association (Pimfa), said the new rules are "entirely sensible", but will "almost certainly" have an impact in the number of professionals serving this market.
He said: "We think it is likely that pension transfer specialists who don't currently hold this additional qualification will think twice before moving to get newly qualified.
"There are a number of factors on why this might be: their career plans, age, time available or indeed their willingness to advise on pension transfers in future.
"Inevitably there will be a drop-off in the number of people able to advise on pension transfers in the future."
The rationale for the new rules is that while a pension transfer specialist may not always be giving the investment advice, the FCA stated they do need to be able to identify whether, in the context of overall suitable pension transfer advice, a proposed scheme and investment is consistent with a client's needs.
Hopes the FCA would allow gap-filling for those pension transfer specialists who may have passed the relevant exams some years ago were dashed, with the regulator stating everyone would have to pass the level four exams to continue to sign-off transfers from late 2020 onwards.
The new qualifications will cost these professionals around £4,750, according to an FCA estimate.
This is broken down in a one-off examination cost of £750, and 100 hours of additional studying - which multiplied by an average hourly cost per adviser of £40, will represent a bill of £4,000.
There are currently some 5,000 active pension transfer specialists in the UK market.
Andrew Boyt, pension transfer specialist and freelance consultant, agreed with Mr Harrington.
He said: "The additional responsibility confirmed in the policy statement may give some non-advising pension transfer specialist food for thought, and may lead to some of them concluding that the reputational risk of being associated with defined benefit (DB) transfers is fraught with difficulty, and isn't worth the pain."
But Mr Boyt, who already has the required qualifications, agreed with the new demand from the regulator.
He said: "Such (pension transfer specialist) individuals may have excellent technical knowledge of DB pension transfers, but limited exposure to investment theory/practice, and little or no 'face time' with clients.
"This can turn the process into a technical exercise rather than an 'advice' process."