The advice market is in the midst of a defined benefit mis-selling scandal and the fallout will not be confined to "dodgy firms", Rory Percival has warned.
The warning came as advisers in the defined benefit market were told it would be "naive" to think they are not on the radar of claims management companies.
Speaking on a panel at the Personal Finance Society's annual conference in Birmingham last week (December 28) Mr Percival, who worked at the FCA for ten years and now runs Rory Percival Training and Consultancy, said he was already hearing regular radio adverts from claims management companies on defined benefit transfers.
Mis-selling in the pension transfer market came to the forefront of the media spotlight in 2017 fuelled by the British Steel Pension Scheme scandal.
The Financial Conduct Authority has since steadily increased its scrutiny of the defined benefit sector, with the regulator finding too much of the advice in this area was "still not of an acceptable standard" in a survey published in June.
Earlier this year the watchdog continued tis crackdown, writing to 1,600 firms in which it has identified a risk in their defined benefit transfer advice practice.
Mr Percival warned the market was already witnessing a defined benefit mis-selling scandal and it was now a case of what advisers could do to reduce future impact.
He said: "Clearly there is an issue. My point which I have been making quite a bit recently - but it’s not really getting any traction in the sector - is most people in the industry think this is an issue isolated amongst a smaller number of dodgy firms. It isn’t.
"It’s quite clear to me that what the findings of the FCA flag up very clearly is this is perfectly decent firms not doing their job well enough.
"So while people in the room may be thinking the problem around mis-selling is not me, I would suggest actually you do really need to look at what you are doing yourself - because this is even more widespread than people think."
The regulator's former technical specialist suggested the "right thing to do" would be for advisers to identify any clients to which a transfer was "mis-sold" and compensate them.
But he cautioned: "Conversely I’m not sure the professional indemnity insurers would be too keen on that approach, so that clearly put firms in a very awkward position.
"I guess one absolute minimum thing firms could do is to look at those numbers of cases [which have been mis-sold] and get a better idea of what potential future claims it might have against [it], and get in a better position of putting capital aside in light of the current excesses for professional indemnity insurance.
"That is the easy step to take. But beyond that I don’t know the answer."
Also speaking on the panel Fiona Tait, technical director at Intelligent Pensions, agreed a mis-selling scandal surrounding defined benefit transfer advice would be emerging in the near future.
Ms Tait said: "There is certainly scope for one [a mis-selling scandal] and one of the key things to consider is we know claims chasers are probably looking for something else to do.
"So it would be quite naive to think that we wouldn’t be on their radar. Which is not to say that everyone in this audience has something to worry about, but yes I could see that we would be looked at."
Ms Tait warned the end of the payment protection insurance deadline, which passed in August this year, had left claims management companies "looking for something else to do".
She added: "As far as advisers are concerned we’re in a bit of a limbo waiting to get the feedback on CP19/25 [the FCA's consultation paper on pension transfer advice] so I wouldn’t rush into making any changes just yet, but I think next year could be the year."
The FCA's pension transfer consultation proposed banning contingent charging on defined benefit transfers, a plan that has been met with some opposition in the sector especially amongst those who believe it will not improve the quality of advice given.
rachel.mortimer@ft.com
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