A turn in the market next year could add fuel to the fire of an anticipated defined benefit mis-selling scandal, a regulatory expert has warned.
Mis-selling in the pension transfer market first came to the forefront in late 2017, fuelled by the British Steel Pension Scheme scandal.
The Financial Conduct Authority has since steadily increased its scrutiny of the defined benefit sector after finding too much of the advice in this area was "still not of an acceptable standard".
Nick Bayley, managing director of compliance and regulatory consulting at Duff & Phelps, warned defined benefit transfers would continue to dominate the regulatory agenda for advisers next year, and said the scrutiny would be intensified further in the event of a market turn.
Mr Bayley said: "With interest rates remaining low, the huge defined benefit transfer market will remain a major regulatory focus in 2020 and the FCA will likely confirm its proposed ban on contingent charging, which it sees as an unmanageable conflict of interest.
"The FCA will also likely introduce abridged advice for defined benefit transfers, although the level of take-up by the industry remains questionable.
"If the markets turn in 2020 and those who were badly advised to transfer out of their gilt-edged defined benefit schemes realise they may have made a big mistake, this will likely become the next mis-selling scandal."
Earlier this year the watchdog continued its crackdown, writing to 1,600 firms in which it had identified a risk in their defined benefit transfer advice practice.
It also recently closed its consultation proposing banning contingent charging on all DB transfers, a plan that has been met with some opposition in the sector - especially among those who believe it will not improve the quality of advice given.
The FCA is also set to publish its findings of its re-evaluation of the Retail Distribution Review and the Financial Advice Market Review in autumn 2020, a process it initiated this year.
At that time the regulator admitted some of its rules might be harming the market.
Mr Bayley said: "Whether we should expect any significant proposals, beyond advocating more robo-advice to address the yawning advice gap, is unclear.
"There must be a role for the broad-based delivery of personalised financial guidance to the mass market."
He added: "Mifid II changes will continue to ripple through the industry and although the government may row back on some aspects of the Mifid II legislation once the UK has left the EU, the key areas that are still proving challenging for advisers, such as costs and charges and product governance, are here to stay."
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