The proportion of adviser firms offering defined benefit transfer advice dropped by nearly half to 22% in the last year, according to new research.

Over a third (36%) of advice firms offering DB transfer advice expected to significantly reduce their volumes in the next year, according to the research from Aegon and Next Wealth.

One in ten (9%) advisers providing DB transfer advice said they planned to leave this market entirely.

Overall business risk and the increase in professional indemnity insurance premiums and excesses were the top reasons given by advisers who have left the DB transfer market or were planning on doing so.

Additional reasons included FCA supervisory activity, with the ban on contingent charging also mentioned by a small minority.

Only 3% of adviser firms said their withdrawal from the DB transfer market was driven by lack of client demand.

Steven Cameron, pensions director at Aegon, said: “This sets alarm bells ringing as we need to make sure the ongoing supply of advice meets demand or people will be unable to explore their statutory right to transfer.”

The research was carried out after the latest FCA rule changed came into effect on 1 October 2020, including the ban on contingent charging.

As part of the most recent changes, the FCA introduced a form of DB transfer abridged advice to allow advisers to carry out an early assessment of where a transfer is unlikely to be in a client’s best interest.

Over half (60%) of advisers surveyed by the research from Aegon and Next Wealth said abridged advice is an effective way of identifying clients where a transfer is not suitable, an increase from 46% last year.

However, only a third (34%) of advisers said that abridged advice with the requirement for a full fact find will save sufficient time and be suitably priced to attract potential clients.

Of those firms offering DB transfer advice, just over half (51%) were offering abridged advice. Just under a third (31%) of advisers who provided abridged advice said they offered it for free.

• Research was conducted by Aegon and Next Wealth with 212 financial advisers between 3 and 11 December 2020. Yearly comparisons are offered to the January 2020 report conducted with 227 financial advisers.