Swansea-based S&M Hughes Limited, which is trading as Crescent Financial, failed on 14 August, according to the Financial Services Compensation Scheme (FSCS).
The firm was placed into liquidation in September 2019.
The FSCS found evidence that the firm may have given poor advice to British Steel Pension Scheme (BSPS) clients.
The UK lifeboat service is now accepting claims against the advice business.
It has already paid £2.4m ($3.15m, €2.65m) to customers who had been advised to transfer out of the BSPS by fellow advice firm Active Wealth (UK) Ltd.
During 2017, many British Steel workers were advised to transfer out of their defined benefit (DB) pension into a defined contribution pension, known as a personal pension plan or a self-invested personal pension (Sipp).
It was one of three choices available to BSPS members. The others were the new scheme (BSPS2) and Pension Protection Fund (PPF).
The FSCS said: “We found that the returns needed by the former BSPS members’ new pensions were unrealistic to match the benefits offered by the BSPS2 or the PPF and the customers would have been better off if they had not transferred to a private plan.
“Even if those that transferred haven’t lost money yet, the terms, exclusions and complexities involved in a DB transfer, where they were advised to transfer out of their defined benefit pension with the BSPS and into a defined contribution pension, may not have been adequately explained.
“By transferring to a private pension arrangement, they would have lost the benefits you already built up in the BSPS. It may not be realistic to achieve the same level of benefits from their new plan.
“The advice they received may not have been the best advice for them.”