Christine Hallett, CEO of Carey Pensions UK, looks at the key business drivers for Sipps over the coming years and why dealing with tried and trusted providers always makes sense in an unpredictable and rapidly evolving marketplace.
The spotlight on SIPPs and SIPP operators in general, continues to increase. Advisers need to conduct diligence and ensure SIPP providers have adequate governance and systems and controls in place. It is important that advisers deal with robust SIPP providers with tried and tested business models and governance frameworks; providers they are confident will survive the next period of change within this marketplace.
What are the drivers that will shape the SIPP marketplace in the coming years?
- The finalisation and outcome from the FCA thematic review findings
- New Capital Adequacy requirements
- Pensions Freedom
The FCA Thematic Review
As a result of SIPP regulatory changes, reviews etc., business models have changed. For example, we continue to see consolidation in the marketplace, and this is set to continue. The due diligence and business acceptance policies of most SIPP operators that allow non-standard assets are likely to have been changed and the marketplace is settling into the new regulatory regime.
Many SIPP operators have obtained exemptions from the FCA to undertake such investments, and most advisory firms must take responsibility for pension transfer advice and also advice for non-standard assets. The world is a more structured, robust and strongly controlled environment now, in respect of SIPP investments.
New Capital Adequacy requirements
The majority of SIPP operators who provide a full SIPP and allow some element of non-standard asset classes, are now determining what their capital adequacy requirements will be in September 2016. As a consequence, there will be some who decide it's a step too far and again seek to exit the marketplace. And there continues to be certain companies circling SIPP providers to snip up those companies that feel squeezed by the new regime and I am sure we will see more changes shortly, as operators consider their 5 year plans and the strategies they want to follow.
Pension providers are now revealing their proposition for flexi access, and we anticipate that there will be a great surge of interest to withdraw individual pension funds. There has never been a greater need for financial advice in this area. However, more and more responsibility is being laid at the door of the product providers too. The need for risk warnings increases. There is mixed opinion as to whether it is a good thing or a bad thing, and both sides of the argument have a point. But as with most regulatory changes implemented, no-one ever really sees the impact until some years down the line. However, one thing is sure, the process by both the adviser and the product provider needs to be well documented and evidence will need to be retained to ensure that the information about the potential impact to individuals is very clear.
Watch this space for the first disaster to be published.
What impact will this have on the adviser and SIPP industry? For those that embrace change, and seek to increase their professionalism and create valued products for clients, it will make their business stronger. Ok, it increases overheads, but if there are fewer companies in the industry the slice of the business for each of those companies gets bigger, so the rewards will be there for those that put the effort in now.
It means that relationships will change; every part of the solution has to step up to the mark and deliver to the standards set. We should all be trying to deliver the most compliant, well run company that the client can have confidence in and can be comforted that we are striving to provide the best that we can.
Carey Pensions UK is a SIPP provider that is working with advisers who want to use a company that has strong ideals and is prepared for the regulatory changes that are being implemented, and can provide the support they need
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.