Letter: Challenges face small Sipp providers

The FSA's concerns about the smaller Sipp provider is apparent following the announcement that they will be undertaking a review of 70 small Sipp firms to assess whether they are "adhering" to its principles and rules.

This year and beyond will be tough for the small independent Sipp provider and only those firms with the ability to operate robust controls, coupled with an awareness of the full scope and expectation of regulation will survive.

For the bigger Sipp providers these systems and controls that have been in place for years and stress-tested on a regular basis. The same cannot be said of the independent Sipp providers, many of which still operate as cottage industries.

Another driver for change is the pure economics of the market in which independent Sipp providers compete. The FSA Product Sales Data Trends Report in September last year showed that 37,000 Sipps were sold in the period from the 1 October 2007 - the first date that such figures were required by the FSA - to the 31 March last year. The report goes on to state that the bulk of these sales were among the top 10 providers. With some 100 providers reporting, this means that the other 90 are scratching around for a handful of plans.

The combination of limited market opportunities and regulation will challenge many firms and there may well be some less than favourable publicity for some - the recently reported news of a £2.5m fraud involving small Sipp providers is a further warning and I hope that this does not damage the reputation of the 'real' Sipp or the added value an independent Sipp provider can offer the right clients and their advisers. Consolidation in the Sipp provider market is inevitable and while this has been much slower than expected it is reasonable to expect this to accelerate.

Tim Sargisson

Managing director

The IPS Partnership