This could well be a landmark year in the world of Self Invested Personal Pensions, according to Greg Kingston, head of marketing at Suffolk Life, who expects to see the Financial Services Authority push ahead with plans to increase capital adequacy requirements for providers.
“We have got a strong feeling that 2012 is when things are going to change,” he says. “If you look at the comments that have been made by the regulator over the past few months it’s clear to us that they will soon be taking a more forceful line on this issue.”
For many this is likely to come as a surprise. “Advisers have been reading articles for years in which these predictions have been made so it’s understandable that many don’t believe it will ever happen,” he adds. “However, the complacent could end up being in line for a nasty shock.”
If the FSA does pursue a tougher line then the pressure will be on independent financial advisers to ensure they are with SIPP providers that have the right combination of financial strength, solid infrastructure, and innovation to deliver long-term stability for their clients.
“The fact is that many smaller providers won’t have the financial resources to meet the new requirements and will face uncertain futures,” he says. “They may well have to find new investors or tap up existing shareholders, otherwise run the risk of being bought out or ceasing trading altogether.”
This, he points out, would present all manner of headaches to financial advisory firms that already have more than enough on their plates meeting the various needs of their clients and making final preparations for the RDR. Worrying about whether their SIPP provider can stay in business, he points out, shouldn’t need to be a concern if the right decisions are made now.
Of course, the entire SIPP industry is still in its infancy as far as financial services is concerned, which means there aren’t that many examples of what happens when providers collapse. Only a handful of names have gone to the wall in recent years – not enough for a precedent to be set.
Making the right decision, therefore, is vital for advisers – especially considering the lack of trust displayed by many potential clients. “The financial services industry has a poor reputation after what’s been happening over the last few years so people need to be given assurances of where they should be investing for the future, particularly given the continuing levels of economic uncertainty.”
So what should advisers look for when scouring the market for potential partners? Well, a strong conviction that they are accessing a top quality service must come near the top of the list of requirements – and that requires a number of questions to be asked.
These include: How financially secure is the business? Is it possible to get up-to-date valuations of a client’s SIPP investments online, even when the investments are held with a third party? How flexible is the SIPP offering? What happens if the provider goes out of business? How can advisers be sure a provider will keep their service promises?
“Advisers must look for evidence of capital strength – both in terms of resources available for the near term, as well as over the longer-term,” says Mr Kingston. “A SIPP provider also needs to be a profitable business because this will have an impact on its future financial strength. It isn’t just about deep pockets, it is about long term sustainability.”
How they can be expected to treat clients is also a vital component of the decision making process, he adds. Are they prepared to work with advisers to find the best solutions for individuals? What scope is there for them to tackle unusual requests?
The way a provider runs the business, therefore, is of paramount importance. “They will want to know how much they reinvest into their businesses as this illustrates how serious they are about growing their proposition,” he says. “Whether a provider is willing to answer the question can be as revealing as the answer itself.”
Suffolk Life, which has been operating SIPPs for nearly 20 years and property and pensions for twice as long, has a lot to offer in this respect, having established more than 16,000 self-invested plans and managing gross assets in excess of £4.3 billion. In a fast-growing industry, it’s one of the most trusted names.
As well as dealing in a wide range of diverse assets - the purchase and management of property being a particular speciality - it also provides direct access to specialists from the world of pensions and property.
Among the key attributes of its offering is the facility to work alongside other firms that the adviser is used to working with, be they platforms, investment managers, execution only brokers or property professionals. It believes in setting high standards both in terms of service and also of conduct – running the business in the correct manner.
“Our business is profitable, enabling us to invest back into research and development,” says Mr Kingston. “It’s always been our goal to develop a full range of SIPPs to meet the various needs of all an adviser’s potential clients – and in the current climate that is more important than it’s ever been.”
Suffolk Life has developed three SIPP solutions: MasterSIPP, SmartSIPP and SimSIPP.
The Suffolk Life SIPP, which was first established in 1995, closed to new business at the end of November 2007 to make way for the wider investment flexibility of MasterSIPP which is still available for all new recommendations, although the company is still accepts contributions and transfers in all existing plans.
The MasterSIPP, which has again been awarded a coveted Defaqto 5* rating, benefits from high service levels – around 200 dedicated staff deliver the Suffolk Life service proposition – as well as access to a wide range of fund supermarkets, investments, platforms, discretionary managers and execution-only brokers.
A more recent addition to the stable has been the SmartSIPP. This was developed on the back of significant market research and consultations with advisers around the time of the launch of the Cofunds Pension Account.
“It is built around our principles complementing the increasing popularity of platforms, backing them up with the additional value an independent SIPP wrapper provides,” explains Mr Kingston. “We are proud of the investment flexibility it delivers, also offering off platform investments as well as fixed term bank accounts all of which is backed up by our trusted, quality service so features such as flexible and capped drawdown come as standard – all at a lower cost.”
SimSIPP offers a similar proposition but instead of platforms offers lower cost access to a range of discretionary fund managers including Brewin Dolphin, Psigma and Cheviot.
The family of products it has established, as well as the financial resources that it has built up over the course of the past two decades, means Suffolk Life is well positioned to prosper should the FSA introduce more stringent financial controls.
“This will be a defining year and we are comfortable that any proposals won’t adversely impact upon our business – in fact we expect the opposite as opportunities to consolidate begin to materialise,” insists Mr Kingston. “Above all, we expect advisers and their clients to be looking very closely at their options and believe our approach stands up to the closest scrutiny.”
The introduction of the changes could pave the way for significant consolidation within the industry – particularly given the widely held belief that more stringent demands from the FSA may force smaller providers to seriously consider their futures.
“For a number of major providers, growth is currently coming courtesy of other SIPP providers and pension consolidation,” he says. “Once any new capital requirement rules are in place everyone will know where they stand and whether their business models are likely to remain viable.”
It’s fair to say that the experience and knowledge picked up over the last 20 years, along with an impressive product range and a focus on continuous innovation makes Suffolk Life an incredibly tough proposition for rival providers to beat.
“It’s important that advisers choose a provider wisely as their proposition needs to not only look good now, but remain attractive for as long as their clients need the SIPP,” adds Mr Kingston. “They need to be able to trust their provider – and we are confident in our ability to meet all their needs.”
