Regulatory changes are likely to wipe out 80 per cent of Sipp operators, one provider has said.
James Hay, which has £11.8bn in assets under administration, told Money Management in its latest Sipp survey that it expects the majority of providers to exit or sell out to competitors.
“With the constant and relentless wave of regulatory change and escalating requirements for increasing levels of capital, staff and monitoring activity, any providers are likely to be forced to exit or sell out to large, more scalable competitors,” said Chris Smeaton, head of product development at James Hay.
“We expect that this process during 2013 will actually clean the industry from one with 100 plus providers into one with less than 20 larger providers who will offer differing services and pricing options depending on the sophistication of its target market.”
This does not mean the customer will ultimately suffer, Mr Smeaton added.
“Does this mean customers will lose out? Absolutely not. In the long term customers will be dealing with much larger, safer and scalable businesses, which will be much better placed to deal with the level of regulatory scrutiny and the demands of the financial markets,” he said.
Mr Smeaton said he expected to see a “flight to quality”, with a higher level of professionalism and transparency and clients able to move from one provider to another with ease.
“Web services will become the main way for advisers and their customers to manage and monitor their investment portfolios,” he said. “Being able to track performance and make decisions in real time will be the expected norm and Sipp providers that do not invest in their IT systems will quickly lose business to those who do.”
According to the MM Sipp special report, more than a quarter of providers do not offer an online valuation facility and around a third are not linked to a platform.
