The adviser’s role in choosing a Sipp

“The adviser could simply be providing the Sipp platform for the investor to make their own decisions, or in many cases the advisor may be charging a fee to provide advice on asset allocation, fund selection, and the best strategy for maximising benefits in retirement.”

Hyman Wolanski, managing director of Sippchoice, adds: “Typically, an adviser wants to maintain an ongoing relationship and usually their remuneration comes out to a degree to advising on the selection of a Sipp in the first place.

“The adviser wants to understand what the client’s financial situation is and, having defined that, they then need a Sipp that will accommodate the adviser’s investment service.

“What you don’t want to do is have a client paying for flexibility that they don’t really need,” Mr Wolanski adds.

“So if you’ve got two similar clients in terms of wealth and your main proposition is Cofunds but you know that one client may want to go maybe go into commercial property at a later date, then while the clients look pretty similar their Sipp requirements may be quite different so you don’t want to put them both into the same type of Sipp.”

As both the client’s needs and circumstances will change throughout their lifetime, so will tax, investment conditions and pension rules, Robert Graves, head of pensions technical services at Rowanmoor Group, stresses that it is crucial the adviser regularly reviews how best to utilise the flexibility of Sipps to the client’s best advantage.

Some advisory firms take this a stage further and operate their own Sipps.

“By running your own Sipp you can gain greater control of pricing both for the Sipp wrapper and also for underlying investments if you have an investment platform, which can allow you to offer a better service to clients,” says Mr Sumpter.

“The potential danger for investors is that advisors are using an inferior Sipp to those available elsewhere and investors are over paying for the Sipp wrapper or are not benefiting from the investment choice and flexibility that Sipps can provide.”

Mr Wolanski notes that as these firms are offering both types of service, advice and investment management, there can be a fine line to tread.

“The Sipp is essentially an administrative function so they’re providing that together with the advice. They’re two quite separate areas.

“I don’t see any particular issue about a firm providing both. As long as they’re very clear about the charging structure – ‘we’re charging this for the advice and this for the Sipp administration’.

“The FSA is very concerned about potential conflicts of interest so when you give advice you’ve got to do it properly and that means look at everything that’s available and provide the best Sipp for your particular client.”