That makes it pretty clear what one of the basic requirements of Sipp providers is: easy to obtain valuations. The degree of sophistication with which this requirement is met varies. An annual statement is part of the package with any Sipp and often suffices. It may be possible to look up values at any time online – easy when everything is held together on platform, but not that much harder if a Sipp provider’s portal has to be accessed as well. There may even be IT integration, so that automatic data feeds into advisers’ back office systems occur.
Whatever the method, the issue is not so much obtaining the valuation as how assets are valued when they do not float on an exchange. With cash and collectives it is easy, but how do you efficiently value a commercial property each year without commissioning an expensive valuation, or a structured product or an Unregulated Collective Investment Scheme (Ucis) that has a five-year term?
These are issues Sipp operators have long had to deal with and the more they can help, the more practical it becomes to advise on hard-to-value investments. Complex investments are also being looked at afresh by operators and regulator alike, in readiness for the forthcoming capital adequacy regime.
It should be kept in mind that the regulator’s requirements for calculating quarterly valuations of more complex Sipp investments are for the underlying purpose of calculating capital adequacy, not for advice. Nonetheless, the regulator would surely not want to impose massive and expensive duplication by demanding different standards for two complementary purposes.
Two obvious questions to ask are: what does the client want? And what does the adviser need? They do not necessarily match up and so some accommodation may be needed. A sanguine client might think a valuation is never needed, unaware that the regulator demands at least a current, formal valuation at each benefit crystallisation event (BCE). Of course, advisers need to know if client’s plans are on track well before the first BCE, although that does not have to mean a formal valuation.
It helps to have an agreed, in-house policy and it makes sense to align the policy with client expectations and how Sipp operators work. The frequency of valuation for capital adequacy purposes should more than meet adviser and client needs. There may also be room for innovation, provided regulatory requirements are met.