As complaints about advice related to self-invested personal pensions continue to rise in number, some in the industry are calling on advisers to carry out more stringent due diligence and suitability checks.
Last week, the Financial Ombudsman Service revealed that Sipp complaints have risen by a third during the second quarter of 2015/16 compared to the same period last year.
Meanwhile, earlier this month the Pensions Ombudsman backed a Sipp provider over alleged due diligence failings, in a ruling contradicting a final decision made by the Fos.
Paul Miles, head of intermediary partnerships at IPS Capital, told FTAdviser that he has recently seen an increase in advisers carrying out appropriate due diligence on the services and products used – particularly in regard to discretionary fund managers and platforms.
“Financial advisers need to be very careful which Sipp providers they use on behalf of their clients,” he commented. “I’m sure most due diligence documents carry questions regarding past interaction with the FCA, but should they stop there?”
Mr Miles pointed out that as the regulator appears to be adopting a harder stance with Sipp providers regarding certain legacy investments and demanding immediate compensation, many advisers may not be in a position to determine their sustainability in such circumstances.
“There seems to be an increase in the number of firms offering an outsourced due diligence service, some of whom will act on behalf of the adviser, taking a lot of ‘pain’ away from the process.”
However, providers pointed out that while they will carry out the necessary suitability checks from a trustee perspective, it is down to IFAs to work out whether things are right for their clients.
Robert Graves, head of pensions technical services at Rowanmoor Group, commented: “As far as I can tell, advisers are still ultimately liable, even if due diligence work is outsourced; they have to make sure the firm is doing a full and thorough job.”
Barnett Waddingham’s head of Sipp business development Andy Leggett, noted that it is not always clear if Sipp complaints concern the wrapper itself, or the investments and advice relating to them.
“Complaints submitted now often focus on historic investments that have since failed, ‘complaint drag’, you could call it. All Sipp operators should by now have thorough and robust due diligence in place.”
John Moret, founder of consultancy MoreToSipp, agreed that most of the complaints about Sipps relate to the investments within the wrapper, not the wrapper itself.
He explained that providers take different views on the vetting of investments, some relying on an ‘expert’ third party to undertake the vetting, while others employ specialist staff to undertake this work in-house.
“The costs involved have led increasing numbers of providers to only allowing ‘standard’ investments, so finding a Sipp provider to accept a non-standard investment is becoming increasingly difficult. I expect this trend to continue as the regulatory risks and costs of accepting non-standard investments are becoming more and more difficult to justify.”
Claire Trott, director and head of pensions technical at Talbot and Muir, stated that it is vital that Sipp providers have robust agreements in place with DFMs so only assets they approve are able to be purchased.
“When dealing with platforms it is slightly different, as often the adviser or their client are making the decisions what to invest in, which means that they must adhere to our permitted investment list and have to agree to this before we will open the account.”
She added that if the adviser is recommending a DFM is used, it seems unlikely that there would be a complaint against the adviser for investment advice, “this is likely to be the case where the adviser recommends a fund to be purchased directly by the Sipp, so due diligence on the DFM and the assets held by them wouldn’t protect them”.
peter.walker@ft.com
