Sipp providers warned platform vital to survival

Sipp providers warned platform vital to survival

Self-invested personal pension providers will need to either have a platform or a strong partnership with a platform to survive in the future, according to the chief executive of Embark Group.

Phil Smith - whose Sipp firm uses platform technology provider FNZ - said over the last five years the market has shifted focus, forcing firms to adapt.

Retirement solutions, prices, Isas and general investment accounts, are priorities, with brokerage services - traditionally a large part of the business - becoming the ancillaries.

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“You can only take advantage of that if you have fundamental technology running right the way through your business, and if you have the expertise to play the trustee role as a pension provider and a nominee role and investment administrator, which is our design,” commented Mr Smith.

“Most of the platform providers of the last 10 years do not have a good pension offering at all, so providers coming into the market now have a great pension offering, which can do all the things a fund supermarket has done, at a price which is significantly different.”

He added that bigger Sipp players in the market that do not have platforms will have to make bold investments to buy the platform technology for their own business.

“Before we even bought Hornbuckle we had already committed to a technology partnership with FNZ because it is the defining characteristic. The players who have the general platform capability in the retirement space will win, the ones who don’t will lose – it is that binary.”

He warned platforms are a long term committment, not a quick fix, and one not all Sipp firms can afford.

“You don’t get an overnight return for investing in a piece of technology the scale of the platform, so I think that will preclude the majority now from getting in the space, and that’s if they can buy the current practice at the right price.”

With this financial risk, Mr Smith suggested collaborative partnerships would emerge between one or two of the big pension players and one or two of the current platform market providers.

Paul Matthews, UK and Europe chief executive at Standard Life, agreed this was “inevitable”.

“Eighty per cent of all advised business is now done by a platform. The way that customers want to interact in today’s world - everyone wants access to technology,” he stated.

But Martin Tilley, director of technical services at Sipp provider Dentons Pensions, said bespoke Sipp providers like his firm will hold their own against the bigger players.

“The bespoke Sipp providers, which of course Embark derived out of Hornbuckle and out of Rowanmoor, [have] said ‘we charge a specific fee for the job we have been doing’ which has worked as a model in the past – we are living proof that it has worked.”

He said there was still space in the market for models such as Dentons, having a link with a platform - in Dentons case Transact - but not being wedded to them and maintaining an open architecture arrangement.