“The regulator will need to remove this exemption following consultation less it face accusations of future complaints and claims on the Ombudsman from clients with exempted providers.”
Otherwise, it is a case of ‘as you were’ for Sipps. The ongoing court cases against Berkeley Burke and Carey have left the industry in limbo, with the role of unregulated introducers thrust under the spotlight. The former has since won its right to appeal, whereas the latter has been acquired by STM, although this does not preclude the possibility of further legal challenges in the future.
Mr Kingston, says the market remains stuck in a difficult position as a result of these issues.
“A fantastic retirement market that paved the way for the positive disruption of pension freedoms is being sullied by a small number of poor advisers, poor investments and Sipp operators,” he says.
“However, there’s enough good in the market to shift momentum now, and whenever the next [outlandish] Sipp investment is published I don’t think anyone really classes the protagonists as genuine advisers or Sipp operators any longer, but instead thinks of them as something else. It will take longer to repair the confidence with the end consumer, though.”
As a result, the Sipp market is becoming more concentrated; this is evident from our first survey of 2019 as a smaller number of providers have taken part. In any case, the data provided shows that in spite of the number of challenges, the market still looks relatively buoyant.
One of the main challenges faced by companies over the past few years, and a prime reason for industry consolidation, was the introduction of capital adequacy requirements in 2016. Three years on, and the issue hasn’t gone away.
Guy Young, partner and chartered wealth manager at Nigel Sloam and Co, says this is still his firm’s greatest concern. “[The capital adequacy requirements] have been detrimental to the Sipp market. They have resulted in substantial consolidation of providers and severely restricted the investment choice available to members.”
Mr Young notes that larger providers have placed greater restrictions on investment eligibility, and made it considerably harder and more expensive to invest in non-standard assets, and a number of small providers have been forced to sell.
He says: “Overall, this has led to a general limitation of the investment flexibility offered by Sipp providers. It has also created a problem for those clients that currently hold illiquid assets in their Sipp, where no [other] Sipp provider wants to get involved.”