Sipp providers are predicting a flurry of new deals with robo-advice firms this year, with some already lined up, as robo-advisers look to branch out from Isas and general investment accounts into full pension wrappers.
Sipp administrators Liberty Sipp and Embark Group both told FTAdviser they had signed several contracts with firms that provide what could be described as "robo advice", and that more were in the pipeline.
Liberty Sipp's director of sales and marketing Matthew Rankine said the firm had already signed three deals to provide Sipp administration to robo-advisers, with two more about to be signed.
One of these firms was Flying Colours, a low-cost online and phone-based advice service set up by former employees of Octopus Investment.
He did not reveal the identities of the other four.
Mr Rankine said that, with as many as "50 or 60 robo-advisers and online investment" start-ups attempting to break into the market, the issue was not finding companies looking to make deals, but finding the ones that would succeed.
“We’ve got to pick the ones that are going to do the numbers they say they are going to do," he said, adding the firm had knocked "quite a few" providers back.
"People see it as a bit of a gold mine. Every single one of these meetings I have, they all quote the advice gap. Not everyone is going to make it."
Embark Group chief executive Phil Smith, meanwhile, said his company had signed five new deals with robo-advice firms to white label Sipps, although he said non-disclosure agreements prevented him revealing who they were.
Embark already provides a white labelled Sipp to robo-advice pioneer Nutmeg, known as the "Nutmeg Personal Pension", which he said already had "multiple thousands" of customers.
Mr Smith said he hoped to have signed on a total of 10 robo-advice firms to be using his platform by the end of 2017.
Like Liberty Sipp, Mr Smith said Embark's problem was not finding willing partners, but selecting the ones that woud "succeed in their business model".
Success, he said, would necessarily be a long time coming.
"For a typical new start-up robo-adviser, it will take around 10 years from start to finish to have cumulative profitability," he said.
On these grounds he dismissed fears that Nutmeg's much publicised losses were a sign that their automated model was unviable.
As yet, so-called robo-advisers have been slow to move into pension wrappers, tending to focus on Isas and general investment accounts.
Liberty Sipp managing director John Fox said robo-advisers had come to Sipps last because the requirement to have a regulated Sipp provider meant it was difficult to keep costs low.
He added most Sipp providers did not have the technology to provide Sipp administration at the cost robo-advisers required.
“All the robo-advisers are, by their very nature, invested very heavily in technology. There are very few Sipp providers who could sit down with them and say this is how we’re going to do the straight-through processes.”
Mr Smith also emphasised the need for straight-through processing to keep costs down.
He said most Sipp providers could not provide this.
"You need technology to do the work, not people. But in the Sipp world, people do most of the work," he said.
However Bill Vasilieff, chief executive of platform provider and Sipp administrator Novia, said he did not believe robo-advice would be big in his lifetime.
“I think robo-advisers are all going to fail. They’ve got the wrong idea. People by and large want advice and they want advice from a person," he said.
james.fernyhough@ft.com
