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Guide to Sipps
InvestmentsMar 12 2020

Do the new entrants hold merit?

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Do the new entrants hold merit?

GPC Sipp also entered administration in June last year following problems with some of the investments in its Sipps.

There have been a number of instances of Sipps holding non-standard or unregulated assets, which is behind many of the industry exits.

But there have been some new entrants into the space, including the likes of Vanguard and Wealthify, ensuring that clients do still have a choice when it comes to Sipp products.

It is important for advisers and their clients to differentiate between the newer Sipp offerings

Some of the new Sipps appear to be trying to appeal to those with less wealth to invest but who still want to save for the future.

In March, online investment platform Wealthify marked its entrance into the pensions market with the launch of a Sipp in partnership with Embark.

Clients are able to open the pension product with a minimum £50 investment, while the Sipp has an annual fee of just 0.6 per cent.

Vanguard, which is best known for its passive investment products, unveiled its own Sipp in February which is, according to independent research firm Platforum, the lowest-cost on the market for the average British pension holder who has not yet drawn on their pension.

A 0.15 per cent account fee applies to the Vanguard Sipp, which is capped at £375 across all the accounts in an investor’s name on its personal investor platform.

Sorting Sipps

Faced with numerous Sipp products, it is important for advisers and their clients to differentiate between the newer Sipp offerings, many of which seem to be competitive when it comes to cost.

Tony Stevens, head of paraplanning at Secure for Life, says: “I think the industry has seen a drive to lower costs for some time, and these offerings follow in the well-trodden path of Hargreaves Lansdown, and other self-managed fund and share-based Sipp solutions.”

He observes from the newest launches that it is price rather than features or services that is the driving factor behind them, adding that “there is little functionality to choose between the offerings in this segment”.

“In the adviser space, charges have become very important so any proposition that brings costs down is going to spark some interest,” Adrian Lowcock, head of personal investing at Willis Owen, notes.

“The fact is that it will suit some advisers and their clients but it’s unlikely that they will appeal to all.”

Cost is always a factor, but it is important for people to look at the investment choices available via a Sipp to ensure it is right for them, according to Richard Pearson, director at EQi.

The Vanguard Sipp, for example, offers savers access to 77 funds and exchange-traded funds (ETFs), while Wealthify is offering ethical portfolios via its new Sipp.

For advisers who might be analysing Sipp products with no track record, Mr Stevens suggests that fund/share range, financial strength, brand awareness and reputation, and customer service plays almost as important a role in product selection as cost.

Service is vital, Mr Pearson adds.

“A cheaper Sipp might not be good value if the service is poor.

"Access to a good range of funds, along with clear research and guidance on what those funds are and why they might suit an investor’s needs is key to ensure the right choice of Sipp,” he says.

Be diligent

Ultimately, advisers can always carry out due diligence on the Sipp’s parent company.

Mr Lowcock says: “Find out how much has gone into developing the proposition and what functionality is available – this is especially important for advisers with clients who will have a broad range of requirements.”

He notes: “There is also the question of their commitment to the idea. Are they going to try it out and give it up after five years?

“A company’s track record in previous product developments might give an indication here.”

Mr Stevens suggests this is where more established entrants face fewer hurdles to entry.

“Vanguard, with its kudos as one of the largest fund managers in the world, has an edge here, over the likes of Wealthify,” he adds.

On merit

The general consensus is that while these newer Sipps are untested over the longer term, the latest offerings do hold merit and are worthy of consideration by advisers and their clients.

“Anything that encourages people to take control of their retirement planning is welcomed, and the entire Sipp market has developed in recent years to become more accessible for consumers,” explains Mr Pearson.

“If somebody is new to Sipp – especially if they are time poor – then a more limited offering like Wealthify or Vanguard could appeal.”

“For those who want a simple, low cost and passive Sipp and investment solution, with no risk of holding unregulated investments, then Sipps from Vanguard, Nutmeg and Wealthify certainly have merit,” says Marc Beattie, chief operating officer at Arlo Wealth.

“However, seeking out bespoke independent advice will still help investors to manage risk effectively.”