Service
Service, unlike features, is un-measurable but should be a core consideration. For advisers, using a new Sipp provider can be a leap of faith, as the quality of service can only usually be gauged through experience. However, demonstrating service capability can be done through externally accredited benchmarks or adviser-voted awards. These will usually reflect customer satisfaction far more accurately than service level agreements, which cannot be audited and have little bearing on actual quality of service offered by the provider. Good service will save the adviser time, money and a degree of frustration.
Due diligence
A provider should be able to supply advisers with sufficient due diligence information including outlining its experience in running a Sipp, its attitude towards certain types of investment classes, clearly laid-out fees and details of key members of staff. This level of transparency should be readily available for advisers to view.
Investment choice
Some Sipp providers only offer access to a limited range of investments, such as a choice of mutual funds, but clients’ needs change throughout their working life, therefore a provider that offers greater investment flexibility to meet those needs should be considered. Has the provider the requisite skills to be able to facilitate the full range of allowable Sipp investments? What is the exposure to non-standard assets? Non-standard assets, as defined by the CP12/20 consultation paper issued by the FCA, can range from unregulated collective investment schemes (Ucis) to unquoted shares and off-plan overseas hotel rooms.
Unfortunately, in the interests of increasing revenues, a number of Sipp providers have accepted large numbers of these non-standard assets. These providers are now in the position that they will have to meet the cost of higher capital adequacy requirements, which in turn are likely to drive up fees - or, in a worst-case scenario, force the Sipp provider out of business. Advisers should be cautious of Sipp providers that previously accepted such investments in volume.
Fees
Fees should be transparent and clear to understand. For more complex administrative functions, such as property purchases, a time/cost approach should be considered as ‘treating customers fairly’ rather than a ‘one price for all approach’, which could lead to cross-subsidisation of fees.
One area where some Sipp providers have not been fully transparent is in the taking of interest on the Sipp default bank accounts. Does your Sipp provider give your clients a competitive rate of interest?
Sipp providers should not impose barriers to clients who choose to move their funds to another provider, potentially to take advantage of other investment opportunities. However, not all Sipp providers adhere to the FCA rules for ‘treating customers fairly’ with some imposing high (and difficult to justify) exit fees. Choosing a provider that can accommodate clients’ changing needs could avoid such penalties, along with additional costs that would be incurred for establishing a new Sipp.
