Dave Ferguson of the Abacus, charts the progress of the Sipp and offers some advice in its implementation across the retirement and savings market
NEVER HAS ONE man been so right, and retained his position for so long as John Moret has with his regular musings on the Sipp market.
Growth in the traditionally complex market has probably surpassed even Moret's expectations over the years, and is set for a massive boost as companies reposition their pension propositions over the next few months.
Subject to the ludicrous debate about protected rights being resolved in favour of the Sipp providers, the market should evolve so that almost every new non-corporate pension arrangement will resemble what we currently call Sipps.
In fact the market may extend beyond even this with several providers making inroads into what is becoming known as the group Sipp market.
Inevitably different providers view the market in different ways with some continuing to focus on highly specialised arrangements, while others adopt a more mass-market stance.
The winners and losers I am particularly interested in the response of those providers that currently outsource their Sipp propositions to the likes of James Hay and Capita PPML.
Given that we can expect very few non-Sipp propositions to remain, these providers suddenly find themselves with an entirely outsourced pensions operation for new business, which can hardly have been the plan when the deals were first struck.
Given we live in an increasingly low margin world it seems unlikely that the average life office can extract sufficient margin from such an arrangement.
I will be surprised if we do not see many companies in-sourcing this business over the next few months.
This brings two problems: Firstly, the average life office is not very good at asset level administration and is generally uncomfortable dealing with a very large number of funds.
Secondly and perhaps more crucially for the strength of the sector, James Hay and Capita PPML are going to have to work hard to avoid being hit by such a shift in business.
I do not have precise data but it feels to me that a significant chunk of each company's business is derived from so-called third-party business rather than business written directly with advisers.
Going mainstream Assuming these important but negotiable obstacles are overcome, the impending acceleration of growth in the Sipp market can only be a good thing for advisers and their clients.
A product that has generally been tagged as intensely difficult and the preserve of the wealthy is about to become mainstream, the change bringing with it more competitive pricing and improved standards of administration.
One can easily see a market evolving where the Sipp market stretches downmarket from its current elevated position into one that mirrors the set up of the offshore bond market.
Essentially clients with more modest pension funds will be forced to select from a limited universe of funds, while those with greater assets are able to find exposure to the entire market and to less regular assets such as property and fine wine.
Simplicity is key Doubtless there are product development brains being exercised throughout the length and breadth of the land in the hope of squeezing one feature or another into the product design.
All well and good but if I could make just one suggestion to this group it would be to make sure the administration works and you are easy to deal with for that is what advisers really (really) want.
For far too long marketers have focused on the features and left the delivery pretty much to chance.
For a sector that has increasingly little scope for innovation in product design and is really no more than an administration business, it is clear to me that excellence in implementation is rather more important than glossy brochures or whizzy ideas.
Now assuming these messages are absorbed, the growth in the Sipp market is not only good news for the pensions and retirement savings market.
It is easy to see the development of the Sipp market around A-Day leading to an explosion in the wrap market as advisers seek to capitalise on their pensions simplification work by bringing all of each clients' assets under one umbrella.
Of course I could now start to go on about wraps but then I might be accused of being repetitive and that would never do.
Our regular video series continues
Investor focus shifts to risk
Joined with 21 Partners
Adds £130m assets under influence
Nexus IFA among first to sign up