Service levels are set to become a key battleground for SIPP providers as competition hots up.
Alliance Trust was forced to close its Full SIPP to new business last week, saying its service levels were not up to the standard its customers would expect.
The company will continue to offer its Select SIPP, a more basic product that accounts for 50% of its pensions business.
Martin Tilley, senior manager at Dentons Pension Management, says Alliance Trust's Full SIPP is intended as a bespoke product for sophisticated investors, and says high service levels are vital at this end of the market.
"Service is paramount for the more complex investor," he says, "whereas mass-market retail products tend to be more price focussed."
Tilley says service is also important to advisers, as poor provider support can reflect badly on their own business.
"We don't want to let the adviser down, because then he would have to pick up the slack. If IFAs spend more time chasing us then they will spend less time with their clients, and time is money so you need to offer a high level of service."
Billy Mackay, AJ Bell's marketing director, says advisers value a service proposition, and often rank service as their most important factor when selecting a SIPP.
"At AJ Bell, our operations staff is the biggest part of the business because IFAs demand efficient administration and service."
However, Matt Ward, principal consultant on pensions and investments at Defaqto, says a balance may need to be reached between price and service, as the recession hits consumers.
"If a SIPP is being sold on its premium service then you need to have a high admin standard, but you also need to offer good value for money. We'll have to wait and see how the economic downturn affects investors and their behaviour."
The suspension of the Alliance Trust SIPP shows the dangers of letting service levels fall behind what advisers expect.
Providers believe 2009 will see other providers step up their administrative service to ensure they do not lose vital adviser business.IFAonline
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