Self-regulation by providers of self invested personal pensions (Sipps) is the key to maintaining consumer confidence until formal safeguards are put in place, according to Standard Life.
Although the Treasury has launched an industry-wide consultation over the regulation of Sipps, Standard Life says it could be a year to 18 months before any formal regulation is in place, during which time consumers could be vulnerable to poor advice and exposure to unregulated investments.
John Lawson, head of pensions policy at Standard Life, says: “Most advisers and providers are reputable and act responsibly towards their customers but there is danger that people with no qualifications to provide advice try to get a slice of the action".
"By adopting self-regulation the industry would be demonstrating that it is prepared to act in the interests of consumers. That would help to build public confidence in Sipps until such time as formal regulation can be put in place."
Standard Life says it already treats its Sipp product as if it were regulated product and it wants other providers to do the same. This would involve: new business illustrations at point of sale; a ban on misleading advertising; a key features document which explains features and risks; a complaints process which is FSA compliant with recourse to the ombudsman; post sale illustrations; and full cancellation rights.
Lawson encourages all providers to make statements on self-regulation before April next year so the Sipp brand remains “untainted”.
In particular, he says providers should avoid entering distribution agreements with firms who are not authorised to give advice because this will significantly reduce the risks for consumers.
Further, Lawson believes the Association of Independent Financial Advisers (Aifa) should call for IFAs to adopt self-regulation because by doing so they will comply with the way the Financial Services Authority (FSA) regulates other product areas and will comply with the treating customers fairly (TCF) initiative.
But Adrian Boulding, pensions strategy director at Legal & General, believes what is needed is for the government to press on with legislation and the FSA to formally regulate Sipps as soon as possible.
“We support the idea that the FSA should be regulating. This will give consumers confidence rather than self-regulation,” Boulding states.
He points out dangers arise not from professional advisers recommending products, but from “cowboy building firms selling property overseas”.
Boulding believes the industry needs “proper statutory regulation to lock the cowboys out” and regulation which is across the entire industry.
Likewise, while Scottish Life supports self-regulation in general, Alisdair Buchannan, head of communications, believes Standard Life is simply “scratching the surface” because it is only focusing on the straight-forward regulation of advice.
“But the issue is much wider – it is not just advice and setting up Sipps but what goes in afterwards”, he says.
Buchannan says the difficult area is promotion of investments because it is not limited to providers and advisers but covers many sub-industries such as the selling of buy-to-let property overseas and race-horse stables.
He points out these “exotic areas” are where the most serious damage to consumers is done but they are independent from Sipp providers and more difficult to regulate.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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