Martin Tilley urges advisers to look beyond headline fees when assessing SIPP providers.
Past selection of a self-invested personal pension (SIPP) provider was often as simple as finding the lowest charging provider who could transact the job at hand. The "cost" as seen by the client was low and that made for a satisfied client.
Happily, selection of a SIPP provider on the basis of costs alone is now a thing of the past as independent financial advisers (IFAs) understand that numerous other factors can have a significant bearing on what makes a good SIPP provider and a long term partner for them and their clients. But while the emphasis is moving away from headline costs, an argument exists that overall costs are not fully understood and can be significantly more when human time and effort are taken into account. These will all have an impact on the IFA's business and the client indirectly.
The Retail Distribution Review (RDR) has focused the minds of IFAs all of whom will or have been considering their methods of remuneration. This isn't just about the headline fees charged for transacting a piece of work, but the time in research, administration and servicing that follows. All of these things have a cost and the true cost to the IFA will help them in determining the overall cost that has to be passed on to the client
Below, some insights as to the impact SIPP provider product and actions may have on an IFA:
1. Headline Fee
Headline fees should be considered as they are one of the only clearly outlined and tangible measures of SIPP charges. A less expensive fee might point to the IFA providing added value but only if all the following are also considered.
2. Bank Account
Focus has often been made on any trail retained by a SIPP provider on the default bank account, but, should the emphasis not be more on what rate of interest is actually paid? Poor interest rates might require additional accounts to be established which may involve time and thus cost for the IFA.
3. Due Diligence
Does the SIPP provider offer a due diligence pack providing all the data the IFA would require to allow them to make an informed choice? Many advisers and paraplanners often spend hours in research and that needs to be paid for somehow.
4. Reasons Why
Some SIPP providers are able to provide factsheets or dissertations listing the key features of their product, saving valuable paraplanner time.
5. Simple Forms
Are applications simple to understand and complete correctly first time? Errors and omissions cause delays and lost time.
6. Slick Administration
Getting things done without chasers being required and getting things done right first time means no remedial work and time required by IFA's administration staff.
7. Case study examples
Often a simple, well written example will help an IFA put across a technical issue related to SIPPs. Having these readily available will save adviser time.
8. Technical Resources
Does the provider have dedicated, well trained points of contact to talk through technically challenging issues and processes and thus educate the IFA for this and future cases?
9. Online capability
An IFA rarely works regular office hours and access to their SIPP clients' details directly means a job can be finished out of hours.
10. Use of own professionals
Often an IFA will have their own network of professional connections and the forced use of a panel solicitor, for example when purchasing property, may hinder relationships with other firms and stifle reciprocal business referral.
11. Satisfaction levels
How satisfied with the service overall, including that of the SIPP provider, will the client be and thus how likely will they remain a client or perhaps refer a friend? Finding new clients is often a more expensive exercise than keeping existing ones!
Only when a good understanding of the time and effort required to deal with the research, selection, report writing, establishment and ongoing servicing of a SIPP is held and a value apportioned to it can the IFA select a provider with certainty of cost and thus retained profit.
Martin Tilley is director of technical services at Denton Pensions
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Retirement Planner Forum 2019