Increased polarisation within the bespoke SIPP market could lead to the emergence of niche esoteric providers, AMPs' chairman has said.
Andrew Roberts said there could be a rise in SIPP providers segregating their offerings into open architecture investments and esoteric investments. Some might choose from a permitted investment list while others will specialise in the esoteric space.
He said these decisions would be shaped by decisions around due diligence requirements, cost to the business and clients and capital adequacy rules yet to be confirmed.
Roberts expects industry wide consolidation and partnerships to emerge as a result of these dynamics.
"You might get SIPP providers saying they're going to specialise in allowing these types of funds [in the] hope to get more of a share of the market. They can then spend more on due diligence and spread the costs across a larger client base.
"It can be a viable position for a small SIPP or someone who will link up with an existing provider. They'll have a white labelled SIPP in their name and do the due diligence but it's powered by [the likes of] Barnett Waddingham, AJ Bell or James Hay or whoever."
He continued: "A lot of people have been predicting consolidation for some time, and as an association we'd like to support the smaller providers in the market and not suggest they're going to have to exit. There is increasing pressure on SIPP providers by the FSA and at some point some people will want to leave the market completely or merge with a larger firm."
John Moret, principal of More 2 SIPPs said: "I would say this is happening already. There are some providers who will only go so far. It depends how you define a bespoke SIPP and where you cross the line from being a more mainstream provider. Probably the dividing line is property and unquoted shares and then you get into the more esoteric type structured products.
"There are companies relying on third parties to accept or decline investments and you've got providers prepared to undertake that assessment themselves or take on more risk. I don't disagree with Andrew, but I'm not sure it's going to be black and white, it's more shades of grey."
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