I expect that the next year or so will represent a tough challenge for the independent SIPP provider and that we will see consolidation and casualties along the way.
I am surprised that not more has been made of the pressures that face the independent SIPP provider despite the euphoria that greets each market survey showing the increasing number of SIPP products being sold.
The dynamics of the market place are changing and only those firms with robust controls and an awareness of the full scope and expectation of regulation will survive.
Regardless of regulation the first driver for change will be the pure economics of the market size that independent SIPP providers are competing in. The FSA Product Sales Data Trends Report in September 08 shows that 37,000 SIPPs were sold in the period from the 1 October 2007 - the first date that such figures was required by the FSA - to the 31 March 2008.
Alarmingly the report goes on to state that of this number some 25,000 were sold by just the top five 'providers'! With some 100 providers reporting, this means that the other 95 are scrapping for just 12,000 plans and on the basis that the distribution is not even then, the report poses some interesting questions about the future of many independents.
Consolidation has been much slower than I had expected but I believe this will now accelerate. For some independent SIPP providers the next 12 months will be a real challenge with the combination of fierce competition - in a market where FSA pressure will challenge the suitability of SIPP against personal pension - and regulation finally beginning to bite!
A SIPP has been shoe-horned into the regulation of a personal pension and for the insurers this is something they can readily adapt to with systems and controls that have been in place for years. The same cannot be said of the independent SIPP provider where there remains an element of the 'cottage industry'.
I would be fearful that limited market opportunities caused by increasing insurer pressure and FSA challenges as to the suitability of a SIPP and regulation will challenge many firms and there may well be some less than favourable publicity for some along the way.
We may now see over the next few years the 'real' SIPP find a home with the independent SIPP provider while the volume market that could be labelled personal pension goes the way of the insurer - but the independent that fails to understand the responsibilities of regulation is in for a hard time!
Despite improved risk appetite
FOS award limit increase
Relates to 136 million transaction reports
Ceremony will take place 13 November