One of the most consistent criticisms of financial services companies has been over the practice of tempting new clients with advantageous terms and products that are never offered to existing customers.
So I suspect many IFAs have been surprised by our current campaign to encourage them to review their SIPP clients' service needs with a view to switching funds from our flagship Private Client SIPP, to our newer, online product, James Hay eSIPP. I can almost hear some of you thinking, "If it saves the client hundreds of pounds a year in charges, it's quicker and easier for us, and they'll even pay us to do it – where's the catch?"
Well, the only catch is that there isn't one, apart from the fact that times have changed and so has the SIPP market. It has moved from being a wealthy niche market to targeting clients at the upper end of the mainstream. These new clients are often actively building-up their SIPP funds and will be doing so for some time before they are ready to begin drawing their benefits.
The average case size of these 'second generation' SIPPs is smaller and, though they can be expected to grow more over the years, their size will be restricted by the lifetime limit. As you would expect, there is a greater emphasis on growth-oriented investment, and on active investment strategies based around retail collectives, rather than the gilts and pooled funds traditionally favoured for income provision.
What this adds up to is a market that is at once service-intensive and extremely cost-sensitive compared with the 'luxury end' which dominated the first decade or so of SIPPs. We recognised early on that the only way to maintain our extremely high SIPP service standards for this larger client base is through online management. By doing so, we can also safeguard service standards for those SIPP holders whose specialised investment requirements can only be dealt with manually by our highly experienced client teams.
We have invested heavily in the development of eSIPP – which was originally launched in 2003 as a 'budget SIPP'. As a result, we believe it is now a suitable vehicle for the overwhelming majority of our SIPP clients and their advisers.
It could certainly be cheaper for clients who hold our Private Client SIPP or one of its third party-branded versions. There is no annual administration charge, we don't charge transaction fees for buying, selling or (unlimited) switching of assets held in the Investment Centre. There are over 1,300 discounted funds to choose from, including many specialised and institutional funds not normally available to private investors.
Best of all for you as an IFA is that each instruction placed onscreen in your office is carried out automatically, immediately, every time. Commission payments are automated too all of which means less administration, less paperwork, and more time focusing on managing portfolios and profitable fee based tasks. Although James Hay doesn't make a charge for your client switching to eSIPP we will pay you 10 basis points of the value of the assets that are transferred into the Investment Centre, and the sale of the eSIPP entitles you to initial and trail commission.
Private Client SIPP is still our flagship product, in the same way as Rolls Royce is for BMW. Some people want what only a hand-built Rolls-Royce Phantom can deliver, and are ready to pay for it. However, most discerning individuals would be more than happy to plump for a beautifully mass-produced Beemer. Quicker, hipper, easier on the pocket – and equally at home in Bond Street or Sainsbury's car park. Some comparisons are not odious.
For more information visit www.esipp.co.uk/switch
Also plan to scrap NI on contributions
Eight-week high against US dollar
Lower cost option for advisers
Following 2016 thematic review
December 2018 or early 2019