FSA cap-ad plans could see wealth manager Sipp sell-off

Wealth management firms could be forced to sell their Sipp operations if the FSA follows through with plans to increase capital adequacy requirements for providers.

Dentons director of technical services Martin Tilley says: “Capital adequacy applies to the entire business which is running a Sipp. There are some wealth management firms that offer a Sipp which is not a core part of their proposition. If the FSA decides to ramp up capital adequacy, I think some firms will have to consider whether continuation of their Sipp business is viable.”

In June, Money Marketing revealed FSA plans to increase the capital adequacy requirement for Sipp providers in a bid to boost investor protection.
Sipp providers are required to hold reserves equal to six weeks’ annual audited expenditure but FSA pensions and investment policy manager Milton Cartwright told delegates at a conference last November that this could increase to two years’ AAE.

AWD Chase de Vere says it will retain its Sipp. Head of communications Patrick Connolly says: “Capital adequacy may cause problems for some firms but we do not believe it will have a negative impact on our business.”

The FSA is expected to publish a consultation paper on increasing capital requirements for Sipp firms in the first quarter.