View more on these topics

AJ Bell interview: Sipps thrive through 2008 crisis cocktail

AJ Bell marketing director Billy MacKay says the year’s cocktail of turbulent markets, bank bailouts and falling interest rates have allowed Sipps to come into their own.

The increased scrutiny of banks’ security has driven people to consider a wider range of financial institutions to use within their Sipp, according to MacKay, while plummeting interest rates have urged others to consider cautious investments other than cash.

But he says volatile markets have had the biggest impact, egging on the more adventurous Sipp investor to start trading more actively, resulting in record trading levels for the firm.

He says: “We are seeing huge activity in terms of trades where people are trying to benefit from big falls in the market. In October, there were a number of days where the markets fell substantially, and on those days we saw record trading levels.

“It shows that the Sipp structure works in scenarios where clients want to spread their cash as well as for clients who see the fall in the market as an opportunity. Largely Sipps have the product structure which allows them to operate across all market conditions from cautious to aggressive and very few products can actually do that.”

According to MacKay, the Sipp market will come out of the FSA’s recent thematic review into pension switching relatively unscathed.

The regulator reviewed 500 pension-switching sales at 30 sample firms and found unsuitable advice was given in 16 per cent of cases and that a quarter of firms were misselling more than a third of the time.

MacKay says that while there may be a period of uncertainty around Sipps and lessons will have to be learnt by both advisers and providers, there remains a strong case for consolidating different pension funds in a Sipp.

He says the FSA should detail how many cases of misselling involved transferring into a Sipp rather than a personal pension, as he believes the Sipp industry has been unduly lumped with the blame. He says the key focus has to be on suitability not on whether Sipps are good or bad.

He says: “People will obviously have to learn lessons. There will be a period of uncertainty where people will still look to suggest that the issues are entirely with Sipps and I do not believe that is the case. The challenge is for advisers to make sure their suitability process is robust. There are billions of pounds worth of cash sitting in old products such as closed with-profits funds, which may not have added to their fund range for 15 years. There is still a strong argument for consolidating and a Sipp is still a good choice for many people.”

Mackay says he does not agree with some predictions that there will be a flurry of Sipp provider consolidations in 2009.

He says: “My gut feeling is that at the moment you will not see any consolidation because the market has been so volatile. I think it will be a prudent year where people will be very careful about how they spend their capital. I would not foresee many acquisitions, it will probably be a year for talk and speculation rather than action in this area.”


The FCA’s five fixes for retirement information

The Financial Conduct Authority (FCA) has started to change the way that people will be told about their pension options. In a recent market study paper, they lay out their final proposals on the information that should be delivered to people approaching retirement and how it should look and feel. During 2015, there will be […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm