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Centre stage

SippCentre is at the hub of AJ Bell’s business and expanding its offering for the platform market is its next big challenge. Rachael Adams reports

Initially, AJ Bell planned to offer Sass administration and consultancy services but the growth of the Sipp market meant a broadening of focus.
“Sipps grew very quickly, so back in 2000 they launched the UK’s first online Sipp, Sippdeal,” says Mackay.

This was very quickly followed by the firm’s launch into the IFA market.

Mackay says: “In 2002, Bell and Littlefair realised that the IFA market was where a lot of the industry growth was likely to happen, so they decided to launch Sippcentre. It quickly became the growth engine of the business. Anyone around then probably would not have appreciated how much Sippcentre would grow over the years.”

While AJ Bell was developing its online and adviser-based Sipp propositions, it also branched out into third-party services. Mackay says: “In 2003, it became clear that there was a market for providing third-party administration, so AJ Bell did a stockbroking deal with Barclays. In 2004, it undertook a deal with Skandia, which is how I came to join the business.”

The company also started to hone its public image, following the opportunity that the A-Day reforms gave Bell to showcase his technical knowledge. Mackay says: “Andy Bell was fairly key in terms of getting to the bottom of a fairly complex reform. He invested a lot of time in getting close to HMRC and picking through the legislation to educate advisers. This was important because it gave us a platform to demonstrate to IFAs that we were very much an ’eye on the detail’ company and we wanted to share that. IFAs were important then and they are every bit as important today.”

One thing that has changed since its 1995 inception, however, is AJ Bell’s size.

Today, the company has over £15bn of assets under administration, more than 400 staff and more than 60,000 clients. It has also been slowly broadening its focus to include the platform market.

AJ Bell added Isas and general investment accounts to Sippcentre, a move that Mackay describes as a “natural evolution”.

He says: “In 2007, AJ Bell bought an institutional stockbroking business, Lawshare, and did the development work required to turn it into a retail stockbroker. This meant it could act as the under-lying dealing engine of online Sipp products.

Mackay says: “We were sitting there in 2011 with our own online Sipp and our own stockbroking business with clients saying it would be great if we could provide a wider range of products. We had the pieces of the jigsaw to become a platform and it made sense.”

He says the updated Sipp-centre has been a success. “We have IFAs who have been using Sippcentre for many years and naturally what they like to do is have a kick of the tyres to make sure we are offering the same range of services and pricing philosophy on our platform. The challenge is that those IFAs will already have platforms in place from other companies.”

Mackay believes AJ Bell can surmount this challenge. “Our philosophy is that if they like what we do in terms of investment flexibility and online services for pensions and we provide the same service for Isas and general investment,we are in with a fighting chance. There are more than a few IFAs out there who like the simplicity of consolidating a client’s assets onto a single platform. It is early days but we are feeling positive.”

The other challenge AJ Bell faces over the next 12 months is adapting to the changes brought by the RDR but Mackay believes the business is well placed. “We are not reliant on rebates. We have grown up in the Sipp market, where it is very transactional charge-based, so the move to a post-RDR world is a reasonably straightforward one.”

AJ Bell’s stockbroking business also means it is well prepared for the RDR.

Mackay says: “People are talking about the issues surrounding rebates and trail commission on platforms. On the one hand, you have the bundled guys who have been used to retail funds bundled with trail and rebates and on the other hand, you have the clean platforms that are used to having supermarket fees and rebates stripped out. We deal with all the potential fund structures already.”

Mackay believes that the introduction of unit credits instead of cash rebates would be confusing for clients but, whatever the outcome of the FSA’s review of cash rebates, Mackay believes the Sipp market will continue to innovate.

“The industry is divided into two. You have companies like ourselves offering online products at competitive costs and niche providers with a wider range of investments who expect a premium. Far and away the majority of growth is the low-cost end, especially if providers want to work with advisers.”

However, that does not mean that traditional Sipps are on their way out, says Mackay.

“There are views in the industry that platforms will be the end of Sipps. The old-style market with higher costs and a more sophisticated range of investments is becoming a niche area but the term I would use is convergence.

“The new style of Sipp such as Sippcentre competes with traditional platforms because they operate in the pension space and also in the traditional platform heart-land of Isas and investment. They are putting pressure on platforms. But it is a far more competitive arena – you only have to look at the Platforum report to get a feel of that.

“There are five times more firms competing for the hearts, minds and, importantly, the assets of IFAs. There is no god-given right to be successful. We think we have all the ingredients to succeed in the platform arena but it will be for the IFAs to decide.”

From humble beginnings…

1995: AJ Bell formed by Andy Bell and Nicholas Littlefair, offering Ssas administration and consultancy services
2000: AJ Bell launches Sippdeal, the UK’s first online Sipp
2002: Launch of Sippcentre, an online Sipp service targeted at the IFA market
2003: AJ Bell starts to offer third-party administration services, carrying out a stockbroking deal with Barclays to look after its Sipp business
2004: Does deal to administer Skandia’s Sipp proposition
2005: AJ Bell employs 100th member of staff
2006: Hits the 25,000 client mark
2009: Goes through £10bn assets under administration marker
2011: Expansion of Sippcentre into platform market

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