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Defaqto: FSA could set its sights on DFM Sipp panel fees

The FSA could look to ban discretionary fund managers from paying to be on a Sipp provider’s panel as part of wider efforts to improve charging transparency ahead of the retail distribution review, says Defaqto.

Earlier this month, the regulator published a platform policy statement in which it said it is “desirable” to ban cash rebates from product providers to investors and product provider payments to platforms. The paper made clear that Sipp operators were outside of scope.

However, the FSA is currently looking at ways to improve pension scheme disclosure as part of its CP11/03 consultation paper.

In a paper, published this week, Defaqto insight analyst and former Suffolk Life marketing and technical manager Andy Leggett says the FSA is likely to turn its attention to “pay to play” DFM panel fees as it seeks to improve the transparency of provider charges.

He says: “DFMs paying to be part of a Sipp provider’s panel falls a bit short of what the FSA wants to see in terms of disclosure, transparency and understanding of how the Sipp provider gets paid and what it is costing the client.

“The Sipp providers will argue it is keeping costs down but at the moment I do not think the way relationships between DFMs and Sipp providers work is presented particularly transparently.

“I expect we will see increased disclosure requirements as a minimum, but we have seen from the platform paper that the FSA is prepared to go further even if that goes against the majority of provider’s response.

“If the stance is really tough, this type of practice may not be allowed at all and we could see a move back to specific administration fees.”

Rowanmoor Pensions head of pensions technical services Robert Graves says: “I think there is less need for regulatory rules and conditions for providers who follow ABI and Amps guidelines on disclosure of fee schedules.

“Where the Sipp is being presented as a packaged product, with one fee that encompasses everything, it is a ‘black box’ situation. That is the area I would expect the FSA to focus on.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. The FSA are really on a mission to totally tip the market on its head but I really don’t think that they have in any way taken into account the huge impact of the law of unintended (and therefore detrimental to customers) consequences of so much of what they are doing. Not a week goes by when someone in an ivory tower totally disconnected from reality seems to cook something new up.

  2. Hyman Wolanski (MD, Sippchoice) 22nd August 2011 at 11:34 am

    Clearly, the responses from SIPP providers will be to oppose this measure if they charge DFM panel fees and to support it if they don’t charge DFM panel fees. Sippchoice does not charge DFM panel fees and we would welcome this measure on the grounds of improved transparency, etc.

  3. Does any of this matter ? The consumer will be required to pay what the consumer will be required to pay – the providers will take everything into account when setting their charges to consumers. The FSA thinks it is making a difference when all it is doing is making life a nightmare for everyone wanting to simply provide good advice and competitive products to the general public. The FSA costs Joe Public a lot more than it will save him in reduced charges – indeed, there won’t be reduced charges because poor Joe will be hit once with higher charges as advisers seek to cover the massive time-related compliance costs and twice in covering the extra regulatory fees and levies.

  4. The problem with our industry is that too many back handers have been going on for too long and hence the FSA wants to stomp it all out.

    You can’t blame them for wanting transparency, but having said that when the client gets it will he fully understand it.

    The advisor is charging this, the fund manager is charging that, the SIPP provider is also charging. It begins to look like everyone wants a slice of him!

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