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.”