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FSA could look at ban on DFM ‘pay to play’ Sipp panel fees

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

Earlier this month, the regulator published a platform policy statement that said it is “desirable” to ban cash rebates from product providers to investors and product provider payments to platforms. Sipp providers were considered out of scope.

The FSA is also looking at ways in which to improve pension scheme disclosure as part of its CP11/03 consultation paper.

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.

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.

“Sipp providers will argue it keeps 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. 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: “There is less need for regulatory rules and conditions for those 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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