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Hornbuckle attacks rival Sipp providers over cap-ad ‘self interest’

Hornbuckle 700
Left to right: Hornbuckle chief executive Phil Smith and senior executive David White

Hornbuckle Mitchell senior executive David White has attacked rival Sipp providers who have criticised the FSA’s proposed method for increasing capital adequacy requirements.

In November, the regulator published a series of changes to Sipp capital requirements designed to provide greater protection for investors.

One of the FSA’s proposals would see a firm’s capital requirement linked to assets under administration rather than expenditure.

In its response, Sipp trade body the Association of Member-directed Pension Schemes warned the proposal may fail to provide adequate protection to consumers.

Hornbuckle senior executive White accuses providers of being “self-serving” in their opposition to the reforms.

White says: “Some of the push back from the Sipp market has been very disappointing and looks self-serving, rather than focusing on what the regulator is trying to achieve.

“Given the regulator’s concern is around liquidity, then linking capital requirements to assets under administration is the right approach.”

Amps chairman Andrew Roberts says: “The choice of using AUA as the key metric rather than expenditure or number of Sipps has practical issues and the clear danger that the capital requirement could fall when consumers need to rely on it the most.

“Our alternative of using the number of Sipps as the key metric would result in a higher requirement for some operators than the FSA’s proposal, demonstrating that the thought process Amps used had the consumer at heart.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. I should imagine that they have managed to reach the cap ad limit by witholding all interest paid on RBS accounts after instructing RBS not to pay any interest to client accounts!!

  2. Great timing after they have had an injection of cash.

    I fail to see how capital adequacy based on assets under management really helps investor protection – after a SIPP isn’t the same a personal pension where you invest in funds of the pension provider.

    Also a SIPP provider with a small number of high value SIPPs could find themselves having to hold capital in excess of running costs whilst a SIPP provider with a high number of lower value SIPPs could find themselves having to hold capital lower than running costs – surely it is running costs that is the main requirement to ensure a smooth transfer of clients should something go wrong.

  3. Surely the headline should read “Hornbuckle takes cheap shot at sensible proposals backed by the majority of the industry ‘in self-interest’…”

    No such thing as bad publicity, after all (unless your name is David Aymes).

  4. And I suppose there’s absolutely no self-interest at all in supporting a model which requires small providers to hold vastly more capital than large providers as a proportion of assets under management? It would be dreadfully self-serving for a large firm to support a measure which would protect their market share, drive small companies out of business, and put up huge barriers to entry for new competitors.

  5. Maybe HM should concentrate on their shambolic administration systems before taking pot shots at their peers!

  6. HB are right.

    The Cap ad proposals as they stand are a very sensible approach by the FCA.

    This is not about how risky an investment is but ensuring that if a SIPP provider goes into administration that there is enough money available to keep going until assets can be transferred to another SIPP provider.

    A property for example can take months to transfer, yet current cap ad only requires a provider to hold 6 weeks expenditure.

    UCIS could be even worse, if a SIPP provider with dozens of overseas resorts, french hotel rooms, gren oil plantations, argentinian farmland goes bust these assets could take years to move if indeed another priovider could be found who is daft enough to take them.

    Many small SIPP providers have built their businesses on accepting low value single asset SIPPs investing in highly illiquid assets such as UCIS and its about time they are compelled to hold
    significantly more capital.

    The FCA’s thematic review of SIPP providers was a damning indictment of our industry and highlighted the risks to SIPP members. The cap ad is a sensible reaction to these risks

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