Why do you think there is a need for a governed Auto Invest option?
Across our proposition we seek to bring institutional quality and standards of governance to the retail market. The FCA have been very clear in their guidance on “suitability” of both the SIPP wrapper provider and the underlying investment.
There is a plethora of choice in terms of investment options in the SIPP market – not all of which may be suitable – hence recent publicity around additional FSCS levies applied to advisers. We believe offering a governed Auto Invest option, which focuses on customer outcomes and draws on best practice from the workplace market, may aid adviser suitability recommendations in the absence of a pre-determined investment strategy for the client.
How does Auto Invest work?
By selecting the auto-invest option, the client enters a target date fund, the target date being the date at which the client expects to retire. The option is designed to make investing easier and more efficient – helping ensure only appropriate amounts of cash are held on deposit.
It also ensures a singular process from the adviser/client perspective of establishing the SIPP and confirming their investment instruction which very often requires duplication of effort between establishing the SIPP wrapper in the first instance, then subsequently submitting a separate investment instruction/application.
It is important to stress that Auto Invest is an “option” which requires a positive selection and may be used for some or all of a client’s investments – e.g. a SIPP client holding commercial property may decide to invest the rental income generated in the appropriate target date fund. In addition, there is no “lock in” and members can switch to a different target date fund if their time horizons change or amend their investment strategy at any time.
Having considered, the underlying due diligence available on both the fund strategy by BirthStar and the fund management by AllianceBernstein, we believe the strong governance which supports the Auto Invest option will help support de-risk the investment selection on behalf of the client.
What does governed mean – are Yorsipp giving advice?
Yorsipp is not offering advice – we are however highlighting the additional due diligence around the governed range.
As the trustee of the scheme, we believe we have a fiduciary responsibility for all investments made available to customers. Historically, SIPP providers have tended to adopt an investment agnostic approach, however if you are a trustee there is no such thing as agnostic in our view.
The governed approach means that we research and obtain due diligence on the manager, on the robustness of the strategy, and the performance of the governed a range for the different cohorts of the membership. We have drawn on the guidance being issued to trustees of occupational schemes to define what good looks like and will hold the governed range to a similar standard.
We have worked closely with BirthStar, the advisory firm, to put this proposition together but have additionally obtained independent third party due diligence from Asset Risk Consultants with regards to the manager and from Moody's Analytics with regards to the strategy.
Who is the fund manager behind the Auto Invest option?
The BirthStar Target Date Funds are managed in London by AllianceBernstein ('AB') an award-winning specialist in DC pensions responsible for $500bn AUM globally. The funds are accessed via Axa Wealth Trustee Investment plan.
How does this offering compare to platform based SIPPs?
We believe it compares well on both investment flexibility and cost grounds. For example, if selected within Yorsipp’s “Singular SIPP” offering, the annual cost is £175 (plus vat) for the wrapper. Taking a typical SIPP portfolio of £200-£250k, many of the platforms have a platform charge of 35-40bps i.e. £700-£1,000 per annum.
When it comes to widening the investment choice – e.g. to commercial property for business owners, many platforms do not support those types of investments and/or any associated borrowing required.
In summary therefore, the offering works well across all investment spectrums, offering cost effective consolidation with the option to widen investment choice as and when required within the same wrapper – a “right time / right place” approach.
If the asset allocation is done within the fund, what is the advisers role?
Increasingly clients are relying on advisers for the big decisions around financial planning, tax issues and how to navigate the complexity of “freedom and choice” in pensions. There's nothing new about managed portfolios, the difference here is they are managed over time so there is less risk of portfolio 'drift'.