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Lack of Sipp competence

Innocence is bliss, or so we are told. A Greek friend of mine, who believes that life is more straightforward than it really is reacted to his divorced friends plight by taking direct action with no regard for the reality of the situation. This is similar to many who will invest in Sipps for the first time as soon as midnight strikes on April 5 next year.

The rush into property by pension planholders is being fuelled by non-authorised firms which are pushing the residential property option as fast as they can.

I accept that most advisers will have bought and sold property more than once in their lifetime but that does not make them experts, we are just regular consumers.

Advising on the correct asset allocation was one of the major planks from the Sandler report and one that few professionals would object to in practice.

When clients invested in commercial property a commercial surveyor was involved, which allowed the IFA to focus on the logistics of getting the property into the Sipp. The danger is that we may be tempted to advise on an area where we have little, if any, real expertise. Operating outside your competence is not just daft, it is in direct breach of TCF.

Now, I believe that professionally qualified IFAs already refer clients to other experts but for those who do not recognise their lack of competence, we have an issue.

Many have called for Sipps to be regulated and that should not stop at key features documents; illustrations and promotional rules but include advising on non-standard assets and residential property.

Let’s face it, there are no longer any non-investments other than wasting assets. Do we know about art or antiques or residential property here or abroad?

The FSA has been silent on the promotion of these assets and on the competence needed to promote them. A-Day is fast approaching and we need to avoid the mess that could occur if competence issues are not dealt with urgently.

Some of the advice that I have personally viewed shows a lack of appreciation of how various issues have an impact, but more important, how they affect each other.

The initial pass rates on the exam on simplification were impressive – not unexpected as the enthusiasts were mostly in the first sitting. At the next sitting, the numbers passing dropped, reflecting two things – lack of preparation and over-confidence in the current level of their competence.

This must be enough to prompt action. In my opinion if you have not passed the CF9/CII exam on pension simplification, then avoid A-Day and refer it elsewhere. That may be unpalatable but it will make sense in the long term and will be less of a risk for all concerned.

My Greek friend was leaving a cafe with the newly single pal, who complained of a lack of companionship. My friend spotted a girl at the bus stop at 11pm and asked her to join them as they headed to a Greek night club. Without a blink, she agreed, only for the newly single to get cold feet. I mention this encounter for one reason in that this level of innocence will, undoubtedly, manifest itself in the world of Sipps. We must be on our guard.

Robert Reid is a director of Syndaxi Financial Planning

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