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Sipp operators: FCA goes too far on investment pathways

The FCA will put some Sipp operators at a commercial disadvantage with the requirement they design investment pathways for non-advised customers, experts warn.

The regulator confirmed it will bring forward a range of measures to protect consumers in non-advised drawdown in a policy statement this morning.

Sipp operators have criticised the rule which will see them have to offer investment pathways to individuals who go into drawdown on a non-advised basis.

There have also been suggestions that the regulator has not addressed the concerns they have raised.

The FCA’s policy statement acknowledges the proposals attracted some negative feedback from Sipp operators.

It says: “Some Sipp operators said that they should be outside the scope of our rules. Most of these operators argued that designing or choosing pathway solutions – and offering these – was completely at odds with the Sipp business model.

“They suggested that the role of a Sipp operator is to provide a pension wrapper and specialist administration services; a Sipp operator is not equipped or able to have any involvement in investment decisions.”  

But the FCA rebuts such arguments where it says: “Our evidence shows that the harm we are addressing through the investment pathways exists in the Sipp market, so we consider that Sipp operators should offer their non-advised consumers investment pathways.”

The policy statement has further highlighted the difference of opinion between the FCA and Sipp operators.

Barnett Waddingham self-invested pensions technical specialist James Jones-Tinsley says: “As well as disappointment that our concerns and arguments do not appear to have been addressed, the FCA have confirmed there will be ‘no safe harbour’ for providers deemed by individuals to have given them a personal recommendation by offering a specific investment pathway solution.

“In addition, Sipp operators are left guessing as to whether they will need to establish an investment governance committee to oversee their investment pathways – as the FCA have said they will not deliver their decision on this aspect until the last quarter of the year.

“In the meantime, the clock has already started ticking on getting the pathways in place – regardless of whether any of the Sipp operators’ clients will want them or not.”

Curtis Banks group communications director Greg Kingston adds: “The regulator is determined to shape the unwieldy Sipp market into the same regulatory regime as other personal pensions, and this is another step in that direction.

“Smaller providers without the benefit of scale or capital to invest will likely see the introduction of default investment pathways as a step too far, leading to them to consider their position in the market.”

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There is one comment at the moment, we would love to hear your opinion too.

  1. I always find it odd that on one hand the FCA complain about the lack of advice availability to clients, whilst at the same time, they keep making it more and more expensive for providers and advisers to have any form of client offering.

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