A J Bell
As the Sipp market continues to grow, the strategic direction of others can be of great interest. Some look to muscle in with new Sipp products, some seem keen to dress up old products to look like Sipps in the hope that advisers don’t notice. Some are standing their ground while looking to highlight reasons why you should avoid these products, with a fear of losing existing assets often a key driver.
As the Sipp market develops and the strategic activity listed above continues, the distinction between the various types of product inevitably blurs, so a quick refresher may be in order. The first product type could be described as the conventional Sipp, dealing in all areas from share portfolios and collectives to commercial property.
The second, typically a lower-cost alternative, offers access to a wide range of investments but does not venture into the more labour-intensive assets. This helps to keep the costs down. The third is the low-cost execution-only model, which appeals to those who rarely take advice and want a DIY approach.
As you would expect, the Sipp market continues to evolve. Recent developments include Sipps that, in essence, work on a factory-gate-priced model, with the ability to increase cost as you increase the investment sophistication and perhaps introduce adviser remuneration. The more sophisticated products offer a genuine whole of market investment choice and online access for valuations and administration into the bargain. Importantly, the client will only pay for increased flexibility that they use.
A J Bell recently asked advisers why they recommended this new type of product. The single biggest driver was low charges followed closely by online functionality, online control, investment choice, quality admin and ease of use. It is little surprise that the market-leading Sipps score heavily in all these areas.
Whenever charges on Sipps are discussed, cross-subsidy from other areas is often raised. The interest rate on cash accounts and fund rebates are provided as examples. Any margin on money held in cash or from fund rebates can cross-subsidise the cost to the client on the underlying wrapper but any focus on this is missing the point.
The client and adviser are in control of how the money is invested. The key question is whether the Sipp wrapper in question will allow you to invest in other cash accounts or other collectives or platforms as selected by the adviser and client. The products that provide this choice with low-cost online delivery will continue to gain support from advisers for the right reasons.