In his first guest blog for Investment Sense, Matthew Rankine of Liberty SIPP, looks at the controversial subject of SIPP bank accounts and commissions paid to SIPP (Self-Invested Personal Pension) providers.
Never before have SIPP cash commissions been more controversial, and hotly debated, than they are today.
I was reading an article on IFA Online the other day on the commissions many SIPP providers take from the mandated current accounts of their clients.
The perpetrators of this sleight of hand repeatedly argue — in this curiously one-sided piece — that as long as they disclose the commission they take to their clients then all is fine and dandy.
They claim time and again that the FCA is happy with SIPP providers’ practice of taking money for nothing as long as they do so transparently.
(Thing is, transparent disclosure in theory and transparent disclosure in practice are entirely different things).
Another argument given in favor of SIPP cash commission in the piece is that because it has always been thus, that justifies the practice.
Worryingly, taking money for nothing from clients — and basing your entire business on this dubious income channel — is even referred to as a ‘generally’ legitimate business model.
Somewhere else in the IFA Online article it is argued that the commissions taken by providers are insignificant.
How on earth could these commissions be seen as insignificant when many SIPP providers’ entire business models are based on them? Am I missing something here?
The bigger picture
And how can a focus on SIPP cash commissions be considered not looking at ‘the bigger picture’ if those very same commissions determine a provider’s financial strength?
For me it all begs one simple question: What planet are these SIPP providers on?
It does feel like many SIPP providers believe that if they say that they’re doing nothing wrong enough times then they are doing nothing wrong.
SIPP cash commissions and capad
At Liberty SIPP, we believe the Financial Conduct Authority (FCA) should factor the dependency of SIPP providers on current account commissions into the new capital adequacy regime.
This will separate the wheat from the chaff and expose those SIPP providers that on the surface are financially strong but in reality are massively leveraged.
It’s certainly ironic that the larger SIPP providers who smugly point out smaller SIPPs have the most to fear about capital adequacy are the ones with foundations built on sand.
In conclusion, we’re urging the industry to adopt a ‘clean price structure’ that is sustainable rather than, as in many cases, sustained at the expense of the customer.
It would be great to get your thoughts.
Matthew Rankine is Technical Sales and Marketing Manager at Liberty SIPP and can be contacted on 07854 765 782 or by email at firstname.lastname@example.org