SIPP industry veteran John Moret, principle of MoretoSIPPs, has warned that SIPP providers will need to pay careful attention to the Consumer Duty and should take the opportunity to review their propositions.
Moret said his warning came after the SIPP industry had “paid a heavy price” for largely ignoring the implications of the Treating Customers Fairly regime 15 years ago.
He listed a number of areas that providers should consider in preparing their first Consumer Duty report by July 2023.
These include:
• Whether it is appropriate to continue with the term “self invested”?
• The legitimacy of disclaimers
• The treatment and disclosure of retained interest and other commissions
• The provision of customer support for “orphan” clients
• The clarity of information provided on income drawdown and other options at retirement
• The identification and support for vulnerable clients
Moret said: “Whilst it is fair to say that in the past SIPP providers were not helped by the inertia and misleading comments from the FSA/FCA, and more recently some contentious FOS determinations on areas such as due diligence of investments and advisers, the same is not true of Consumer Duty.
“The FCA have been very clear on their cultural and operational expectations of all financial services companies and it is vitally important that SIPP providers take the opportunity to review their propositions and operations and ensure that they have evidence to support all aspects of their Consumer Duty report. This may well include the results of independent surveys of both staff and customers.”
A key issue for the industry is determining whether it is responsible to continue to use the description “self invested personal pension” when the majority of clients using this product are not using non-standard investments and using an adviser to manage their investments.
Moret also drew attention to SIPP providers’ revenue against a backdrop of rising interest rates.
He added: “In the past SIPP and platform providers have derived significant revenues through the retention of a margin on SIPP bank accounts. Those margins became less important when interest rates were very low, but as rates rise, providers will need to think carefully about whether it is appropriate to continue with this approach and if so how they meet the fair value and consumer understanding outcomes that are part of the new Consumer Duty culture.”
