When you have 11 options but they are all vanilla, do you have a choice?
Businesses buy other businesses as big fish eat little fish; it’s the way of the world. But the recent slew of consolidations and take overs should give the industry pause to consider; is all this amalgamation positive for the end user? Or is it presenting an increasingly corporate and opaque world of bland options and call-centre ‘customer service’?
It is true that our hard working regulator has changed the SIPP landscape into one that is very challenging for all providers, but has caught out some of the smaller ones in particular. The idea of linking the speed with which any given asset can be liquidated to the amount of cash a SIPP Operator must have sloshing about doing nothing, might not seem the best or even the most logical approach to everyone, but we are where we are.
The problems facing the SIPP industry and, crucially, SIPP clients, because of this new landscape, are too numerous to explore here but for now, let’s just consider what choices a SIPP client had a handful of years ago, what is available to them now and what the market might look like in just a few years.
Some of us still carry a torch for the SIPP that was created out of the 1989 budget. At that time, anyone that could join a SSAS, had unrivalled access to flexibility and control over their pension investments. The SIPP opened this freedom up to those who could not join a SSAS via a burgeoning collection of fledgling SIPP Operators, most of whom regarded that flexibility and control as the cornerstone of their business. SSAS and SIPP Members alike could invest directly in commercial property, shares, collective funds and loads more things that were way beyond the reach of anyone in a Personal Pension. Personal Pensions were all about ticking a couple of boxes to identify your appetite for risk and then living with the choice of funds the IFA/provider put the money into. So in terms of being limited to what’s in the shop as opposed to all the investment options legislation will permit at least, Personal Pensions are not dissimilar to most current day platforms and SIPPs, with the investment limitations that are part and parcel of their product offering. Borrowing restrictions aside, SSASs have remained largely untampered with, whereas SIPPs have largely, and sadly, become a shadow of their former selves and in many cases, hard to distinguish from the Personal Pensions they used to eclipse in more ways than just the cost of having one. From infancy straight to senility without the opportunity to actually mature.
So where are we going and who benefits from the path we are on?
It was announced recently that Rowanmoor Pensions are set to be taken over by Hornbuckle Mitchell’s parent company, Embark. Both Rowanmoor and Hornbuckle are SSAS and SIPP providers with significant portfolios. This is just one of a number of changes, shifts and acquisitions that have been building ever since the FCA (finally) announced their inimitable Capital Adequacy requirements.
Will the smaller, more bespoke providers ultimately be squeezed out of the market? Well, no not all of them. Will SIPP clients be left with a Hobson’s choice of mega-providers? The answer for people who seek agile, sagacious solutions which will respond to their evolving circumstances is surely not a bigger, bolder conglomeration of unpersonal. Not everyone is solely fixated on set up fees and running costs. For some, value for money alongside good old flexibility, control and real choice trumps those rather narrow criteria. Will, or can the big boys service such clients? Unlikely.
The disappointingly flavourless cherry on the beige cake is that when you compare the current market and find little to distinguish one SIPP Operator from the other, your choice, should you feel able to make one, might then be taken over by the next behemoth of the pensions arena anyway, and the choice you think you have made, hands your affairs to a different company. This must be how Remain voters feel now we’ve ended up with Boris talking to the world on their behalf; powerless, bereft of real choice and not convinced your best interests are being represented.
So if we aren’t careful, the only real winners from this developing scenario is the growing number of super-providers who partly gain their size by taking over other providers or by being complicit in them being squeezed out of the market.
Are there actually any alternatives? Why, yes. It is not germane to demonise businesses for wanting to be successful. And it does not follow that larger companies are all cynical, faceless megalomaniacs, but it stands that when you are catering en masse, the offering becomes more bland so as not to offend anyone, least of all the FCA with their brief to protect the consumer (which isn’t always possible to align with what is best for them). For those wanting a richer palette of pensions solutions, for those who know the value of something built to fit the individual, seek the artisan providers. Those of us who truly craft our products know how to add value to individuals. If you’d always had vanilla, you’d be perfectly happy with it. Until you tried pistachio.