How to avoid poor SIPP providers

Advisers should not have to put up with poor-performing SIPP providers.

The reality is that while some SIPPs are like Mercedes, others are more like Austin Allegros. Surprisingly, though, the Allegros must still be selling, or whoever produces them would be going out of business.

With this in mind, how can advisers ensure they pick a Mercedes rather than an Allegro? How can they check what they are selling against the opposition, and what should they really be looking for? What is certain is that if they make the right choice it will benefit not just the client but them as well.

The modern SIPP: what to expect

One option is an independent rating service such as Defaqto, which is a valuable and detailed guide to the capabilities of different products. However, for anyone looking for a shorter summary, this article aims to help identify what a modern SIPP should really be providing.

Perhaps surprisingly, some of the best developed products in the SIPP marketplace are at the low-cost end, where competition is fierce. Oddly, it seems that at the top end of the market the more bespoke 'full SIPPs' tend to rely on old-fashioned personal service. There is nothing wrong with this in itself, but a modern SIPP should offer much, much more.

Online capability, for example, is an essential requirement and covers a range of features:

• All documentation for the SIPP should be available online, including application forms, key features and guidance notes.
• It should be possible to purchase quoted investments online and pay by direct transfer of funds: no form-filling or sending cheques in the post.
• Online valuations of SIPP assets should be available for clients and their advisers, showing all the assets and their current market values. Many SIPP providers offer online valuations, but on closer inspection they do not show all the assets or, worse still, show historic values.

In line with online functionality

SIPP providers should be constantly developing their systems in line with the latest online functionality and full online capability is a must-have requirement. If low-cost SIPPs have these features, what excuse is there for expensive products to not have them?

A fair scale of fees is also important. Again, this tends to be a criticism of full SIPPs, as competitive pressures at the lower end have driven down fees. Some would argue that service, not fees, is more important at the bespoke end, but there is still no excuse for products with basic fees at well over £500 per year.

SIPPs with a complex array of extra charges may not be good value, either. Additional charges for contributions, transfers, accepting protected rights and the like tend to be behind the times. In short, fees should be fair, clear and, most importantly, clients should not be paying for services that they are not using.

Arrangements for cash deposits should provide good value. The main SIPP bank account should pay a decent rate of interest. At present, most accounts pay close to zero, but base rate will rise in the future and differences between providers will become more apparent.

More importantly, the SIPP should allow deposit accounts with better rates to be opened and clients should be encouraged to move surplus cash into those accounts. The difference between interest rates on a normal SIPP bank account and a higher rate account can be more than 3% per year. For a £100,000 SIPP, holding perhaps £10,000 on average in cash during a year, that is over £300 extra interest, which goes a long way towards paying a SIPP provider's fees.

Importance of flexibility

Flexibility is also key and is not just about allowing weird and wonderful investments, it covers a range of things:

• Allowing investments other than those available from the standard dealing platform. Investments such as structured products or ethical investments can be mainstream choices and many SIPPs will want to buy them at some stage.
• The ability to extend the SIPP and make it scaleable so that the client pays for simpler administration in earlier years and, when desired, can purchase more complex investments such as commercial property, for example. This avoids clients having to (1) Pay for services not used in the earlier years and (2) Needing to transfer from a 'mini' to a 'maxi' SIPP if they want to do this in the future.
• If clients are investing in property, they should be free to choose their own advisers (for example, solicitors and valuers), rather than be forced to use someone from the provider's panel, with potentially higher fees and the suspicion of kickbacks to the provider.
• A full range of benefit choices should be available. A topical subject at the moment is Scheme Pensions, which are effectively an alternative form of income drawdown. For certain clients, benefits may be some way off in the future, but circumstances can change and the ability to have full choice without changing products is valuable.

Service is key

Finally, service is vital. Clients and their advisers should be able to contact the SIPP provider and get straight through to a human being who knows what they are talking about. Work should be processed according to published service standards. The following should not be happening:

• Calling your SIPP provider and having to press endless buttons and being held in a queue
• Speaking to a 'customer service adviser' who has little detailed knowledge
• Speaking to different people every time you ring up, with no continuity
• Work taking longer to process than you would expect, especially if you are not being told what is happening
• Niggling errors with service

If you are experiencing any of the above, it may be time to start looking for a new SIPP provider.

There is no need to continue using SIPP providers that have fallen behind the market. There are better ones out there, and the benefits of using them will be significant. If things are really bad with your current provider, moving books of clients is much less painful than you might imagine, and your clients will thank you for the long-term benefit. Our firm has successfully taken on books of business and minimised the burden for clients and advisers alike.

Due diligence on a new SIPP provider is also vital and a wealth of advice is now available on how to go about this. By choosing the best products and carrying out due diligence on the provider, you will be doing better business for yourself and your clients.