FSA visits confirm concerns over small SIPP firms: Defaqto

The Financial Services Authority’s (FSA) inspection of eight SIPP providers shows it is concerned over levels of risk among small providers, a Defaqto expert says.

The FSA confirmed yesterday it is continuing its review of the SIPP market with inspections of eight providers, in order to "learn how the market has changed over the last few years".

The inspections did not come as a surprise to industry figures. John Moret, director of MoreToSIPPs, said: "I expected the FSA would be following up on their questionnaire, issued earlier this year, at some point."

Andy Leggett, insight analyst at Defaqto, said the FSA's activity in the SIPP market is welcome because the regulator "will be able to go further and see more than IFAs" when it comes to due diligence on providers.

He said there is a definite shift towards providers carrying out more due diligence on investment themselves, rather than leaving this to the IFA or clients.

"The FSA is not going to announce what it is looking for, but it is focussing on small providers as it is more concerned about them," he said. "The FSA sees relatively higher risks among small providers, although that does not mean smaller providers are bad or more risky as a rule.

"There is a critical mass needed to be a SIPP provider; you need a certain number of people and a big enough knowledge base because these investments are potentially very complex."