Good today, better tomorrow
SIPPs have traditionally been the domain of the wealthy but more and more people are showing interest. But, post the FSA Thematic Review, who are SIPPs right for and in what circumstances?
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It’s worth stepping back to think about what a SIPP actually is and what it aims to deliver for the customer. Many still think of it as a product when in reality it is a range of services that a customer can buy from the service providers within the SIPP wrapper.
What does today’s SIPP customer look like?
A pen portrait of today’s SIPP customer may look something like this. They are in their late forties or fifties, they earn good incomes and they may be directors, senior managers, entrepreneurs or business owners. Financially, they are very astute – they do use financial advisers but may also do their own research using the internet and personal financial magazines.
Today’s SIPP customer has a propensity to purchase high quality, high value and time efficient services. They are responsive to ‘products’ that offer these attributes and when it comes to savings and retirement planning, SIPPs clearly fit the bill, whether via a wrap or not. The long held view that SIPPs have traditionally been the domain of the wealthy is probably – just – a fair assessment of today’s SIPP customer but will this be true of tomorrow’s SIPP customer?
What is tomorrow’s SIPP customer faced with?
Firstly, more choice. The market has witnessed a rush of established and new providers rushing to deliver SIPP-type products, especially through advisers. There have been some problems with well-documented company failures and the FSA’s recent review of smaller SIPP providers was not complimentary, but largely customers can count on wide investment powers and a good choice of quality providers.
Secondly, more access points. SIPPs have traditionally been distributed through financial advisers and this will continue. Although a developing market, customers will be able to access SIPPs more and more through the workplace as part of the benefits package. This could be as the main employer sponsored arrangement, as a top-hat arrangement or for maturing share options. It may be presented as part of an employer’s wrap proposition. The SIPP services available to employees will be tailored according to the needs of different groups – a one-size-fits-all approach is unlikely to be appropriate. Direct SIPPs will also increase in popularity for those self-directed customers who eschew the services of financial advisers.
Thirdly, more information to assimilate. SIPPs are more complicated than personal pensions, purely because they can do more. As a result, advisers have to spend more time, especially now the products are fully regulated, with each client.
This last point is the key one for advisers of customers of the future. With the inexorable and thoroughly overdue cessation of the commission war, it’s certainly the case that SIPPs may be just too time-consuming to be economic to sell to smaller investors; even if they do like the look of the investment freedom. But at the same time, stakeholder pensions are a pretty lacklustre alternative and often not even all that cheap.
This group face the issue of how they move up the spectrum should they need more investment options or when they need to take benefits. They don’t want to buy a pension again and don’t understand why their existing plan can’t flex to fit their needs.
Personal Biography:
Alistair Hardie
Alistair is Head of SIPP at Standard Life. He is a Chartered Insurer and member of the Chartered Insurance Institute. He has 20 years experience working in the insurance and financial services sectors and has held marketing and business development roles at Alliance Trust, Britannia Life and GRE. He played a leading role in the development of Standard Life’s award winning SIPP and is responsible for maintaining its market leading position.
Alistair is married and has three sons. He enjoys quality time with the family and when time allows fly fishing and golf.
Recognising that a new approach and way of discussing pensions is needed to engage the next generation of SIPP customers, this February we launched the active money personal pension (AMPP). The launch is supported by consumer advertising and a dedicated consumer website www.getarealitycheck.co.uk that includes tips and tools to help get this generation thinking about their pension provision.
Designed specifically for the wealthy customer of the future, AMPP is part of the active money lifeplan product suite that comprises the active money SIPP and (later in the year) will include the active money specialist SIPP. AMPP has ease of use and flexibility at its heart and so will evolve to meet a client’s changing needs with minimum cost to serve for advisers. Supported by our exceptional customer service and online functionality, it will help an adviser bring the pension ‘closer’ to a client and will also support advisers in building long term, successful relationships with the next generation.
In summary, the SIPP market has generally served today’s SIPP customers well. The challenge for new and existing providers will be whether they can identify what the SIPP customer of tomorrow values and deliver the services to meet those values. What might the pen portrait of tomorrow’s SIPP customer look like? The SIPP provider(s) that get this right will emerge as winners in what is shaping up to be a very competitive market.