Mailings
Monday 20 July 2009
SIPP providers - FSA expects IFA due diligence
At the recent Henry Stewart SIPP Conference, Milton Cartwright of the FSA reinforced the point that the FSA expects IFA firms to undertake due diligence on any product provider that they use. Since the regulation of SIPPs came into force in April 2007 this includes SIPP providers, a point that a number of IFAs may have overlooked.
Documentation needs to be made available by the provider to give comprehensive answers to the following points:
1. The quality of systems and controls, administration procedures, T&C regimes and management information
2. The financial strength of the organisation
3. How SIPP accounts are administered and the segregation of duties
4. How SIPP providers interact with advisory firms and firms that introduce clients
5. How much actual experience do the principals have in administering SIPPs
6. How SIPP operators manage potential conflicts of interest where they or associated firms also give advice
7. The extent to which firms are embedding TCF and how they are applying TCF to SIPP administration
8. The quality of client communications, including illustrations, disclosure and transparency of charges
9. How SIPP operators combat fraud and money laundering
10. The firm’s structure with regard to Trust arrangements
The importance of carrying out robust due diligence has been highlighted twice this year and serious concerns about small SIPP providers are documented. Firstly there was The Freedom SIPP. Following a visit by the FSA it was agreed that The Freedom SIPP needed to implement certain additional administrative procedures and that no new members would be accepted until these changes had been made. More recently we have read about the alleged £2.5 million fraud involving a Merseyside-based SIPP provider, which may have fallen foul of point 9 in the above due diligence list.
As a result of these concerns, the FSA has formed a special team to investigate the operations of the smaller SIPP providers as the FSA believes that they may not have the resources to maintain their operations to the required standard. The big question is can IFAs continue to entrust their clients’ SIPPs to these providers that run SIPPs in a manner reminiscent of an old fashioned "cottage industry"?
The IPS Partnership sits comfortably in the top 10 of UK SIPP providers. Because of our size, we are"relationship managed" by the FSA and are big and robust enough to operate to their demanding standards, whilst maintaining the highest levels of customer care.
We are delighted to offer any IFA firm that has introduced business to us, or is thinking of doing so, a comprehensive due diligence pack covering all the information gathering expectations of the FSA. If you would like us to send this to you, please do not hesitate to contact a member of our business development team.
The IPS Partnership