Spreading the risk - more than 1 SIPP Provider

Malthusian

AnotherJoe wrote: »

The thing that confuses me in that article is that it repeatedly mentions SIPPs and people being advised to buy certain funds. But isn't the point of a SIPP that it's Self Invested? None of my SIPP providers give me any advice. If I wanted advice I'd use an IFA and a SIPP just to hold the results of that advice.

Certain SIPP providers have taken a view that if an "IFA" has come to them with a client in tow to whom they have flogged dodgy investments, the SIPP can happily accept the dodgy investments and collect fees for arranging them knowing that the adviser will carry the can. They are nur following ze orders mein Führer.

It is undisputed that SIPP providers have some responsibility to check that the investments they accept are appropriate for SIPPs; specifically they have to check whether the investment is permitted as a pension investment by HMRC. Residential property for example is not permitted. Dodgy unregulated overseas property scams, however, are permitted by HMRC. So no problem there.

The counterview to the SIPP-as-camp-commandant is that SIPP providers are (usually but not always) trustees of a pension scheme, and as trustees they have the standard responsibility in law to act with due care and attention in the member's interests. The question is whether, if one trustee (the member) thinks it is in his own interests to invest in a dodgy property scam and the other trustee (the SIPP provider) thinks he shouldn't, or should have thought that he shouldn't after due diligence, the SIPP provider is liable for going ahead.

There is no clarity on this. The Ombudsman has both ruled that SIPP providers can be held liable for not doing due diligence and that they can't. The ruling that they can be is I believe still undergoing judicial review. The FCA released some typically useless guidance in 2013 which said that SIPP providers should conduct appropriate due diligence (which is a redundant statement) but not what appropriate due diligence consisted of.

So to sum up, traditionally the punter was responsible for deciding what went in his SIPP, and if he had an "adviser" the adviser was held responsible, meaning that the SIPP provider could wash its hands and collect its fees. But the "advisers" in this case have as per usual done a runner and dumped the liability on the FSCS, i.e. everyone else, and the investors are writing letters to the Daily Mail, so this assumption is going to be tested to destruction. Whether the SIPP providers will have to pay out (or go bust) I have absolutely no idea.

AnotherJoe

Thanks Malthusian, very instructive.