Sipp sector director predicts shift in market ahead of capital adequacy reforms

There will be a shift in the Sipp sector towards firms either restricting their offering to standard assets or offering a full Sipp investment offering including non-standard investments, an industry expert has forecast. Mark Smith, operations director at Mattioli Woods, said in the run up to the capital adequacy rule changes taking effect in September 2016 he expected consolidation in the market.He also believes there are two key problems he perceives that still exist for Sipp providers in meeting the new requirements.Mr Smith expects cash flow and the ability to retain cash in the business to be a major difficulty. The second issue, he said, revolved around firms considering a blanket position on commercial property.Mr Smith told Sipps Professional last week that his firm has been holding talks with troubled Sipp providers and the FCA to look at possible solutions ahead of the revamped capital adequacy rules taking effect next year.{desktop}{/desktop}{mobile}{/mobile}Asked where he sees the sector going as it prepares for the implementation of the capital adequacy reforms, he told Sipps Professional: “We expect to see further consolidation in the market and with a shift which will see firms either restricting their offering to standard assets or offering a full Sipp investment offering including non standard investments although the number of firms in that part of the market will reduce with a smaller number of specialist firms.”As to the main problems he perceives that still exist for Sipp providers in meeting the new requirements, he said: “There are two key issues as I see them. Firstly, firms that have allowed high levels of non standard investments into their Sipps are seeing a significant increase in their capital requirement.“If those firms are exposed to certain non standard assets that are illiquid, their clients are unable to pay their fees which means that, at a time the capital requirement is increased, their cash flow (and ability to retain cash in the business) is being seriously affected.“Secondly, a number of firms are considering a ‘blanket’ position where they will consider that all of the commercial property held within their Sipp arrangements are deemed to be standard assets. However, I believe the FCA is expecting a more considered approach to commercial property and only those properties that could be sold within 30 days should be deemed to be standard for capital adequacy purposes.”

Sipp sector director predicts shift in market ahead of capital adequacy reforms

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