‘For any advisers trying to understand why we have taken this action, we respectfully suggest they examine the extent in which the rules, regulations, responsibilities, expectations and capital requirements placed on their own firms have continuously been increased over the last decade.
‘Then consider that Sipps are actually a very complex product which involves even greater levels of responsibility and workload.
‘Intelligent Money is simply… taking action to ensure it remains as a strong provider for advisers and clients alike. Advisers may not like what we have had to do, but make no mistake – we have had to do it.’
Intelligent Money CEO Julian Penniston-Hill
Since RDR, IFAs have found ways to leverage value out of SIPP platforms and clearly Intelligent Money have had enough. IFAs will consider this one off charge opportunistic, IM argue it is necessary for “advisers and clients”. I cannot comment on the detail.
But there is an important issue here. It is the job of intermediaries to get best value for clients but that does not mean value at all costs. If a supplier’s costs rise and they cannot be passed on, then financial instability ensues and member outcomes are put at risk.
Good intermediaries understand their suppliers’ models
We used to call it “financial strength”, it’s critical to understand the sustainability of a supplier before committing your clients to them. This particularly goes for money management.
Right now, many intermediaries are considering their suppliers, not just for the value they offering for client’s money but for the sustainability of that VFM. This goes for workplace pensions too.
Some supplier covenants are stronger than others. At the top of the workplace pinnacle is NEST, whose finances are underwritten by the DWP through a loan that still has a little headroom to it. It is clear from the diagram below , that Nest consider its peak financial vulnerability in two years time.
As the loan declines over the following 12 years, Nest’s resources for investment in their clients increases. While Nest is under an obligation to publish its finances, other workplace pensions aren’t. The Pensions Regulator’s job is to monitor profitability and if break even points are too far away, suggest an alternative structure – usually involving new ownership.
Many employers make instinctive decisions about workplace pensions. Choosing Nest as a workplace pension (as over 1.2m employers have) avoids this critical question of due diligence, “will our supplier last as long as we do?”.
So what should advisers do about Intelligent Money?
The cost of moving money away from a SIPP platform is high, the disruption to the client relationship is high too.
The account management team at IM needs to speak to to its intermediaries which I understand include True Potential and Wealthtime.
It needs a proper financial explanation of why the one off fee is necessary and what it will buy as well as what it costs.
If the explanation isn’t forthcoming , then advisers should consider a new platform for their clients, but if both the adviser and the supplier find the numbers stack up and offer a sustainable future, they should stay where they are.
I suspect that Intelligent Money has a future, I didn’t when it gave a platform to Darren Reynolds, Active Wealth and their nefarious associates.
But I’m not a client or an adviser.
