When it comes to Sipps, we have read much in the industry press of court cases and due diligence for what seems many years.
There is, as a result, much talk over the due diligence advisers should be taking before recommending a provider’s products to their clients. Advisers have to cut through all the marketing and external noise they receive from providers to consider the needs of their clients.
Equally, rather than a scatter gun marketing approach, providers should be keen to know what it is that advisers use to compare them to another and how, if at all, they look to exploit or debunk typical practice.
As part of Defaqto’s annual service survey, we have tried to identify the key filters and influencing factors used by advisers to support their decisions. We spoke to 320 advisers of different sizes from different parts of the country.
Financial strength came top with 91 per cent of advisers saying it is included as part of their due diligence. This is not a huge surprise, as advisers will be looking to ensure their clients’ money is safe. However, financial strength ratings can only be relied upon to a point – it is important that advisers understand the methodology used in much the same way as outsourcing to technology providers or comparing ratings. It is also worth being aware that a product or brand is only as ‘safe’ as the parent’s commitment to the market as there have been cases of strong financially backed parent companies selling products to competitors, so it is important to understand if the financial strength measure used takes account of this.
Providers should know advisers clearly do not forget easily. Eighty six per cent said they base their due diligence on service either they or their client has received in the past while 81 per cent on their experience of the provider. It is therefore clear that providers should be considering their service and treatment of their existing clients rather than just focussing on how to attract new ones. For all the marketing that providers can use to encourage new investment in their products, nothing beats walking the walk, not just talking the talk.
Equally, the fourth most popular selection is the provider’s reputation (69 per cent) indicating that advisers are not only influenced by their own experience but that of others. Providers would do well to heed this and ensure that advisers are not given course to pass on their poor experiences. Having said this, for an adviser their peer’s opinion of the provider scored low at 19 per cent. This could reflect the fact that advisers are basing their view on what they see in the media or in other industry forums.
FCA actions (19 per cent) and complaint statistics (13 per cent) score low. Advisers clearly feel their own experience of a provider outweighs any generally reported actions or complaints made, the argument with an FCA action could be that as a result of redemptive action, the provider may be better placed than any other to ensure it does not happen again.
So, providers should be aware that advisers have long memories. Features and pricing of products are all important and will be considered by advisers. However, it is clear from the adviser responses we received that putting too much emphasis on this at the expense of their ongoing service would be unwise and providers must keep a clear focus on this or risk not being able to tempt them back.