Bill Gates famously said: “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”
Wise words from a very wise and successful man, especially when applied to the self-invested personal pension (SIPP) and small self-administered scheme (SSAS) market.
In recent years there has been a blinkered drive towards platform-based SIPP products at a very low cost that need vast volumes to be profitable for the platform provider. What the majority of these products have in common is a lack of personal service. They simply ignore the fact that technology can be married with personal service to produce a better outcome for advisers and their clients.
The SIPP market is going through uncertain times; there is the issue of toxic assets, complaints, increased capital adequacy limits, poor service and increased consolidation.
These issues have seen providers rush towards platform-based solutions in the belief that cost and functionality were the sole drivers for the SIPP marketplace.
But the platform sector is very crowded, many are yet to make a profit and some may fail in the face of competition with deeper pockets. But service is being sacrificed at the altar of technology and there is a vacuum being left in the once heavily populated ‘bespoke’ SIPP marketplace.
For advisers, there was a move to platform SIPPs but there is an increasing number of these adviser firms looking to move their books of business back to the bespoke providers.
There are a number of reasons for this, but a key one is that platform SIPPs are not necessarily a ‘SIPP for life’, rather they are often only appropriate for part of the journey towards retirement, whereas a bespoke SIPP offers all investment options and can flex with a client’s changing circumstances.
Fees can also be an issue, flat fees are suited to genuine SIPP cases as these tend to be high value and are therefore cheaper than a basis point (BPS) approach that has been adopted by many platforms.
Service is critical for advisers and their clients and when there are issues, they like to deal with real people, not an online robot ‘web chat’ or trawling through a static set of Q&As.
In my view, technology and service are not mutually exclusive. The technology that everyone has worked hard to develop over the past decades can work in tandem with a personal, customer/adviser-led approach.
Graham Muir is director at Talbot and Muir