The uncertainty of future new business streams created by the government’s recent activity, mentioned above, makes certain elements of a Sipp operators business difficult to value and
the experience of some acquisitors of deals that were more complex than expected has led some firms to cease looking for new targets.
One thing of which we can be certain though is that consolidation has not stopped. Once the outcome of the Green Paper consultation is known and as we get closer to the capital adequacy deadline more deals will be done.
Impact
So what implications will this have for advisers and inevitably their clients?
Firstly it is not just consolidation that has been impacted by regulatory changes. Some operators, faced with the requirements and costs associated with meeting the increased controls of asset acceptance, have already scaled back their propositions to restrict the range of assets they are now prepared to accept. Others have introduced tighter controls which impact costs for offering the same services that have previously been available. It’s these changes in proposition that advisers will need to assess, especially if the consolidation bandwagon starts to roll again.
An adviser will most usually have placed their client with a particular Sipp provider based on specific criteria. The list of factors leading to Sipp selection is long but key considerations are usually product features, service and charges. It is probable that at consolidation one or more of these factors will change, albeit not immediately, as the new owner seeks to integrate the acquired book with their own.
There will inevitably be upheaval if changes of staff or premises, or migration of clients from one operating system to another is to occur. It might be here where cracks start to appear particularly in service delivery.
So should advisers be proactive in pre-empting possible consolidation? Might such a move be jumping from the frying pan to the fire? It is difficult to identify potential sellers in the market and no one will openly admit they are “on the market”. Care should also be taken with acquiring firms as integration post-completion could result in resources being stretched and perhaps otherwise taking their eye off their current client bank.
Survey analysis
Some candidates can perhaps be identified through surveys, such as the one within this special report; those who are committed to obtaining new business and to the retention of current clients. Many will be happy to report the meeting of capital adequacy requirements ahead of the deadline and those that can be identified as financially strong are more likely to weather changes brought about by amendments to legislation and/or regulation.
