I started writing a blog about "decency limits" on SIPP charges a while ago and it included the line "I'm not sure what effect RDR will have on this". Well, with RDR just round the corner, maybe it's time to dust it down and apply the finishing touches.
Many (hopefully most?) SIPP providers will (or should) impose "decency limits" on the levels of adviser charging they will be comfortable with. It was one of the questions asked by the FSA in their survey of SIPP providers in 2011, and the subject of a recent article saying that providers could get sued if they didn't impose these limits. We think it is a key area where the product provider needs to be doing something as part of their "good housekeeping" role.
We have always operated decency limits, though it's very unlikely that you would have been aware of them, as our introducers are all operating within the levels which anyone would regard as reasonable. Very occasionally we need to have a discussion with an introducer about remuneration levels, but these are few and far between and generally an extra charge is for a very good reason.
You could argue that RDR makes decency limits redundant, after all if the adviser agrees charges with the client and this has been validated by the client, what is there for the provider to question? Also, one of the odd things about RDR is that providers won't be able to tell you what their decency limits are. I suppose the argument is that if we say we will allow up to X%, then all our introducers would take X% in practice.
I think it comes back to the good housekeeping role I mentioned earlier, which the FSA are keen for us to follow. There comes a point where total charges (fund plus provider plus adviser) start to make you wonder whether a product makes sense. This is a point picked up recently by the Labour Party, with much noise about clamping down on high pension charges, though they seemed to be in a different ball park altogether, with charges of over 5% p.a. being quoted in some reports. At that level you do have to doubt whether the product makes sense, but if there really are products like that out there, then we and our introducers are very cost-effective.
I can't see RDR having much effect on this aspect of what we do here, or all the other aspects of our SIPP operations for that matter, but we will be updating you on our implementation of RDR as we get nearer the end of the year.
We feel the regulator's position on this and their expectation of SIPP providers is clear. Nevertheless there will always be the "provider down the road" who will be more accommodating and we would welcome your views on our stance on this and your experience of the wider market.