Worth The Agro?
Many of you will have seen the reports in the trade press of the recent administration of the Sustainable Wealth Group, which includes Sustainable Agroenergy Ltd specialising in tree plantations in South East Asia. Reports are of 1,500 - 2,000 SIPPs with total sums involved of around £40m.
This is sadly part of a general trend of non-standard SIPP investments getting into trouble, and increased focus on the SIPP industry. It's even more depressing that many of the problematic investments we see are badged up as ethical or green and it is likely there will be more to come on this sort of thing, and I'll be chipping in where I can.
Where to start? Well the obvious first question would be whether it was sensible for up to 2,000 SIPPs to be investing in trees in places such as Cambodia. For some it may be a large part of their pension pot, they may not be sophisticated investors who understood what they were doing and they may not have received advice. Clearly questions need to be asked about the sales and marketing process and how it is regulated.
Another angle is what the SIPP providers were up to in allowing this sort of thing on such a large scale? None of our own SIPPs have invested in this company, and there were only about a dozen of these investments in the SIPP book we acquired from Montpelier last year. At the time of the acquisition, some elements of the press were portraying Montpelier as some sort of "rogue" SIPP operator, but we pointed out at the time that there were no investments in the Montpelier SIPP book which you wouldn't find in other SIPP books.
Taking Sustainable Agroenergy as an example, it looks like there were rather more of them in other SIPP books! Other news recently has shown that sadly some SIPP books have bigger holes in them, and I don't think we have heard the last of that either.
I'm not singling out this particular investment as being different to lots of others; it may be the case that it was a good idea which failed through no fault of its own. The point I'm making is that a lot of investments like this have taken place on the back of uncertain marketing, little or no advice and limited due diligence by SIPP providers.
I could write lots more on this stuff, and probably will do in future blogs. The worrying thing at the moment is that, after at least a year of intrusive FSA interest in SIPPs and investments going wrong, this sort of investment is still taking place and the whole subject of non-standard investments in SIPPs is still too much of a grey area. One thing I'm sure of is that there will be increased regulatory interest and it will be one of the drivers towards consolidation in our industry - this process is already starting.
For advisers, knowing what due diligence your SIPP provider carries out on investments is more important than ever, and we know we are ahead of the curve with our own procedures in this respect.
So more to follow on this I think..................