Liberty SIPP: Crystal balls and hind sight

Liberty SIPP is copping no small amount of flack over its decision to allow its clients to invest in non-standard, unregulated assets, introduced by non-regulated ‘advisers’.  It doesn’t make for pleasant reading and the move to appoint a firm of lawyers to represent the group of investors is hardly surprising.

But as is so often the case with articles such as that published in FT Adviser, the real interest can lie in the story behind the story.  That which reveals itself through what Dave Gorman refers to as ‘the bottom half of the internet’, otherwise known as – the comments section.

It’s not exactly a shock to see a good number of comments under articles such as this, nor is it surprising to note that all comments relate to either due diligence, the unregulated introducers or illiquid, non-standard investments.  If only we all had crystal balls.

As a SIPP Operator with a very clean set of investments under administration, we are not here to stick the boot in on Liberty, nor defend them.  What we find more interesting is the reaction among some to use hind sight to render this a very simple, black and white situation.

Let’s look at due diligence first.  Not that long ago some might have wondered if such a thing referred to the early morning inspection of a lawn.  Now of course everyone talks about DD as though it’s been at the heart of their business practices forever.

It’s easy to look at DD (or the relative absence of it) carried out in the not so dim and distant past and snort in derision, but two things worth remembering are:

1) Due Diligence in the form that seems to currently form part of every sentence, spoken or written, in this industry, is quite different in profile alone now to what it was just a handful of years ago.
2) Robust Due Diligence will never guarantee that clients, their advisers or their provider is immune to failing investments.

To reiterate, this is not a piece in defence of Liberty, it is a comment on how easy it is to be self-righteous when you look at the mistakes of others through your rear-view mirror.  Ok, some decisions now will always point to trouble tomorrow and no crystal balls are required.  But it’s not always so clear cut.

Then there’s unregulated introducers.  Like the vast majority of SIPP providers, we don’t accept clients from unregulated introducers.  But is this industry wide stance due to some blissfully straight forward equation of regulated = good and safe, unregulated = bad and unsafe?

The regulator is right to have moved the SIPP industry to where many of its elements now are and this is one of those elements.  However, it just doesn’t follow that a non-regulated ‘adviser’ – by definition – doesn’t give a monkeys about their client any more than it does that a regulated adviser is the sole route to client centric, safe, honest and trustworthy investment advice.  Nothing is that black and white.

How about the myriad opinions on the investments themselves?  This is another area where those quick to point at failed assets and claim they would have seen that coming a mile away are often a bit quieter when it comes to the issue of regulated, due diligence passing, non-dodgy investments that catastrophically fail, most likely leaving even more investors out of pocket (to say the least).  Are we really saying that Self Invested Pensions need to be pushed into an ever-smaller container of vanilla investments?

The painful transition of SIPPs as they were intended, to a 21st century personal pension is not yet over.  Until it is, some clients will look for the flexibility and control that used to be defining characteristics.  Some advisers will seek providers at least prepared to look at everything put in front of them on a case by case basis.  And, some providers will try, without compromising their clients’ financial security, to not only ever offer those clients the choice of vanilla in a cone, or vanilla in a tub.

There will doubtless be many more stories like this and even more comments that amount to sticking the daggers in.  Many of these comments will be hard to argue with.  But, irrespective of how Liberty might have behaved, the motives of unregulated advisers and the nature of certain investment opportunities, the thing to remember is that   hind sight is a wonderful thing and today’s hot tip, can easily become tomorrow’s sad news story about missing funds and diddled investors (just look at Arch Cru).

We should avoid a future where we let a few rotten apples ruin the whole barrel.  Let’s instead try to regulate a sophisticated sector of the industry rather than render it unsophisticated to make regulation all the easier.


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