The much anticipated FCA reforms take effect from tomorrow after years of discussions.
A number of experts have raised concerns that there are still grey areas that have yet to be fully ironed out. Some believe there will trouble ahead in the coming months for firms that have not managed to entirely get to grips with compliance.
Greg Kingston, head of communications, product & insight at Suffolk Life, told Financial Planning Today: “It seems that too many providers still do not understand the nature of the assets they hold.
“Marking them as standard or non-standard appears to be a challenge for some providers, and that’s far from what’s required to meet the regulator’s expectations.”
He said: “The greatest challenge has been to help advisers understand that what the regulator is trying to achieve is so important, and what the risks are, to them and their clients, of selecting a sub-standard SIPP provider.
“If a SIPP operator has found the new rules challenging then they probably shouldn’t still be in the market. Advisers certainly shouldn’t be putting their clients’ retirement funds with them.”
He does believe, however that some elements of the reforms still need to be clearer in his view.
He said: “There’s definitely some frustration from the higher quality SIPP operators. The regulator’s learned a lot since the original framework of the capital rules were drawn up, and I wouldn’t be surprised if there were some amendments made following the next inevitable regulatory review.
“For example, I don’t think that anyone feels that a proportionate approach to these rules sees many fixed term cash deposits being listed as a non-standard asset. The risk isn’t comparable with some of the more exotic investments available.”
Paul Darvill, director at Talbot and Muir, agreed there would be difficulties initially and some aspects required greater clarity.
He said: “There are always teething problems with changes in regulation, especially where providers are left to interpret the changes themselves. Clear rules that left no room for interpretation by individual firms would have been preferable.
“The 30 day rule should be reviewed in light of the issues we have seen with the temporary suspension of some property funds. This development does not appear to be consistent with what the regulations are trying to achieve, and therefore there should be some additional guidance provided by the regulator to cover previously unforeseen circumstances such as this.”
Mike Morrison, head of platform at AJ Bell was on the AMPS committee at the time the consultation for the new rules started.
He said: “Believe me, this was not an easy one. The FCA’s basis for calculation was questioned right from the start, with a number of alternative suggestions put forward.”
Mr Morrison is another who believes the rules may not be entirely crystal clear still.
He told sister website Sipps Professsional: “We are left with a degree of subjectivity and provider interpretation. At A-Day providers were left debating some aspects of the definition of ‘taxable property’.
“The softening of the effect of the capital requirements on smaller companies is, in one sense, good news as we did not want to be in a position where the capital adequacy requirements were driving disorderly exits from the Sipp market.”
Read more from Mike Morrison here.