THE WORLD of self-invested pensions has been hitting the headlines a lot recently, arguably for all the wrong reasons.

Words such as mis-selling, high court claims and compensation make for brutal reading and paint a bleak picture of a marketplace that would appear to be struggling to keep its head above water.

Without doubt, our industry is facing its toughest challenge yet. Let’s not forget that since its inception back in 1989, the self-invested personal pension (SIPP) has been a much-revered retirement product due to its fundamental principle of investors choosing their own investments.

The latest High Court judgment delivered on Tuesday goes some way to clarifying a SIPP operator’s duty in discharging its overarching regulatory obligation to “conduct its business with due skill, care and diligence” before it executes a specific instruction from a client, but within the context of an investment scam.

However, the judge in this recent case acknowledged that such overarching obligations are “a very wide general principle, and that what it amounts to may be ‘very subjective’, with different people holding different views about what a SIPP operator ought to do”. Therefore, the end of headlines involving investors seeking redress against investment losses seems a long way off.

Against a backdrop of continued consolidation and a keener regulatory focus, this is a market that is undoubtedly changing shape. Everyone must adapt to these changes if they are to survive.

Providers have an important role to play by demonstrating, in a clear and concise manner, that they are adequately capitalised as well as ensuring that the essence of their offering and the defined target market are unambiguous.

Financial advisers also need to keep pace, and be vigilant, about product provider choice. Now is surely the time to review their selection and consider if their previously chosen firm, still fits the bill. A recent piece of research from AKG showed that advisers ranked service delivery as the most important factor when considering provider firms, with 58 per cent of adviser firms agreeing with this.

In what has become a contracting SIPP provider market, where cost efficiencies are often the main driver for acquisitions, advisers should rightly question the potential impact on service delivery to their clients. This is a fundamental consideration for all advisory businesses.

Let’s not overlook what the regulator, the Financial Conduct Authority (FCA), is bringing to bear in the context of provider due diligence. The FCA has long been focused primarily on financial strength, but the landscape is clearly changing.

In light of this week’s High Court judgment, the CEOs of SIPP operators received a letter from FCA the reminding them of their obligations should it call into question their firm’s ability to meet its immediate and future financial commitments.

Scrutiny of a provider’s financial standing remains a fundamental element of any selection process. But I would argue that with a limited number of specialist SIPP operators in the UK with scale, strong balance sheets and recurring profits by any reasonable measure, a finessed approach to due diligence is needed beyond simply the financials.

While weathering this SIPP storm we must not lose sight of the fact that there are still many specialist operators offering investors a compelling proposition. These offerings should be put under the microscope, but let’s ensure that forensic examination, keeps up with the times, and is focused on the right areas.

Using financial strength as a primary differentiator is somewhat conceptual rather than practical - providers need to be able to demonstrate sustainability. Let’s be honest, regulatory capital requirements have never been more onerous, so it stands to reason that the strongest will inevitably survive.

Lee Halpin is technical director at @sipp.