Since the inception of pension freedoms in 2015, self-invested personal pensions (SIPPs) have witnessed a remarkable surge in popularit, says Ian Partington (pictured), CEO, Third Financial.

These flexible investment vehicles, originally established in the 1990s, have gained substantial traction, with 1.7 million individuals in the UK opting to establish a SIPP by 2023, accumulating £205 billion in assets. What is particularly striking is the potential SIPPs hold for engaging younger individuals in retirement planning. Thanks to their self-directed nature and the opportunities technology provides, a slick SIPP offering can help advisers to tap into the younger, but growing, pool of digital natives.

Digital natives – those born after about 1980 – have grown up in the era of ubiquitous technology. Generally, digital natives consider instant access to information to be the norm and appreciate the convenience of managing finances online. This shift in perspective is leading to an increasing number of young people forgoing financial advisers with their out-of-office hours and seeking their own alternatives to managing money.

Further, the pandemic ushered in a surge of interest in markets and stock picking. While this is encouraging in one sense, it remains crucial for wealth managers and financial advisers to remain well-informed about the dynamic DIY sector. Though SIPPs offer investors the flexibility to craft a tailored savings portfolio, this flexibility also carries the risk of clients venturing into investments that may prove excessively volatile or ill-suited for their financial objectives.

Despite the SIPP sector’s aforementioned growth, the number of providers has gradually dwindled over time. Escalating regulatory pressures, particularly in the aftermath of notable failures, have spurred industry consolidation. Concurrently, a new wave of technology-driven SIPP providers has emerged, addressing the evolving expectations of investors. To retain their competitive edge, advisers must harness technology to remain competitive.

A self-service generation

Large cohorts of young people set to come into wealth in the coming years have already become quite self-sufficient. With the vast amount of information readily available, people can easily Google what they should be investing in, which weakens the demand for traditional financial advice. However, this shift presents a great opportunity for companies to offer robust self-service tools and functionality. Financial advisers should offer SIPPs via investment platforms that allow savers to easily access their accounts, track investments, and make informed decisions from their smartphones or laptops. This convenience not only fosters active engagement but also demystifies the often-complex world of retirement planning.

Technology also allows SIPPs to incorporate goal-oriented investment features. Clients can work with their advisers to define their retirement objectives and risk tolerance, and the system can suggest suitable investment options. This tailored approach empowers savers to align their investments with their individual financial goals, providing a sense of ownership and purpose in their retirement planning.

Towards hybrid advice

I also believe the younger generation will prefer a hybrid approach to financial advice. When people seek out an adviser, it will more often be for specific advice at that moment, not a long-term commitment. Firms will therefore need to handle a larger volume of business because they'll be able to charge less per client unless they show they are consistently adding value to that client's finances over time. The technological advancements will allow more flexibility for people to mix and match their advice sources, manage where they hold their assets, and tailor their financial strategies.

Rarely in living memory has the global economy seemed so volatile. This leads to clients who have more questions than ever and – when they spy an opportunity – are keen to put their money to work. This means an effective SIPP platform needs to facilitate the rapid deployment of client cash into the markets. This quick response to market developments aligns with the expectations of younger, tech-savvy investors. Furthermore, user-friendly interfaces that are easy to navigate and understand are crucial to ensuring younger individuals feel comfortable and confident in managing their retirement savings.

Technology plays a pivotal role in making retirement planning more accessible and engaging, particularly for younger individuals. In parallel, technology plays an important role for advisers looking to tap into a younger generation with technology deeply embedded in their day-to-day.

Via a SIPP on an advanced platform, advisers have the potential to harness the power of technology to provide flexible, convenient, and personalised solutions that cater to the preferences of the digital generation.

By Ian Partington, CEO, Third Financial