This article provides a step-by-step guide as to how you can quickly and easily write a suitability report confirming your recommendations for your client to use a SIPP or SSAS to purchase a commercial property.
We can only think of two scenarios where you’ll use Genovo to recommend a commercial property purchase via a SIPP or SSAS:
1) An existing SIPP / SSAS using some or all of its fund value to purchase a property, or
2) An existing non SIPP / SSAS being switched into a new SIPP or SSAS and then using some of the transferred fund to purchase a property.
For the purposes of this article, we’re assuming that a brand-new plan without any switched-in funds simply won’t have sufficient fund value to purchase a commercial property, although we appreciate that with sufficient single contributions from a number of SSAS members and possibly with additional borrowing, it could be possible.
Report creation method
In both cases, you’ll need to select the report creation method of from scratch as there is currently no Genovo report template or pre-configured advice scenario to use. However, once you’ve created your report, you can save it as a template to your report template library – have a look at the Genovo Knowledge Base articles on templates or even watch the short overview video.
We take the view that the purchase of a commercial property is a significant change of direction of investment strategy (as opposed to a simple switch of underlying funds or portfolios), and therefore we only make the Recommended Actions required to support the purchase of a commercial property via a pension fund available in the Suitability Report.
To keep it simple, this blog will assume a private client, but depending on the scenario, it could be a corporate client for a SSAS recommendation to a business or even a trust client if addressing the trustees of an existing SSAS.
You’ll need to add the required wizard sections into Report Builder, which will depend on the scenario:
1) If the existing pension scheme doesn’t allow your client to invest directly in commercial property, you will need to switch to a pension that does. Therefore, you’ll need to include the following sections:
i. Review of Your Existing Pension Plans
ii. New Pension Recommendation
iii. Recommended Investment Strategy.
2) If the existing pension scheme remains suitable for the client and allows them to purchase commercial property directly, then you’ll need to add the following sections:
i. Review of Your Existing Pension Plans
ii. Recommended Investment Strategy.
The first element of Genovo to specifically support commercial property purchase is the inclusion of a dedicated Advice Option in the Client Objectives step of the Introduction section:
Once selected, this objective can then be edited and further ‘know your client’ information can be added, to provide the extra ‘colour and detail’ that compliance departments and the regulator love to see in suitability reports.
Review of Your Existing Pension Plans section
If the existing pension scheme doesn’t allow your client to invest in commercial property, the plan will clearly need to be partially or fully switched into a plan that does. In this case, after you’ve entered the client’s existing plan on the Plan Summary step and then completed the Benefits and Features and Charges steps, you’ll arrive at the Recommend Action step where you can select the Recommended Action of either ‘switch’ or ‘partially switch’ as appropriate for the scenario.
One of the standard Genovo Advice Reasons to support either the ‘switch’ or ‘partially switch’ Recommended Actions deals specifically with the objective to purchase a commercial property. Having selected this, you can edit it if required by clicking the pencil icon, or of course, you can really easily add your own advice reason by clicking the add advice reason button).
If the existing plan does offer the feature of investing in commercial property (i.e. it’s a SIPP or SSAS), then simply enter it in the Plan Summary step and after completing the Benefits and Features and Charges steps and reaching the Recommend Action step, the Recommended Action to choose is ‘purchase a commercial property with’
Once you’ve selected this Recommended Action and saved it, you’ll then be taken to a list of dedicated Advice Reasons to support the Recommended Action (or of course, you can really easily add your own).
New Pension Recommendation section
If you’re working with scenario 2 (switching an existing plan that doesn’t facilitate a commercial property purchase into a plan that does), then you’ll clearly need a new plan recommendation and this is the section where you’ll detail the new plan, and the rationale for the recommendation.
After you’ve added the recommended plan to the Plan Summary step, you’ll then move on to the Why Product step. It’s here that there’s another dedicated Advice Reason to support the purchase of a commercial property via a pension plan.
This time, you’ll definitely need to edit the Advice Reason using the pencil icon, as it includes details of the commercial property being purchased.
There are a couple more dedicated Advice Reasons in this section to support property purchase. Firstly in the Why Provider / Plan step….
…and also in the Key Disadvantages and Tax Implications step.
Recommended Investment Strategy section
Regardless of whether you’re using scenario 1 or 2, the next piece of the jigsaw for wizard sections with specific content to support commercial property purchase is the Recommended Investment Strategy section. Having added the investment strategy, you should then add the underlying investments for the strategy. Clearly, at least one of the investments will be the commercial property and most likely, there will be a cash account too, to facilitate the plan charges and possibly the property management fees. Additionally, it’s quite likely that any rental income from the property tenants will be received into a cash account, at least initially.
You should note that while the table above shows columns for all the possible charges, only the completed fields are included in the table included in the downloaded report.
Once the investment strategy has been completed, there’s a final element to this section, where again, you’ll find Advice Reasons dedicated to supporting a commercial property purchase by the client’s pension fund.
Download the report
Once you have completed the Recommended Investment Strategy section, click the download report icon in the Report Builderand the report will download to Word. On opening the report you'll notice the report follows the typical Genovo format and structure.