How do I write a suitability report covering the purchase of a commercial property via a SIPP or SSAS?

Nigel Ogram

IMPORTANT – This user tip relates to an older version of Genovo. Although much of the content and many of the concepts still apply to the current version of Genovo, the screenshots and some instructions may no longer be accurate.

As you probably know from the steady stream of new features and updates, Genovo is constantly evolving and it has been well over three years since it was tweaked to better facilitate advising on a commercial property purchase via a pension. So, in light of this evolution, we thought it was worth dusting off and updating an old ‘How to’ user tip blog from the User Tip Blogs archive.

Advice scenarios

Clearly, one of the many benefits of a SIPP or SSAS is the ability for the scheme to purchase a commercial property. Usually, this is the property used by the business of the SIPP’s / SSAS’s owners, however it could be an unrelated 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 user tip blog, 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.

Report type

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.

Client type

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.

Report Builder

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.

Introduction section

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

Scenario 1

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 Plan 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).

Scenario 2

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 Plan 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 into 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.

Important Information section

Although this section is self-explanatory, it’s worth pointing out that you might wish to add your own Advice Options to steps such as:

Supporting Information – possibly the SIPP / SSAS provider’s guide to how commercial properties are dealt with
Next steps – informing the client of any action required to proceed with the recommendation

And finally….

In addition to all of the optional functionality in the wizard sections, Genovo also provides additional material to support a commercial property purchase, namely:

Risk Warnings
Appendix – Product Information for both SIPP and SSAS
Appendix – Technical Notes – a dedicated snippet when a commercial property purchase is being recommended.

Nigel’s Knowledge

Although we’ve spent a lot of time and effort making sure Genovo can handle just about any advice scenario, I’d remind you that Genovo is massively customisable. If you have alternative wording that you’d prefer to use in your reports, you can use the Report Content Manager to customise the entire boilerplate content of your reports. You’ll find more information on how to do this in the Report Content Manager sub-section of the Customisation section of the Genovo Knowledge Base. In particular, there’s a really useful five-minute video that covers just about anything you need to know about the Report Content Manager.

Additionally, you can use the Advice Option and Reason Library to create your own versions of any of the selectable options in the steps. You’ll find more information on how to do this in the Advice Options & Reasons Library sub-section of the Customisation section of the Genovo Knowledge Base. Just as with Report Content Manager above, there’s a really useful video that covers just about anything you need to know about the Report Content Manager.