Wrap will enable IFAs to switch their clients from retail fund prices to wholesale fund prices, according to industry expert Paul Bradshaw.
Speaking at the PIMS conference last week, Bradshaw said wrap would let asset managers reduce their costs, opening up the possibility of shifting from retail prices at 100 basis points to wholesale prices at 15-30 bps.
Bradshaw also believes wrap will cut life offices out of the advice process as he says there is very little value left in life company new business.
He said wrap disintermediates life companies, giving the opportunity to disinter-mediate 50-75 basis points of the cost base.
Bradshaw predicts that wrap will be able to bring in profits of 13-21 bps for IFAs, calculating that running a fund supermarket generates 25 bps in income but the cost of del-ivering it ranges from 4-12 bps. But he says once a platform achieves critical mass, it will be able to negotiate chea-per prices from the mutual fund industry.
Transact head of sales and marketing Malcolm Murray said he now knows for certain that a genuine wrap service will reduce admin costs and overheads, giving IFAs more time to deal with clients.
Bradshaw said that at the moment there are 12 or 13 service platforms in development but he foresees that half of these will fail and there will inevitably be consolidation in the sector.
Once the market has settled down, Bradshaw believes there will be two or three aggregators remaining which will enable individual IFAs to differentiate their own wrap propositions.
Murray pointed to the Australian model, where five or six propositions now survive, with 100 firms using these systems or a combination of them to build their own offering.
Murray said: “Things will evolve here and once the market has settled down, I believe there will be six basic models adapted by the users for their individual needs.”
Bradshaw said: “There inev-itably has to be consolidation in the wrap sector.”
