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&#39Wraps will eliminate providers from chain&#39

Wraps could see product providers eliminated from the IFA distribution chain altogether, according to financial services software company Aquera.

Managing director Ed Holt believes the introduction of fully functioning wrap platforms will see providers made redundant.

He thinks big brands entering the market and bancassurers in the future will choose to access IFAs, other distributors and fund managers direct through wrap platforms.

Holt believes this might be one of the reasons that some providers have not embraced the wrap concept with as much enthusiasm as expected by technology companies.

Aquera, which has invested £7m in its own wrap platform, has worked with three providers to produce a study on the future of wraps. It examines the potential costs and benefits of different wrap options for providers.

The results show three different models for the market – the first would offer aggregations and valuations only, the second a portal service and the third a new entrant specialist wrap company.

Holt believes a holistic industry platform could be built within two years but would cost about £18m in incremental shared costs to establish.

He says he sees Sipps as the natural stepping stone to a fuller wrap proposition and will be an area to scan for potential new entrants to the wrap race over the next couple of years.

Holt says: “When compared to the cost of individual development of a full wrap platform, a shared model makes huge sense. The most radical of the three options considered was a new wrap company as it offers the most complete offering and lowest cost service to the market while changing the nature of the financial services value chain.”

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