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Accept pain for long-term gain

Just one year ago, we thought a wrap was what the Scottish Widow wears but the more we heard, the more we began to wonder if this was indeed the case.

We embarked on comprehensive research of the subject, which revealed that wrap is, beyond doubt, the future for firms such as ours.

From the outset, we rejected fund platforms. After all, if you are going to change your business model in favour of complete flexibility to acquire anything clients could need, within whatever tax wrappers they need, and with all the transparency soon to be demanded of us, then we concluded that half-measures were pointless. That left fully specified wraps.

Life office wraps (that is, most of them, if you drill down a millimetre or so) dazzle, gleam and offer toys galore but we were deterred by high costs and hallmark thick coatings of fudge.

But the final word on the issue was that to declare independence from life office domination and then to bow our knee to them via a different route, appeared rank folly.

That left the few independent wraps and the only proposition that made complete sense to us was that of Nucleus. Just one low annual management charge. No wrapper charges. No switching charges. All as transparent as can be. And not an ounce of fudge in sight. We went for it, pledging to convert from 95 per cent commission to 75 per cent fees within one year.

We wrote off 2008 to achieve this because we considered that, without radical action, we may face extinction along with many life office dinosaurs. Our attitude was to accept the short-term pain in the hope of long-term gain. And what a cracking year we chose to do it. Commission cold turkey, fudge withdrawal symptoms and plummeting markets devaluing our hard-won new fees linked to assets under advice made life distinctly challenging, to say the least. Unfortunately it was not just poor timing, fudge cravings and a short-term hit on profits that bit hard last year. Learning the wrap ropes required major adjustments to every area of our operations and Nucleus is very much a work in progress. But one that is steadily growing its capabilities while offering a perfectly workable platform.

How many life offices can profess to being finished articles even after over 100 years? More important, how many will still have a future?

Our “lost year” is nearly behind us and we are happy to report that the medicine has been taken, independence has been reclaimed and our business has emerged immeasurably stronger, with all objectives achieved.

We would earnestly recommend Nucleus to any IFAs considering wrap. When you have embraced it, despite ongoing growing pains, you will wonder how you ever ran your business any other way. Nucleus management answers to you, not life office boards. The difference could hardly be more stark.

This recommendation comes to you in the spirit of TIF (Treating IFAs Fairly) which will surely be the next regulatory creed (no charge, fellers, just bung us a spare Rembrandt and a share in your 2008 merit bonuses). Now I am off out with my favourite widow. She says the drinks are on me, because both her parents are skint and living on taxpayer handouts. Maybe our conversion to wrap was not so badly timed after all?

Andrew Martin is managing director of Key Benefits


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