The huge inflow into wrap accounts is a bonanza for wrap providers, fund managers and advisers. So entranced are we all by this runaway gravy train that we fail to notice that the advantages for the client are soon going to be entirely taken for granted. And most wraps are still PC-based rather than cloud and tablet.
Bank accounts, for example, are already well on their way to becoming bank apps. If you were setting up a bank today, that is what it would be – a bank app.
Likewise, it will not be long before we have wrap apps. Some exist already but they are just primitive precursors of what will be normal in a few years’ time.
One of the things holding this back is not that the typical wrap client is over 60 but that everyone else in the chain thinks that these older people do not want app functionality.
But look at the oldies using Skype to talk to their grandchildren and buying books and CDs from Amazon, groceries from Ocado, photo albums on Flickr – all on their tablets. Do you really think they do not want access to their financial accounts on their handhelds?
So the direction of travel is clear, which raises a question: will wrap eat itself?
The issue is integration. If clients are going to have an app, they will want it to show everything. They will not want four separate apps for shares, funds, pension and cash.
Delivering that kind of integration for all of a client’s accounts will be difficult. And it may not happen because the banks probably will not play ball due to concerns about security.
But if advisers envisage the end-point as an app that delivers all of the client’s saving and investment holdings in a user-friendly format, that probably will not be a wrap app. It will be a CRM app.
Wrap providers have been piling on functionality in an attempt to become the adviser’s CRM. They are making it easier to put other assets on wrap as well as the conventional shares and funds – life bonds, term deposit accounts and structured products, for example.
But this is a race the wraps must lose, at least for advisers with high net-worth clients, because so many hold non-standard stuff such as offshore and EIS. Ideally, you want to be able to show the client everything.
So either your CRM adds app functionality or you need a front-end system such as Moneyinfo to pull the data from your CRM and app it to the client.
I have no idea which will be adopted most widely but this is where IFAs with HNW clients will want to go. In which case, all the fancy reporting features of wraps will become less relevant. The serious work will happen in your back-office CRM, where you will generate integrated asset allocation and portfolio analysis.
So could the end-game be one in which advisers with larger client assets – such as bigger wealth managers – migrate to cheaper, simpler wraps because they do not need the fancy stuff? The biggest already have their own low-cost wraps. Restricted advisers with clients having smaller assets are likely to aggregate into larger groups that adopt semi-bespoke commodity wrap apps.
Does this runaway train movie have a happy ending? I think Casey Jones had better watch his speed.
Chris Gilchrist is director of Fiveways Financial Planning, a contributing author to Taxbriefs Advantage and edits The IRS Report