If, on the other hand, you believe, as I do, that the role of an IFA is to provide clients with regular and up-to-date advice on their investments, taking into account the changing tax regimes and market volatility, then a wrap is as close to a panacea as we are likely to get. After all, we do work in the financial services industry.
A good example of the need to have a flexible investment structure came following the 2007 autumn Budget statement in which Chancellor Alistair Darling announced the changes to the capital gains tax regime.
At the stroke of his pen, he made a portfolio of open-ended investment companies cheaper from a CGT perspective than a life insurance bond.
However, moving a client’s bond investments into Oeics speedily and efficiently is very nearly impossible in the old product world.
Making such changes from within a wrap can be done within just a few days, thereby limiting the effects of volatility on the funds themselves.
Furthermore, the functionality within most wraps allows the adviser to make full use of a client’s CGT allowances by switching from one fund to another without being out of the markets for too long. Any tool that helps financial advisers utilise the single most underused tax allowance has got to be recommended. This can, of course, also be done with a platform such as FundsNetwork or Cofunds but switching quickly between tax structures is only available within a wrap.
All this functionality inevitably comes at a cost and only time will tell whether the extra expense will have been worth it. The FSA is quite right to ensure that wrap is being used for the right people and the right reasons.
If the extra features of wrap are not to be used, then a wrap should not be offered. We as advisers should encourage clients to want to make the best of their investments but we should not force them to.
The wrap platform that we use is Standard Life. I believe that it offers more than any other wrap in the market place at present. It is not the finished article – there are improvements to be made, especially within the charting and reporting tools, and there are still a few bugs to be ironed out.
One of the ongoing discussions in our office is over whether we need a second wrap. In theory only one should be needed but as providers prioritise their wish list of improvements differently to that of advisers, maybe we should have at least two wrap providers competing for our business to ensure that they focus their developments on what the market needs and not what their systems advisers find easy to fix.
Simon Ring is director at Ring Associates