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For the record

One of the most hotly debated subjects in the wrap/platform industry is the ability of advisers to re-register assets away from platforms as well as on to them.

Last week, I met with a major adviser support group with thousands of members which told me that this was the number one issue on its list of requirements when considering potential wrap partners.

There is, however, another issue, and one which is entirely within the control of the adviser, that makes the question of platform to platform re-registration irrelevant if the adviser has not given themselves the flexibility they may subsequently need.

This is the question of using the platform provider’s systems to maintain client records as opposed to the adviser maintaining their own separate client management system. Many advisers are starting to do this and this is a serious error that could substantially inhibit their ability to act as truly independent advisers and undermine both their ownership and the value of their businesses.

If an adviser chooses to keep all their client records on the wrap provider’s system, they will have far less ability to move clients to a different provider if the provider changes its fees/ commission, if service deteriorates or anything else happens that suddenly makes the wrap provider less attractive.

If a wrap provider advocates that you should use its system for main- taining client records, the obvious question to ask is how easy would it be to extract that data if you want to move the client to another platform?

The best answer you are likely to get is that they can generate a full extract of all the data stored on their system as a comma-separated value file or similar, which you could use to populate an alternative system.

This would still mean that you would need to understand how to take all this data and match it to the fields you want to import it to in your new system or, more likely, pay someone else to do it.

In practice, this is a far from simple task and, realistically, I would be surprised if a wrap provider could extract every last item of data from their system. In other words, once you have started keeping your client records on the wrap provider’s system, you can never move provider without losing some of your data.

Any firm which has ever tried changing back-office or client management system provider will recognise this issue. All too often, I talk to advisers who have tried to move from one of the various adviser software packages to another and almost invariably they find they have to leave some data behind.

The most frequent solution I have come across in this instance is that the adviser will keep a single licence of their previous system running on a machine somewhere in the corner of the office but when it comes to a wrap account, this is hardly an option.

The adviser firm may consider paying a single licence fee for a software application to have access to legacy data about all their clients but clients are unlikely to find it appealing to keep a wrap open, incurring whatever minimum fees may be involved just so the adviser can have access to records that should have been kept on a system owned by the adviser in the first place.

Equally, I cannot see it being sustainable for a wrap provider to commit to always keeping legacy records of old contracts that are not earning them any income accessible to the adviser. I can see that by maintaining a client’s records on the wrap provider’s system rather than the adviser’s own software, it would be much easier for an alternate adviser to take over the case and have access to records of all that has gone before but then I doubt that most firms will find that an attractive option.

If we look at the issues around clients selling the business, firms which have all their clients’ records computerised attract far higher value than those which do not.

The value of a business can be massively increased where the adviser has made the move to trail income as opposed to initial commission but if all the records for these clients are sitting in a wrap provider’s system, it may be attractive to a firm that does a lot of business with that wrap provider but any other firm is going to be faced with the same issues around extracting data outlined above.

Consequently, by keeping their clients’ records on the wrap provider’s system rather than an independent client management system, the adviser firm is seriously limiting the potential market for the business when they want to sell and the value of the business.

Several of the major network organisations are creating portals allowing their advisers to deal with a range of wrap providers through a single interface.

Equally, both Capita and Vertex are advocating the role of the client management system as a wrap of wraps. This approach also makes it far easier to maintain records electronically of a client’s other legacy investments that it may not have been possible to keep on the platform.

Some people argue that if you are using third-party software, the adviser is still exposed as the software supplier controls the data. They may hold the data but they do not have the ability to change the terms, conditions and pricing of your client’s investments whereas wrap providers can change their terms periodically. This may be for perfectly good reasons but may not be attractive to your client.

Advisers who choose to keep their client records on wrap providers’ systems are locking themselves and their clients into a situation from which it will be difficult, if not impossible, to extricate themselves if the need arises.

The solution is simple. Choose a client manage-ment supplier which has developed deep integration between their software and use that as your core method of record-keeping, allowing the adviser to change wrap provider without major difficulty if the need arises.


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