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Friends rejects wraps

Insurer says there are problems with technology, legacy service and indemnity commission

Friends Provident is not entering the wrap market, saying the industry does not yet have the technology required and is relying too much on up-front commission to make it viable.

The majority of Friends’ competitors are striving to build wrap platforms but the firm says that until these problems are addressed, any attempt at a wrap platform will be a piecemeal affair.

Head of investment mar- keting Christine Foyster says that besides the number of advisers relying on up-front commission, wrap is also being severely hampered by an inability to include legacy business.

Friends claims it will be ext-remely difficult in the fore- seeable future for wrap platforms to take account of existing investments held by a client as there are few indus- trywide electronic links to provide online valuations of legacy business.

Foyster says: “We believe that a credible UK wrap market may be emerging but it is still very much in its infancy. It will be extremely difficult in the foreseeable future for wrap platforms to take account properly of existing investments that clients hold.”

Lifetime director Michael Short says Friends is right to point out the issues surroun-ding legacy business but this should not be seen as a barrier to entering the wrap market.

He says: “Lifetime entered the market as a result of adviser and consumer demand. There are issues over legacy business but the market will take care of itself and these issues cannot be resolved by staying out of it.”

Skandia investment marketing manager Ian Thomas says: “The points raised by Friends are legitimate issues but we are finding ways of accommodating them. With up-front commission, it is a chicken and egg situation, where wrap will help the move to an annualised commission structure either through trail or fees.”

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