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FSA says some wrap providers may leave market

The Financial Services Authority says it is possible some wrap providers will exit the market if they fail to make a profit or lose their existing financial backing.

Responding to delegate concerns about client protection should a platform go bust, at the Platform Evolution conference in London yesterday, FSA senior associate for investment policy Steve Tully said it is no secret that most platforms do not make money.

He said: “Let’s face it, no firm logically is in business not to make money otherwise, ultimately, what is the point.

“Clearly these firms continue to be backed presumably because they believe longer term that they will get a return.

“What is the worst case scenario? Some of them will pack up their bags and go or their backers decide they are not going to give them anymore cash.

“Those are possibilities. The most likely situation to occur would be, I would guess, that they would be bought out.”

However, Tully said that you could not “totally and utterly” say that a platform would not pull out the market.

He said: “Amex did a few years ago, or indeed on a smaller scale we had UBS pulling out last November. You can’t totally discount against that. Whatever financial firm you talk about there is no absolute cast iron guarantees attached to that.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Due Diligence?
    I continue to be surprised how few IFAs even consider the commercial vialbility of different wrap business models, let alone put that question at the heart of their due diligence process.

  2. Bob Donaldson 5th June 2009 at 2:31 pm

    Wraps
    How many life assurers have come and gone over the years. National Mutual became GE became Windsor. Where are Scot Prov, Scot Amicable, Scot Mutual Etc. Today’s best company or best platform is highly unlikely to be tomorrows. At least you can move the money/funds.

    They are not telling us anything we didn’t know already and no matter how much due diligence you do you still have problems. Look at the amount of people that have used Cofunds for years and they have only just made a profit.

  3. Julian Stevens 5th June 2009 at 2:37 pm

    FSA says some wrap providers may leave market
    It would be nice if the FSA would wake up to the fact that IFA’s are in business to make a reasonable living as well. Our incomes do not come from coercing others into either paying up or packing up. There is a limit to the extent to which the costs of ever more layers of bureaucracy and reel upon reel of red tape can be passed on to customers. Sooner or later, for any IFA’s operating outside the HNW market, it will have become impossible to operate a business that is both profitable and fully FSA-compliant. The terms fully compliant and profitable, together, will simply have become a contradiction in terms. Yet still the fat salaries and generous bonuses continue to roll out at Canary Wharf. What was it Hector Sants said on Hard Talk? “We’re not infallible” (so don’t be too hard on us for our never ending succession of regulatory failures). IFA’s are not infallible either, nor are we paragons of virtue and efficiency. What’s sauce for the goose should also be sauce for the gander. But when will we ever get that from the FSA?

  4. !
    Who will have to pay to transfer assets from a platform that pulls out to another? In my opinion IFAs shouldn’t be advising their clients to keep money on companies that are losing money year on year. It just isn’t sound logic. It’s not just AMEX who backed out – look at Friends Prov, Norwich Union, Egg etc etc. Find a profitable company – if it is working their proposition is probably the right one for your clients and your business. Look at the accounts when you’re picking a platform! It is at least as important as the question of whether they can in-specie transfer the assets or not – if they go bust does it matter if they can or not?!

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