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If the wrap fits…

The recent problems at Heathrow left me no option other than to drive to Scotland after British Airways could get me there but not bring me back. All the recent cancellations came as no surprise, having witnessed the understaffed approach to security when last going for a flight at the crack of dawn.

Driving such a distance does allows you to consider issues of the day at your leisure. My personal preference is to listen to talking books as I find music sleep-inducing. But when all of that is played out, my mind begins its gymnastic workout.

Now that A-Day has come and gone, and despite the ongoing shambles at the Treasury regarding alternatively secured pensions, the focus has switched to commission and wraps. The former is currently residing on the too-difficult pile but the latter is certainly making its mark in column inches alone.

But beware. Deciding which wrap to join is not about the ease of setting up and transitioning. It has to be about just how easily we can leave and how long it will take to move the assets to an alternative platform.

As my good friend Peter Mann of Bankhall pointed out, moving all your clients on to a provider wrap will make your client databases vulnerable. Providers often seem to have difficulty in recognising that the IFA is their client. Remember, guys, without us the planholders are temporary residents.

The key attraction of wrap is in that it enables the IFA to capture a greater “share of wallet” and derive savings from using a single platform. This relies on complete trust between the wrap provider and IFA/client.

The IFA needs to be confident that his clients’ data is safe and not likely to be used for marketing while the client will want reassurance that the money is safe. After all, a major insurer is generally far better known than any independent wrap provider and the IFA will need to ensure he has a clear idea of what financial guarantees are in place should the service close down.

For the non-insurer wrap, the main concern will come from the client, where the financial stability and reserves of the wrap provider may not allay any fears. Quite apart from the technological mountain that any new providers have to face, their lack of financial clout may prove to be their undoing.

For the last four years, I have watched the development of the wrap concept in the UK and wondered just how many clients will be prepared to pay more for the same. Unless these platforms start to show some sort of savings, I cannot see what benefit they deliver, especially where their range of funds remains limited.

I heard recently that one platform might use investment performance or lack of it to insist on reduced charges. This is quite mad.

“We will reduce our fees in light of poor investment performance.” The likelihood of that is on a level with Chancellor Gordon Brown realising that being a Scot may be just the barrier he did not expect in his quest to be Prime Minister.

Wraps will only prosper if we support the process in its development and not stop it in its tracks.

Despite my moans, security people have a difficult job, as I once found out when they discovered an unexploded black pudding in my holdall. I was less exasperated than the police who arrived complete with their machine guns to deal with a suspected explosives smuggler and found a financial planner who likes Scottish fare.


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