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IFA warns wraps offer compliance bypass

Wrap platforms can be used to bypass network restrictions on the amount an adviser can invest with a single provider, says Family Office IFA Sebastian Lyle.

Lyle told the Money Marketing Wrap Round Table last week that Positive Solutions puts a 20 per cent cap on the proportion of money its members can invest with a single provider. However, he said the network deems wraps and fund supermarkets to be the product provider rather than the underlying fund manager.

He said this means advisers can invest all a client’s money with the same fund manager if investments are spread across several platforms.

Lyle said: “Many networks will only allow you to put 20 per cent of your business with any one product provider. The wrap account is seen to be the product, not the fund, so you could in essence put all your money with Fidelity across a number of different platforms and the compliance engine would not pick it up.”

Sesame sales and marketing director Steve Young said: “It is our understanding that the FSA is looking at the notion of concentration, whereby if an IFA was using a specific provider for more than 25 per cent of a particular packaged product, they would need to give a reason for doing so.

“I think this adviser is probably right and we will be arguing with the FSA that the rules need clarifying.”

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