How much money has been poured down the drain in the supposed development of the perfect wrap or platform? Review the amounts being bandied around and you can get past half a billion pounds – without necessarily a thriving range of profitable providers to show for it.
From corporate theory to practical reality, there appears to be a yawning chasm. Often sold as the next “must have” for advisers and insurance companies, I have to question the value that is being created here. The most important person to benefit should be the client and so far I have seen little understanding or appreciation of these innovations by many of them. I have only seen one presentation about a professional adviser’s platform for their clients and it was far better than any I have seen from any of the industry providers which seem to focus on the engineering rather than driving out the benefits. This was Jacksons Financial Services in Penzance, whose dynamic managing director Pete Matthew put over in 10 minutes what some providers have taken hours to bore audiences with.
Also, how many professional intermediaries can fully prove they are deriving benefit not just for their clients but also for themselves through the use of the wrap platform models? In theory, as we move closer to the implementation of the RDR, the disciplines and controls of a good wrap platform could be very beneficial in terms of information management and control. What users should be able to see is not just better management of costs but an increase in efficiency and potentially new business through the addressing of old legacy books.
Finally, we should look to the providers. Some have addressed this area as a new business opportunity but the cost of building and development can barely be justified in terms of the amount of business and income. You have to question that, unless serving a specialist niche area, without huge volumes and assets on high mass market volumes, can they be viable? The alternative will be higher charges and this will give rise to questions over the benefits for advisers and clients.
Others have come from the insurance companies where they seem to have been a defensive project often to prevent older pension assets leaching out into the marketplace. Such structures seem not to be designed as open architecture to service advisers and clients but rather a wire fence around the assets to stop them escaping.
There will be successful providers both on a large-volume scale and in specialist niche areas but their success will be driven by proving to be of value to users and not industry and consultancy-led dogma.
Justin Urquhart Stewart is a director of Seven Investment Management