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Small wrap firms are facing buyout

Threesixty partner Phil Young says smaller wrap providers could be taken over this year due to the economic crisis.

Young says unless the markets pick up soon, smaller players will follow in the footsteps of Ascentric and be bought out by bigger firms.

He says: “Smaller platforms must look to reverse into bigger organisations if they are to develop their assets under management and expand their distribution reach, otherwise they may just wither and die.

“Platforms which have large existing assets under management or those backed by heavily capitalised institutions are better equipped to wea-ther the storm.”

However, Young says that existing wrap providers are highly unlikely to acquire another platform in the near future as the overhead on running two platforms makes no economic sense without huge scale.

He says: “Product providers without a wrap are seriously reviewing the market and trying to time their entrance around an optimal moment before it is too late but after the price point has come down considerably.”

For small wrap providers, Young says the best time to sell is probably within the first two years of launch as the technology will not have dated significantly.

Novia chief executive Bill Vasilieff says: “The point that Young is trying to make is that you have got to be a large organisation because you get distribution reach and you have got cash. But you have only got to look at the players that have pulled out of the market to realise it is not a question of how much cash you have got. It is, do you understand the markets, do you understand the offer- ing you are delivering and can you manage your costs accordingly? If you can do that, you will survive.”

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