Over half of IFAs (55 per cent) believe they will be conducting at least half of their business electronically in five years.This was one of the key findings of The Exchange’s 2005 technology index survey of 300 IFA firms and demonstrates that the use of e-commerce is set to increase dramatically over the next few years and play a fundamental role within the business processes of IFAs. The question is, how is this going to manifest itself at a practical level? Are wrap accounts the future and, crucially, will they replace the IFA?The last question is the easiest to answer. Technology, in any form, will never replace IFAs and is not designed to do so. The role that IFAs play in using their market expertise and understanding their clients’ requirements to find appropriate products and explain them to consumers is invaluable and cannot be replaced. What technology can do is make it easier for the IFA to provide an ongoing holistic financial planning service to a larger number of clients. This is what wrap accounts aim to do – enabling IFAs to manage their client’s financial affairs according to their lifestyle, optimising their tax position, matching their investments to their risk profile, selecting the correct asset allocation and rebalancing it on an ongoing basis. However, there is currently little substance to wrap accounts in the UK. Datamonitor may be predicting that within two years, half of funds will be held in wraps and by 2008 there will be a massive 150bn in the accounts but at present none of the so-called wrap offerings in the market delivers what a true wrap account promises. In theory, wraps are centred on aggregating a range of products and wrappers under the one roof. They should be a one-stop shop, where an adviser can view all their client’s assets and liabilities in one place, giving a clear understanding of their underlying net worth. By being able to produce this quickly and easily, IFAs can review their client’s financial position on a regular basis and advise them on appropriate action to match their stated financial requirements. The problem is there is still a lot of posturing about what should and should not be included in a wrap account. The current propositions seem to focus mainly on equities and collective investments and ignore product areas such as traditional life and pensions products or property. These products contribute significantly to the net worth of any individual and that is why wrap accounts, in their true form, do not exist yet in the UK market. Providers are positioning themselves for the launch of wraps and are trying to attract IFAs but true wrap accounts will only emerge over the next few years as the providers expand the products they cover. One of the most problematic areas for wrap providers is life and pension transactions and valuations. Wrap accounts do not so far provide any transactional capability for new life and pension contracts and there has not been an effective service that provides valuations of in-force life and pension policies in one place. The industry e-commerce initiative, Project Sapphire, was put in place to solve this. The objective was for a group of leading product providers and IFAs to work together to develop a range of e-commerce services that are open to all IFAs and product providers. Two of the main services were an improved electronic new business application process and a valuation service that would deliver real-time aggregated policy valuations electronically to IFAs. These services are now available via Exweb Gold and will be integrated into IFA back-office systems. These industry utilities are set to play a vital role in wrap accounts by filling the void for life and pension policies. The new valuation capability enables IFAs to access electronic policy valuations and provides them with a single view of each client’s policies, including details of the funds attached to each contract. Policy valuations can be produced in three ways. Electronic links have been established with leading product providers to deliver real-time valuations for pensions and bonds. For policies that are not supported by the real-time valuations capability, there is a supplement price feed that enables daily pricing of many other key asset classes such as unit trusts (including Peps and Isas) and individual shares and bonds. Finally, a manual update feature is available for assets where electronic updates are not available, such as paintings or property. This type of service saves IFAs a huge amount of time in producing up-to date valuations of their clients’ portfolios and these portfolios can be printed as a financial statement and used within the adviser’s advisory process. Wraps will not assume a central position in financial services for some time but their day will come. Rather than replacing IFAs, they will enable them to deliver the holistic financial planning process that they are aiming for and will help answer criticism from some MPs that IFAs do not do enough to justify trail commission because they do not always provide ongoing advice. The key over the next 12 months or so it for wrap providers to ensure that their service covers all product areas that are likely to be relevant to IFA clients. Only these services will deliver the true benefits that wrap promises.
Lincoln Financial Group is re-launching its investment bond with improved allocation, a new loyalty bonus and reduced charges. With its new structure, the investment bond now takes up third position on the Exchanges comparative unit-linked bond table.A one-off loyalty bonus of one per cent is now added at the end of year ten and from […]
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