Aggregators have a role in helping advisers get access to a wide range of investment products.

Many advisers use options such as exchange traded funds and investment trusts alongside mutual funds as they look to deliver value-added services.

However, most advisers have not had a platform on which to use a variety of investment vehicles and a way of getting paid for their advice where non-commission-based products are used.

The platform concept and wrap in particular have given advisers the option to use a variety of invest- ment vehicles in port- folio construction.

Wraps can also provide a flexible and transparent means of paying for services, laying much of the ground-work for advisers to move to a fee-based model.

Any platform that helps with the idea of factory gate pricing – separating the cost of distribution from the cost of the product- is a step in THe right direction.

The move to more product availability is certainly to be welcomed but there is a growing body of opinion among advisers that some key players in the industry, specifically fund supermarkets, have yet to embrace a more holistic approach to product provision.

Some feel that the super-markets’ continued reliance on distributing only mutual funds may be detrimental to clients’ needs and could lead to assets moving from fund supermarkets to wrap or in-house platforms with greater product choice.

This may not be wholly fair. Supermarkets have relied on mutual funds but this was a business model suited to the times and was what many IFAs wanted.

The arrival of FundsNetwork and Cofunds to join Skandia and other life companies that entered the market early was a heaven-sent opportunity for fund firms to redefine their distribution model.

The major aggregators have based their business model on revenue share with the fund companies, leading to reliance on commission-loaded products and restriction on what advisers can access through these platforms. However, this is changing and we have seen the addition of wrappers such as investment bonds and self-invested personal pensions to the major fund supermarkets. It is also encouraging to see the introduction of trusts for estate planning.

The fact remains that as the advice model moves toward fee-based holistic planning, advisers require a set of tools that stretches beyond mutual funds and life wrappers. The regulatory framework has evolved to deal with new investment techniques with the introduction of Ucits III but the basic chassis on which investment manage-ment has been delivered to mass users – daily-priced mutual funds – has changed little.

As advisers become increasingly familiar with more product types, it is important for aggregators to recognise that they will differentiate not just through bringing these vehicles on board but also by providing easy access to investment opportunities such as water, infrastructure, private equity, forestry, clean energy. etc.

There is no doubt that some IFAs are putting off using some asset types because they do not have easy access to trading.
Fund platforms lack a co-ordinated approach to IFA access to instruments such as ETFs but there are some well designed solutions for advisers.

Our view is that it will not be too long before fund supermarkets begin to integrate online brokerage facilities for IFAs and one or two have stated they will be looking to launch such services in the first half of 2008.

This is most likely to be through partnerships with established market players, as scale is important, although some may build the infrastructure in house.

A key component is cash management at the client account level to draw fees to the IFA. This removes the reliance on using products that are loaded with commission costs and opens up a new universe of investment vehicles and sets the tone for a transparent client-adviser relationship.

This will eventually become an industry norm, paving the way to the customer-agreed remuneration relationships that the FSA is seeking.

The economics of running a fund supermarket are unlikely to change over night and provider-paid remuneration is likely to remain the dominant fund supermarket model for some time but demand is growing from advisers for access to more products and forward looking platforms are starting to take notice.