Although it is relatively straightforward to build a web application with a client database and portfolios, there is much more to effective and efficient data management. Whilst valuations are one thing, there are many other key components in terms of fee and commission handling, diary management, pipeline tracking, management reporting, FSA reporting to name but a few.
2009 has seen further progress in the wrap space, or as is now the preferred terminology, platform space. The wrap description has become something of a parody, given that they have been much hyped but slow to be adopted – with many high profile expensive causalities along the way.
Ask three IFAs to describe one and it is likely that you will get three distinctly different answers. Wrap platforms are now seeking deep integration to the major software suppliers. This can be at valuation level and can include commission handling and ultimately will move to dealing and transactional capability too.
Wraps are by no means cheap and a £100m set up cost is not uncommon. Therefore it is important that in your selection of wrap (or wraps) they have financial strength and resources. Painful recent history has told us they cannot be run on a shoestring and deep integration to leading CRM systems is a highly important but not insignificant cost.
So in terms of crystal ball gazing, 2010 will see continued moves in the adoption of wraps. They are well positioned for RDR and some major providers have already set up cash accounts within their platforms so fees agreed with the customer can be taken directly from the wrap.
Whilst there will be more new entrants, there will also be further casualties. Many have been helped this year by the rising stockmarket and we cannot be certain that this will continue. Any form of correction could see management fees plummet in direct correlation to the funds under management.
Caution should be expressed to any IFA seeking to nail their colours to a particular mast, as although the wrap operators can be very persuasive about their extensive funds coverage and financials, the future is never certain. Therefore, by selecting several you are de-risking that potential pitfall and business angst, not to mention preserving independence.
In short, the winners are going to be those wraps with financial strength and scale, with deep integrations to leading CRM software. The industry is also likely to see a rise in outsourced investment management with model portfolios sitting within the platform. E-commerce has a huge role to play and advisers should expect technology suppliers to have the requisite tools to sit alongside the wrap, which will include asset analysis – enabling intermediaries to monitor underlying performance of models, risk profiling and lifetime cashflow tools.
David Child is managing director of 1st – The Exchange