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Unwrap the wraps

Like Christmas presents, some wraps may not be so exciting when their contents have been exposed

With Christmas approaching fast, there is one prospect I dread – wrapping presents. I enjoy seeing piles of bright packages and the anticipation about what they contain. What matters to me is what is in them. What am I going to receive?
Given my frequent involvement in the development of adviser-facing technology and how it is packaged, this seemed like an interesting analogy to me. I would like to ask providers to start being a bit more candid with us – and helping to unwrap the wrap.

Vast amounts of time and resources are being poured into adviser tools and technology offerings. From some recent examples I have seen, at last we may begin to experience technology in a positive way. Applications are more user-friendly than ever before. More important, technology companies are starting to work with providers and other software houses to develop integrations which start to join up all these fragmented pieces.

I am seeing increasingly innovative technology to support administration and compliance procedures unobtrusively, which makes the processes more efficient, mobile and auditable, avoiding multiple data input. This starts to put some form to all the hot air spent discussing wraps, straightthrough processing and even signatureless applications.

Every week, it seems a new provider is in the press talking about the launch or development of its own wrap platform. But speak to advisers – the target market – about wraps and there is a lot of confusion and cynicism.

A true wrap should deliver the consolidation of all client assets, provide integration with other tools such as portfolio planning and research tools and, with the subsequent delivery of business transformation, realise business value for new and legacy business.

Arguments over provider offerings versus independent wraps are raging. Some provider offerings are more advanced than others but there is nothing I have seen that deals satisfactorily with the issues of multiple providers and legacy business. In my view, provider wraps are simply secure web-based service and administration platforms which allow portfolio management covering a range of investment and pension products under a single reporting umbrella.

So why don’t providers adopt a much less confusing approach and describe what the product does and cut away from the complex wrap comparison debates? What do advisers really want? Advisers are looking for only a few things from a wrap:

  • To capture a greater share of the wallet.
  • A platform that supports their independent status (or multi-tie as appropriate).
  • To realise savings by using a single transactional platform for each client.
  • To create increased value in their business as they demonstrate a deeper level of client service and merit an increased share in the revenue from funds under management.

They also feel quite strongly that there is a natural bias for any provider offering wraps to steer business through to its own packaged products and funds. There is already a strong loyalty among intermediaries to wraps that are perceived to be independent, with Transact being the most established. Fund platforms such as Seven Investment Management are also seen to be working in intermediaries’ interests.

Recently established Nucleus was heralded as the first adviser-led wrap and claims that it is looking to readdress the underlying business value issues for the adviser sector. Could the revolution be upon us? This is unlikely in the short term but it is clear that what IFAs want has be central to anyone wishing to succeed in the platform or adviser technology market.

The FSA, not surprisingly, has had a look at the market and its views are encouraging on the whole. It recognisesthat wraps are here to stay. However, it will ensure that customers are treated fairly, adequate disclosure of material information takes place, charges and their impact are transparent and, where advice is held but to be independent, it is in fact independent.

I think we need to start defining clearly which wraps are capable of enhancing the independence of advisers and those that simply play a support role but are not complete solutions in their own right. One size does not fit all. Different clients may need different platforms and this needs to be as honest, simple and consistent to implement as possible.

Jo Smith is a director of Integrated Distribution and a consultant with Teamspirit

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