Just because you have a superior product it does not necessarily follow that you will be successful. The technology world is littered with examples.
The solutions that were adopted were the ones that got their message across effectively to customers. The last time that I wrote about wrap in this column was in June of last year. I then questioned if the approach being taken by many wrap providers might result in wrap being the next big thing that never actually happened in the UK. Nearly a year later, the question looks even more valid.
It is hard to think of a subject that has had more exposure in the last 12 months. Many millions of words must have been written on the subject of wrap and all it can do for IFAs and their clients but how much impact has this had on the way that investments are managed?
The answer has to be very little. Transact recently ran an advertising campaign emphasising its position as the biggest player in the UK wrap market with £700m under management – a respectable sum for what is a relatively modest organisation but it is hardly changing the face of UK personal finance.
If one looks at potentially bigger players, Abbey has had the most high-profile wrap launch of the last 12 months but this hardly seems to have been a resounding success.
Funds Direct has promised much and delivered rather less. To be fair, one major IFA who saw what Funds Direct was planning late last year did describe it to me as “the nearest thing that we are likely to see to a decent wrap in the near future”.
Since then, the company has announced a major partnership with Marlborough Stirling to provide the Funds Direct wrap over The Exchange and IBM has been appointed to rebuild its Fund Direct system. Clearly, any judgement on the quality of what Funds Direct can offer will have to wait until a service is actually delivered.
Tempting though it may be to fill the rest of this column with a long list of the wrap projects that have talked a good story but delivered somewhat less, let us focus on what can be done to make a difference.
There are many life office-inspired wrap projects doing the rounds. Hardly surprising, since if anyone can get wrap right there will not be a need for life insurers as we currently know them.
Many life offices recognise that getting into the wrap market is a survival issue. Sadly having recognised this, too many life offices are falling into the trap of thinking that ways of business that are better for them are better for advisers and consumers.
The net result is that a massive amount of money is being wasted on developing dream scenarios for providers that will deliver little or no value to the IFA or their clients' and as a result will end up as white elephants.
One of the fundamental differences between life offices, which are essentially manufacturers of financial product, and advisers is that, like any other manufacturer, life offices are primarily focused on what they are going to sell next. Advisers, on the other hand, recognise that consumers are far more interested in what they own already, than what they might buy in the future.
Once you recognise this distinction, it becomes very easy to identify those wrap solutions that will have a reasonable chance of delivering value to the consumer and those that should be consigned to the round filing cabinet under the desk.
In my view, the most significant deliverable from technology to the IFA this year has been the extent to which it is now possible to get information on existing investments electronically – from life companies using the Origo contract enquiry messages, via EMX, for individual collective investments and, of course, from the fund supermarkets.
Anyone who attended the Advisertech part of the recent Money Marketing Live event at Olympia will have had the opportunity to see several examples in action.
This is technology available today that can deliver real savings to advisers. More services are being launched every month so why are we not seeing all wrap propositions coming to market with a full range of integrations to electronic messaging for all a client's existing holdings? When are we going to see a wrap proposition come to market with integration to all the leading IFA CRM and back-office systems and the various messaging systems already in place?
Sadly, I fear the answer is, don't hold your breath. Yet without this, how can any wrap service be taken seriously by any client-focused, advice-orientated adviser? If you cannot include details of all a consumer's existing holdings how can you possibly hope to take a truly holistic approach to their investments? If a wrap can only look at a subset of a client's investments, is it really any more than a glorified fund supermarket?
Fund supermarkets have, in just a few years, transformed the way in which new collective investment business is transacted. If wrap providers can emulate their success, we will be witnessing a revolution on the personal investment market, but today we are not. Why? Because those delivering wrap today do not seem to understand either the advice process or what represents real value for consumers.
Aggregating full information on a client's existing holdings will not be a universal panacea for a wrap market that must today be described as miserably failing the needs of its potential customers. There is much work that needs to be done on the pricing models if wrap is to be more than a niche product.
Examining the extent of the adoption of these facilities described above can, however, probably save IFAs from wasting a lot of time with wrap salespeople. If they cannot deliver online values for the products that your customer already owns they cannot be serious. Personally, without that, I would not even let them through the door.