Extra charges on wrap platforms could threaten the development of existing propositions and see new entrants dominate the market, according to leading technology experts.
Retail financial services consultancy Cydonia director Allan Greenshields says most of the companies building wrap platforms are looking at building re-registration charges into their initial costs.
When an IFA puts a client's investments on to a wrap platform, they have to check which investments are already registered with an asset manager. Most existing platforms will charge a consumer to re-register these investments and this transfer can then be subject to capital gains tax.
The admin costs levied for the transfer of products such as Sipps, Isas and bonds can range from £10-£25 and are incurred by third-party administrators.
Greenshields believes the new wraps could end up dominating the marketplace if existing platforms fail to recognise that, in order to attract investors, they will have to absorb more costs.
Industry experts such as Financial Technology Research Centre director Ian McKenna believes Fidelity is setting a benchmark by introducing an incentive scheme for advisers and consumers to register assets on their platform.
He says the move indicates that some players are actively considering ways of attracting investors but believes they need to go one step further to ensure that investors can see where they will recoup the cost of the charges through savings.
Greenshields says: “The risk is that clients will see these extra costs and decide that a wrap is just not worthwhile. There are currently not enough benefits for an IFA to absorb this cost either.”