It may feel like the race for the potentially lucrative corporate wrap space is moving at a snail’s pace but a number of providers are now saying this is the year it will all start to happen. Getting a proposition to market by the end of this year is essential if providers are not to miss a once-in-a-generation opportunity to be accepted by a large number of employers.
The reason for this urgency is that many employers are on the verge of a major rethink of their benefits offering. Corporate advisers say a combination of automatic enrolment, Nest and the disengagement of decision-makers from company pensions that will result from the Budget tax changes, is forcing employers to reassess what they want from their benefits packages.
Adding intermediaries, benefit platform technology firms and individual wrap providers into the mix, alongside life offices and the number of organisations developing something for the corporate wrap space, now stretches into double figures.
Innovative technology projects are notorious for being an easy way to blow a lot of money yet, paradoxically, such is the nature of what corporate wraps are trying to achieve that only those who make a big financial commitment are likely to be successful.
Some, but by no means all, of the big five employee benefit consultants will attempt to build something of their own. Others will be wary of committing so much capital to a project that falls outside their area of expertise. The choice then will be between existing employee benefits portal providers and the life offices.
At the centre of this choice is the question of what employers actually want – something that makes their benefits spend worthwhile while motivating and retaining staff. But different distribution channels will interpret different solutions as more appealing. I expect that employee benefits consultants will resist life office corporate wrap offerings, believing them to be built from a starting point of aiming to amass and keep control over assets.
That said, there is a real demand for what corporate wraps can offer and if life offices can do this cheaply by achieving scale, the proposition will be compelling for many employers. It will allow them to target their benefit spend more efficiently and at the same get employees to self-service their benefits online, reducing the burden on human resources and encouraging engagement. Meanwhile employees should enjoy more suitable benefits from their employer.
However, there are also many potential stumbling blocks along the way for corporate wraps. And for providers, many questions remain unanswered. How receptive will providers be to allowing the free flow of information off their own systems to the corporate wraps of rivals? As a result, how big a risk that they will cannibalise each other’s business? And will it be possible to convert the employee’s corporate wrap functionality into an individual wrap when people move on?
Questions also remain as to how employers and employees will perceive corporate wraps. How comfortable will staff be bringing information relating to their own personal financial products into a system run by their employer? How comfortable will employers be aggregating data of potentially superior pensions from previous employers alongside their own offering? Will employers want to put all their eggs in one basket or prefer to feel their employees are being ’sold to’ by an insurance company?
With defined contribution pots set to grow exponentially in the coming decade, the sums of money that will be floating around in the workplace could be astronomical. Whoever gets corporate wraps – or whatever it ends up being called – right will reap the dividends. But I cannot believe that everyone playing today will do so.
John Greenwood is editor of Corporate AdviserMoney Marketing