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Wrap relations

If you laid out all the articles written about the impact of wrap and its potential in the marketplace they would probably reach Uranus.

The recent life office scramble to get insurance bond and pension wrappers onto the major fund super-market platforms – leaving Skandia aside – is undoubt-edly evidence that they are likely to be an influential distribution line.

The market has been flipped on its head in that whereas advisers would traditionally go straight to the life offices for various tax wrappers, such as insurance bonds and Sipps, soon they will be able to log onto the likes of Cofunds and Funds-Network and access them there. So do the fund super-markets now wear the trousers in this relationship or is the linking to fund supermarkets simply an easy route to open architecture?

Cofunds spokesman Dick Eats says it is more a marriage of convenience in that life offices now realise the burgeoning distribution power of supermarkets and the supermarkets do not have or lack the inclination to offer their own life wrappers.

Eats says: “Originally, life offices may have seen fund supermarkets as almost an irrelevance, like when the dinosaur saw the first mouse, but in the past couple of years, they see we are shipping in a lot of money.

“Life offices have the technical product structures to run life and pension wrappers and have excellent brands and strong distri-bution. Cofunds and Funds-Network have strong distri-bution in their particular segments to provide the open architecture.”

Life offices, which used to be product and service pro-viders, will lose the latter function if platforms come to dominate the insurance bond and pensions arena as they have the Isa, Pep and unwrap-ped investment fund market.

Wrap is a service not a product and if advisers can in future get all of their life and pensions products, along with valuations and other servicing needs, from the platforms, then life offices can surely afford to cut back adviser support functions.

NU head of wrap Paul Stoakes says the key diff-erence between wraps and supermarkets is the focus on service rather than products.

He says: “It has to be a part-nership. Being technology-led only works if you have the life and pensions provider for wrappers, distribution reach and brand strength. If you have all that, then you have a very powerful proposition.”

Ascentric chairman Clive Boothman agrees that the strength and reputation of the major life offices will build on the penetration fund supermarkets have already achieved. He does not think the platform is wearing the trousers in the relationship because they need the wrappers that only life offices can provide.

Scottish Equitable head of marketing individual and development Ian Kerr says opinions on the impact of wrap vary from the death of the life office to the view they will just be niche play-ers. He expects the truth to be somewhere in the middle and is unperturbed by ScotEq not having a presence in this field.

Kerr says: “It took fund supermarkets a long time to build the level of assets they have now and they still only hold a small percentage of the overall market. Unless things change, I can’t see wraps harming life offices.”

Norwich Union, through its major investment in Lifetime, is a strong propon-ent of wrap and confident it has a rosy future, but Kerr says ScotEq is happy to watch market developments. He adds, NU, through building a wrap as a subsidiary com-pany, has watered down any shift from being a product provider to a service company.

“By doing it through Lifetime, NU’s overall proposition remains unchanged. If you are changing from being a product provider to a service provider it is a massive leap of faith,” says Kerr.

Transact managing director Ian Taylor believes this is essential for life offices to survive and believes its independent nature is one of its keys to success. He says companies can not really be life offices and wrap providers and have to chose one path or the other.

By partnering with supermarkets, Standard and L&G have selected an alternative route. But have they bagged the best deals with their tie-ups with FundsNetwork and Cofunds, respectively? Kerr is unperturbed, pointing out so-called true wraps, such as Transact, can hold bonds from any prov-ider anyway.

GE Life chief executive Scott Dolfi says open architecture is all well and good but he is happy to stick with GE’s strategy of using a more selective range of four hand-picked fund managers and is sceptical of the benefits of what might be called open architecture.

“We have not gone down the route of offering hundreds of funds and instead offer a selected range. If everyone has a fund supermarket at one end, then our proposition is a differentiator,” says Dolfi.

That said, when the FundsNetwork and Norwich Union partnership, which was to see the insurer provide a bond for the platform, broke down, Standard Life was more than happy to jump in. So clearly other life offices have a different take.

Informed Choice manag-ing director Nick Bamford says he is happy Funds-Network switched bond providers given his experiences of NU’s admin, but he, like many, wants to see results rather than hot air when it comes to wrap.

Bamford says: “This all comes under the general heading of that lovely word ‘wrap’ and all it is purported to be but is not yet.”

It is clear that additional wrappers are the logical next step for fund supermarkets which themselves are the logical proponents of wrap given their power and reach. Life offices may find not dealing with them costly and will be watching the sector to see who dominates the market – the true wraps, such as Transact, which can hold anything or the more narrow offerings with amb-itions to expand, such as FundsNetwork and Cofunds.


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