View more on these topics

Wrap wrangle

IFAs and providers are locked in a battle over what clients really need from the current flood of wrap products.

Intermediaries are currently being bombarded with marketing from wraps and fund supermarket providers claiming they have the proposition that will definitely save time and money.

But according to Fin-ancial Technology Research Centre director Ian McKenna, most IFAs do not know what they really need for the clients while prov-iders are battling it out to bring what they hope will be the right mix of assets and systems for firms.

Last week, American Express Financial Services Europe unveiled its latest wrap offering – a platform which offers access to 266 fund managers and more than 4,000 registered UK funds.

It includes discounts on a number of funds and, in a tie-up with Standard & Poor&#39s database, up-to-date fund factsheets that give performance compared with sector, consistency, key fund statistics, risk profile and key risk features, top holdings, risk return map, asset allocation and sector weighting.

But debate rages over whether this is enough. FundsNetwork offers around 825 funds and Cofunds has around 780.

Rival Abbey for Intermediaries, which has 641 funds available but does have a whole of market option, claims that what advisers need is a provider that offers a pension as well as funds.

FundsDirect, which is preparing to launch next year with an initial six IFA firms, say advisers will be looking for funds, Isas, Peps, life and pension products to be offered on a platform.

So who is to be believed? McKenna says: “The simple answer is that no one really knows what they need or whose is going to work the best. It is too early to say.

“It seems that all anyone can talk about at the moment is wraps but that is all going to die down and very soon everyone will be talking about multi-tie technology. Realistically, it is going to be a couple of years before we see a wrap product that is really going to work and that will fit the market. It is only through a process of trial and error that providers will know what systems are working.”

One stumbling block in the development of wraps so far has been compliance issues over who has regulatory responsibility for fund factsheets.

If an asset manager provides it, then they have compliance but if a non-regulated third party is giving the information, then IFAs have been forced to ensure that they do not take complete responsibility for the information.

With IFAs already facing increased costs from the FSA, PI insurers and the FSCS and a growing regulatory burden, wrap prov-iders are desperate for this situation not to arise.

For them, what is crucial to the process is time and cost. Amex believes that advisers will be prepared to pay more if they can offer their client access to the whole UK fund universe.

FundsDirect&#39s proposition is long-awaited – a fact that it acknowledges. Certainly, if its promise of an open architecture platform with access to all funds, as well as Sipps, Isas, Peps, life and pension products is fulfilled, then it will offer an entirely new proposition in the marketplace.

FundsDirect sales manager Rikos Leong-Son says: “Developing a wrap product should be a long pro-cess. What a wrap platform should not do is add to cost. It should be multi-product and it should be easy to use. The adviser has to be able to show value for his services and ongoing servicing costs. IFAs are under a lot of pressure to prove that they have earned money from non-transaction business. They can show that they have done work on the client&#39s portfolio, easily provide quarterly portfolio statements and give ongoing support as part of a more holistic service.”

But they are not the only one whose proposition is anxiously anticipated. The Lifetime wrap project join-tly owned by Norwich Union and Millfield, had a setback when technology partner JP Morgan announced that its FundsHub was closing. Lifetime is also still waiting for regulatory approval.

Lifetime investors will work in conjunction with their adviser to aggregate their investments onto the platform.

Both client and adviser will be able to access existing assets according to different criteria such as risk rating or tax efficiency. The information will be available real-time and online. Lifetime will target investors in pension plans, unit trusts, Oeics and other collectives as well as shareholders and homeowners.

Abbey for Intermediaries head of product development Steve Conley acknowledges that the shape of wrap products may change but that the systems should allow that possibility.

He denies that the emph-asis on wraps will die out as depolarisation nears since many IFAs will stay independent.

Conley says: “We have placed quite a lot of focus on our back office and the systems there in order to keep costs down. The deals that we have made mean that you can have a Sipp on the wrap and that we can get you any fund.

“At the moment, we see ourselves as the only true wrap platform because we provide all the product wrappers and all the product administration in one company.”

As McKenna acknowledges, it will only be once competition for products is fierce that advisers will be able to judge what the best deal is.

He says: “I can see a situation where IFAs realise they have not got on the right platform and will want to change. Like any new product, it is all going to be about trial and error.”


Negative equity?

Ominous coincidence of the week? Jennifer Blackwood of Intelligent Finance was having a perfectly pleasant day at a Council of Mortgage Lenders seminar just outside Dorking. As one of the speakers plunged into a speech on the implication of Basel II on mortgage lenders, the heavens opened and a huge thunderstorm raged overhead. Someone up […]

Barclays Global Investors – i-Shares MSCI Japan

Type: Exchange traded fund Aim: Growth by tracking the performance of the MSCI Japan Index Minimum investment: Subject to negotiation with a stockbroker Investment split: 100% tracking the performance of the MSCI Japan index Place of registration: Dublin Isa link: Yes Pep transfers: Yes Charges: Annual 0.59% Commission: None Tel: 020 7668 8007

Extinction claim at odds with reality

Contrary to Peter McGahan&#39s assertions in Money Marketing that supermarkets are exp-ensive and double charge, true fund supermarket platforms have been successful in the UK precisely because they do not layer double-charging on underlying funds. A further factor that has ensured that fund super-markets have enjoyed a rate of adoption by IFAs quite unprecedented in […]

Schroders joined by Sutton

Julian Sutton has joined Schroders&#39 multi-manager team as a senior fund manager from Credit Suisse Asset Management. His appointment comes just one month after the launch of Schroders&#39 multi-manager funds and brings the multi-manager team to six. Sutton will be responsible for analysing and monitoring investment funds, including Schroders&#39 S&P strategic balanced and S&P high […]

Powerful estate planning tools ignored or forgotten by wealthy Brits

Canada Life IHT Survey 2016 Only a quarter of wealthy Brits have sought professional estate planning advice to ensure their families don’t pay more tax than required More than a quarter don’t even have a will and just one in five have gifted money Many say they do not need these tools but families would […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment