Wrap - an experience to be understood

18 April 2006

by

Three years ago the Wrap concept launched in the UK with a number of large UK financial service providers choosing to offer Wrap services. This launch led to a lot of debate in the industry press over the next couple of years about whether providers were offering true Wraps or simply offering a Wrap type service and there was story after story about how much of a success Wraps were and still are in Australia and America, and how they really should be the future in the UK.

And now, as many providers have realised the UK financial services market is very different to the markets across the Atlantic and in Australia - our tax system is very different. Revenue rules and legislation surrounding some of our UK retirement and savings products are simply not always a good Wrap fit and fitting products into one service cannot always be as seamless as we in the industry may like.

So to sell a Wrap service has sometimes been difficult for Financial Advisers, as different providers set up very different services to try and offer the most streamlined Wrap available. This has meant that some providers have now stopped offering their Wrap services altogether and some providers who have survived these initial pioneering years are now beginning to find that their products are beginning to be more widely understood by high net worth clients and their financial advisers.

However, there is still a lot more work that Wrap providers can do to get the message out about the benefits of a Wrap - and may be it's worth first of all working out what a Wrap should be.
To me it should simply be a financial service which is flexible enough to suit your clients needs throughout their life. A Wrap should not simply be a service for high net worth clients, but it should also appeal to all types of client, like mass affluent clients working towards achieving a high net worth status.

It should be a service which is designed to give your clients control over the investment strategy of their money whether this is held directly by them or the provider of a savings product like an ISA or a retirement product like a pension.

The service should give your clients:

• A choice of different products to put their money in, for example ISAs and pensions.
• Control over the investment of their money by allowing them to choose from a wide range of investments, for example Unit Trusts, Investment Trusts, OEICs, Stocks and Shares, Gilts, Corporate Bonds and commercial property.
• One central point of contact. This may be of interest to your clients if they already have investment and pension portfolios with many different providers and would like to:
  • Bring these different products into one place and
  • Have one overall contact to assist them with making transactions and administering these different products.

The service should give you, as their Financial Adviser:

• One single view of your clients investment and pension portfolios allowing you to monitor their savings and retirement portfolio more effectively as the Wrap provider will gather information from the different investment providers.
• An online view of your client's Wrap portfolio at both a product level or an investment level. This allows you to see the different categories of investments your clients have across all products within their Wraps.
• An online view of the different transactions that take place within your client's Wrap. For example deposits made by the client, or their employer, transfers from other product providers and buy, sell and switch investment transactions.
• Access to information about your clients Wrap portfolio online through the Wrap provider's website 24 hours a day 7 days a week.
• Commission paid by the Wrap provider on a regular basis, but with the flexibility to allow you to vary the level of commission you receive from product to product depending on the level of advice you have given for each product.

A Wrap is not like any other financial service offered in the UK and a change in thinking is needed to appreciate it's value - perhaps we need to remember the difficultly Tim Berners-Lee had when describing the benefits of the World Wide Web to a sceptical public.

This commentary represents the views and opinions of Jan Regnart, CEO Abbey National Wrap Managers Limited & Managing Director, James Hay SIPP. This is not intended as a substitute for professional advice. Independent advice should be sought before making any investment decision.