Stay ahead of the pack - use a Wrap

29 September 2006

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The market for financial products is maturing - sales volumes are growing and prices are coming under pressure as products become more alike. Advisers need to find ways to stand out from the crowd or be crushed by it.

 

Research shows that clients want quality, holistic advice. So one great way for advisers to differentiate themselves is to provide this through the use of investment Wraps. Wrap platforms help IFAs give clients a complete, up-to-the-minute view of all their investments. This can be done faster and more effectively than ever before.

 

Wrap providers will need to stand out too. For them, we believe that the main differentiator going forward will be the service they offer. The access they provide to people and technological support will also be vital.

 

The four key areas

Wrap has become a buzzword and there are lots of new providers and an array of service propositions coming onto the scene under this label.

As you know, a Wrap is a single, web-enabled platform that helps IFAs to transact, administer and report on a client's investment portfolio.

 

That much is obvious, but not all Wraps are created equal and not all providers offer the same functionality or support. So how can you assess what's on offer? For my mind, you should consider the following four questions before making your selection. These areas are core to our own Wrap proposition.

 

Q:  Does the provider offer a Pure Open Architecture Wrap?

 

A:  Many providers label their offering a 'Wrap' but it's important to understand the difference between Pure Open Architercture Wraps and limited offerings based on Fund Supermarkets.  Pure Open Architecture Wraps should offer access to the whole of the market.

 

This means that IFAs should be able to access any fund or investment such as life bonds, gilts, OEICs, equities, structured products, investment trusts, futures/options, CFDs, SHEPs, property, trustee and corporate investments (provided that it is a permissible investment within the relevant wrapper). This whole of market approach is crucial for IFAs to retain their independence and is consistent with a service proposition such as a Wrap.

Fund supermarkets offer more limited access, essentially providing a platform for cash and collective investments. With these, the investment choice is effectively made by the platform owner rather than by the adviser and their client.

There are also wrap-like services that can include equities, pensions and offshore bonds but these too fall short of Pure Open Architecture.

Q:  Is the pricing transparent?

 

A:  Wrap pricing should be clear and transparent. There should be no hidden charges for dealing or transacting.   Look for fund manager rebates that are passed back to clients. This would mean they could be purchased more cheaply than by buying directly from the fund manager. Not all Wrap providers pass on these discounts.

 

Q:  Is the provider experienced in multim-asset administration?

 

A:  Many new entrants in the Wrap market have little or no experience in complex asset administration. Look for a provider with sufficient experience and scale, which has solid, long term financial backing in place to ensure their commitment. The longer they have been in the market the better. Experience in managing open architecture administration is essential.

 

Q:  Will the provider fully support you and your back office staff in moving your clients to a Wrap, and will it provide ongoing support and technical help?

 

A:  Are the goals of the Wrap provider absolutely aligned to the goals of its IFA supporters? You should be looking for one that provides a five star service to you and your clients. This means providing all the support you need to write and to keep the business.

Comprehensive and tailored support to advisers should be key to their offering. Look for implementation support that helps you migrate client assets onto the new Wrap platform and provides IFA back office support where needed.  

 

To sum up, look beyond the buzzword.   True Wrap offerings should be transparent and built on a strong infrastructure. They should be fully flexible, pure open architecture products. The provider should have proven experience in this area and aim to deliver a first-class service. Only when these criteria are met will you find a Wrap that truly stands out.