The Ascentric service provides an independent and comprehensive wrap platform for IFAs. The service is exclusively for IFAs and, more importantly, it enables IFAs to realise a share of the intrinsic value it creates from the assets under management. A key objective of the Ascentric service is to establish a stronger relationship between the client and their IFA and to enhance the IFA's own brand.
According to the FT publication 'Financial Adviser' 1st July 2004, 'Wrap accounts are on track to dominate the UK's financial services landscape, with advisers expected to be the greatest beneficiaries'. Oliver Guirdham, financial analyst for Datamonitor, said it is likely that wraps will gradually reduce the importance of providers and increase the influence of advisers. His comments follow a new market report from Datamonitor, which forecasts £150Bn worth of assets in the UK could be under Wrap administration by 2008.
Fund platforms and wrap providers which are favoured by IFAs would retain their market share, while IFAs expect these fund platforms to expand their offerings within the next year, according to CWC Research which carried out a recent study. Clive Waller, senior partner at CWC, said: 'IFAs are fully aware that the old, cottage-style industry model is well and truly broken and that successful businesses of the future will be built on an asset-backed fee basis using an appropriate wrap platform'. 'The first provider to get the platform right stands to establish serious market share and will be hard to shift as entry barriers will be high.'
Some 74 per cent of respondents indicated that they will move to a fee-based model when they migrate to wrap, including some of the largest firms. Key findings included increased usage of fund supermarkets: 83 per cent of respondents are using them compared with 67 per cent in 2003. Some 63 per cent intend to use just one platform and 82 per cent said they would prefer open architecture rather than one provider with extensive funds and wrappers.
This speculation has fuelled the development of a number of Wrap products being created and promoted by product manufacturers concerned that they will lose their grip over the financial services industry. Some product companies have chosen to handle the threat of Wrap differently, by simply offering multi-fund propositions, i.e. their product Wrappers remain separate from one another, but within each product Wrapper the investor is given access to a wide range of externally managed funds, e.g. Winterfloods Life, Scottish Widows, Standard Life and Merchant Investors.
The Datamonitor report states that Wrap accounts are beginning to make a bigger impression on the intermediary market, whilst IFA awareness of, and confidence in, the platforms is on the increase. For example, 7 out of 10 UK IFAs are now aware of platforms, compared to a mere 2 out of 10 in 2002. In addition, over a third of IFAs surveyed said they now currently offer some type of Wrap or multi-fund product to their customers. Guirdham is quoted as saying “Awareness of Wrap accounts has exploded in the UK’s IFA community, but whilst awareness of Wrap accounts has increased, it will take longer for a large part of the market to start using the accounts for a significant part of their client base'.
The report’s predictions for the growth of the Wrap market indicated that it would still only be 8% of the total retail UK Wrapable assets of £1,839Bn by 2008. Further it expects the growth in the Wrap market to be at the higher net worth end of the market and the priority will be wrapping direct equity and collective fund investments.
Mr Guirdham said 'The Wrapping of large quantities of life and pensions business will come three or more years from now, when the technology is in place and Wraps have an increased level of penetration in the IFA market'. This is a view supported by Renae Potter, Wrap Development Manager for Abbey, who agrees that it is likely to be several years before the full effect of Wraps will be felt in the marketplace, but she said that depolarisation will be a significant driver in developing the Wrap market, especially for advisers who are staying independent and will need to reduce costs and administration to compete effectively.
Campbell Edgar, a certified financial planner with Bloomsbury Financial Planning, said 'Wraps minimise the administrative process lending more weight to asset allocation and advice' and went on to say “the transparency of a Wrap will also assist in revitalising public confidence in the financial services industry'. John Baxter, a certified financial planner with Baxter Fensham, has said “The best people to create a Wrap are advisers, although none of us has enough money to fund it'. He is currently unaware of the IFA Wrap proposition.
The report supports the push for independent or collective Wrap propositions, stating that consortiums could help financial institutions reduce scepticism about using a branded offering of a bank or other financial organisation. A survey of 100 IFAs revealed that most would prefer to use a Wrap provider that was independent.
Despite scepticism surrounding the product provider Wrap accounts, Datamonitor claim that the UK is still Europe’s fastest developing market for Wrap accounts. On average in continental Europe just 1 in 10 of financial services distributors are aware of Wrap accounts, although Italy is the exception, where more than £82Bn is already invested using Wrap accounts, according to research and consulting group Cerulli Associates.
