Abbey is one of the most well-known wrap providers in the UK market and has managed to secure its reputation through word of mouth. However, finds Christopher Salih, the group is ready for new challenges that will emerge with increased competition
Abbey has become one of the best known of the UK wrap providers. In a recent RealAdviser survey it ranked alongside Transact in adviser recognition. Abbey has the advantage of deep pockets and a Spanish parent with experience in the wrap market. Wrap is an expensive game and requires sophisticated technology, so early adoption, plenty of cash and an old hand are trump cards.
Abbey started to develop its wrap proposition in September 2003. It took product wrappers from subsidiaries Scottish Provident and Scottish Mutual, and came to an early agreement with Sipp specialist James Hay. The platform was designed by Jan Regnart, managing director at James Hay, before being branded Abbey National Wrap Managers Limited. James Hay still does the administration for the Abbey Wrap service.
The Abbey Wrap model conforms to the traditional understanding of wrap as an aggregation service. It allows advisors to update valuations, transact across asset classes and tax wrappers, and offers clear reporting and data. Regnart, who is also CEO at Abbey National Wrap Managers Limited, says: "We believe our model is both traditional and contrarian, simply because it has broader aspects than other wrap platforms. Many have a restricted number of assets on the platform - for example, they may lack any sort of investment through a Sipp. Others platforms also lack the ability to show aggregated assets, whereas the Abbey Wrap does the housekeeping for the intermediary by both monitoring and moving assets."
The agreement with James Hay brought scale and experience. James Hay managed 40% of all UK Sipps and had 10 years of experience providing and administrating pensions. Abbey could also tap into its existing distribution network of 10,000 advisers.
The wrap has approximately 900 funds available from around 40 fund managers. It also includes investment trusts, straight equities, exchange traded funds and hedge funds. The group's policy is to put any new products requested by advisers onto the platform, but all funds will be analysed to ensure they are up to the requisite standard. According to Regnart the group has had to turn away lacklustre managers on occasion due to poor administration. She says: "We have to make sure we can get information from these managers quickly, especially for the electronic side of our business. From a purely legal stance we need a commitment from them to keep up with our time scale, if they can't guarantee that, we will turn them away."
Abbey Wrap offers a sliding scale of annual charges. Regnart says that the group aims for simplicity and transparency of charging. She thinks this separates the wrap from many of its competitors.
She says: "Unlike most other wrap providers, the Abbey Wrap rebates back to the client whatever money the fund management group gives us for the aggregation of their funds and administration. We and the IFA then charge overtly to the client. This ensures there is complete transparency about what Abbey Wrap is doing with the clients' money."
Regnart believes this differentiates fund supermarkets from wrap providers. She says: "Most fund supermarkets keep that rebate from fund managers within their world. Also, despite some fund supermarkets having online dealing, it is not as instantaneous as our wrap model; the same is true of the access they offer."
Two holes remain in the Abbey Wrap proposition. One is the lack of a suite of investment tools. Regnart says the group has its eye on three specific investment tools. It has recently signed an agreement with Finantix to develop risk profiling, asset allocation and simulation tools. Regnart is still looking for providers for the remaining two tools.
The other absence is on the tax wrapper side, where there is no UK Investment Bond. Regnart says this is down to the Offshore Bond, offered by Scottish Provident, being far better value. She says: "It's simply a case of the offshore position being far more favourable from the tax point of view. But we do have a UK Investment Bond available through open-architecture."
The message that Abbey Wrap is taking to the adviser community is that it can make their businesses more efficient. Abbey has claimed that it could save advisers up to 40% in back office processing costs.
Regnart says the building of a full wrap service will be done in increments. She adds: "Wraps are an on-going thing; you have to keep up with your competitors and improve all the time. One of our aims is to set up a user group for intermediaries on the platform, we see this wrap as a partnership and we want to know how intermediaries want to see it develop. We need to know what direction they think the market is going in and what they feel is right and wrong."
Regulation will bring mandatory changes to the platform, notably A-Day in April 2006. Like most of the industry, Regnart sees A-Day as an opportunity rather than a problem. She says: "The A-Day changes in 2006 could well see wraps play a larger part, particularly by enhancing benefits offered by employers. Sipps can also play a major part by working alongside the final salary schemes."
As yet the group hasn't done much advertising, but Regnart believes this may change as competition in the market is growing. She adds: "We don't really advertise that much, we tend to get by fine on word of mouth. We would argue that we are the leader in terms of word of mouth. But competition is growing, particularly in 2006 on the Sipps side, and that may well lead to us advertising."
When Abbey was taken over last year by Spanish giants Banco Santander, there was much speculation as to the future of the bank and its subsidiaries. But one year on and Regnart thinks the purchase has been nothing but good news for the group. She says: "The takeover has been nothing but beneficial for us. Santander is strongly committed to both the Abbey Wrap and the James Hay SIPP in the long-term. It is also strong in the technology market, and quick technology is paramount now, because this is the main barrier to entry."
The UK wrap market is still in its infancy and could develop in a number of different ways, but the Abbey Wrap has a lot going for it - brand, money, technology and experience. Advisers should expect Abbey to be at the forefront of development in the wrap market.
Tony Catt, Sole Practitioner, Independent Financial Adviser
I previously had no experience of this service. I contacted Abbey for Intermediaries to find out about it and was amazed at the lack of knowledge of the staff answering the telephone. They had not heard of the Abbey Wrap!?! I then found the website and it looks quite nice. I have registered for the service, but it will take some 5 days for a registration pack to come through.
The services on the Wrap are SIPP, Offshore Bond and then the range of Mini and Maxi ISAs and PEP. This is fairly standard and seems to be in line with the competition. Perhaps it needs to be higher profile both internally and externally.
Abbeys marketing material includes the following bullet points of what their Wrap offering does for clients and advisers:
"A single view of their portfolios on one statement."
This is true but very much focused on "investments" held within collectives and bonds. Where are the pension funds and other assets going to feature?
"A wide range of investments available for each product."
Again correct but this would be expected as the norm on any "platform" being used by a whole of market IFA.
The time spent on, for example, switching or changing investment strategy and asset allocation is reduced, meaning less time out of the market.
Abbey will score very highly with advisers if the proof of the pudding is in the eating and the wrap delivers. Time spent in front of or talking with clients is the only time fee income is in reality being generated.
"Competitively priced service as a result of economies of scale."
Another potential attraction for the wrap offering--but Abbey will need to keep their charges closely reviewed as other offerings are revealed onto the market.
"A wide range of products administered by one company, Abbey National Wrap Managers Limited."
That's what any good back office system does right now. Depends what you mean by "administered"?
As a result, their advisers will have more time to spend on adding real value and providing expert advice on the most appropriate investments to meet their needs and expectations.
This is the key--if Abbey have it right then they have a potential opportunity to secure significant market penetration.
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