Some of wrap's leading lights have decided to form a platform committee with the aim of improving business practice, says Christopher Salih. Market reaction has been mixed
The world of wraps would appear to have gone into overdrive of late. As if praise for the concept from the regulator and the launch of Nucleus's adviser-led platform were not enough, some of the market's more established names have decided to band together and form a 'platform committee' that aims to represent the wrap sector and review and improve operational processes and regulations.
Advisers could be forgiven for raising an eyebrow on hearing that Cofunds, Funds-Network, Skandia, Selestia and Standard Life - all of whom have traditionally fought tooth and nail for market share - have joined forces in such a manner.
Still, reeling in any scepticism for the time being, what will the committee actually do? With input from the Investment Management Association (IMA), its stated focus will be, for starters, to ensure the needs of consumers and their advisers are supported through industry developments, improve reporting of fund sales data via the IMA and other trade bodies, match operational processes between fund providers and platforms, improve re-registration and create industry-wide processes to support platform to platform re-registration, boost levels of e-business within the mutual funds industry and work with the FSA on the implications for UK and EU regulations on the rise of platforms.
Not much then - but perhaps even more interesting than the committee's commendable ambitions is the timing of the committee's foundation and the identities of those included - and excluded - from the gang.
According to John Taylor, marketing director at Standard Life, there were a number of reasons behind the timing of the launch. "First and foremost, it was largely driven by a swelling of interest for some sort of committee," he says. "People wanted to grasp the nettle and tackle issues such as re-registration and the relationships between customer and platform and platform and platform."
Taylor says discussions started just after the FSA published its report, which essentially praised the use of wraps in the adviser market, claiming it could not find any evidence of firms using wraps in an inappropriate way and adding that many actually provided the FSA with examples of firms working in the best interest of their clients.
Charlie Eppinger, chief executive officer at Cofunds, argues the growth in the wrap market certainly warrants the advent of a committee such as this. "Platforms have become a significant factor in the mutual funds industry in the last few years - already accounting for more than £28bn in fund assets and growing rapidly," he explains.
"The intention of this committee is to acknowledge the increasing importance of the platform industry and to improve market practice with the clear objective of treating the customer fairly with a range of services that deliver simplicity, flexibility, accessibility and fairness."
Again, commendable aims, but initial market reaction has been somewhat mixed. David Ferguson, chief executive of Nucleus Financial Group, is, to put it politely, 'miffed' by the need to form a committee at all - particularly one with objectives that are as vague as this. "It really is a surprising initiative," he says "The participants are by no means bedfellows and they don't appear to be 100% sure of what the committee is looking to achieve."
Ferguson, whose own adviser-led group Nucleus was set up in June this year with £3bn under management and seven adviser firms, including Helm Godfrey (see Adviser profile on page 16), was quick to pick the bones out of some of the committee members' comments that went to reinforce the rationale behind the launch.
Of particular interest to him were some from Trevor Matthews, chief executive of Standard Life Assurance, who claimed the initiative provides groups with a great opportunity to make sure the needs of customers and advisers are at the heart of their activity.
"We are surprised these firms have had to form a committee to work these kinds of things out," says Ferguson, who is equally forthright this month in the column he writes for RealAdviser (see page 34). "We formed a company instead."
But while Ferguson argues issues such as re-registration are industry-wide rather than specific to platforms, Justin Modray, an investment adviser at Bestinvest, does see benefits of a committee. "It could be a good thing for advisers as they can achieve certain things that would have been impossible to do independently," he says. "For example, they can solve the problem of transferring assets from one platform to another, without having to start from scratch. However, the one major worry is all it will be is a committee by name."
Industry commentators have frequently pointed out that, as with any business, wrap is due for consolidation at some point. The question of whether the committee's formation is a move on the part of the five member groups to insulate themselves from that is also a consideration in some of the smaller groups' opposition to the banding together of bigger brands.
Bestinvest's Modray points out that, with new incumbents still joining the wrap market, the committee's launch could be seen as an attempt by these more established platforms to highlight themselves as the senior players. "Taking it a step further it could easily be perceived as a threat by those not involved, with some viewing it as an attempt by these groups to accelerate the consolidation of the market," he adds.
Standard Life's Taylor has a different explanation, however. "Instantly forming a universal committee would mean 20 to 30 potentially different ideas, which could hinder the platform's progress," he argues. "We are, however, more than willing to talk to other groups who may be interested in joining the platform about their respective aims and objectives."
Transact, one of the major forces in the UK wrap market, looks the most incongruous omission from the list. "We have lots of time for Transact, a group that has helped pioneer the development of wrap in the UK," adds Taylor. And yet Malcolm Murray, head of sales and marketing at Transact, says that while the group was not asked to join, he would have declined anyway on the basis there are already enough trade bodies in the financial services industry.
To say the creation of this committee has provoked controversy is putting it mildly. While some argue that the bringing together of some the industry's leading players to tackle issues such as re-registration and TCF is only going to be beneficial, others see it merely as an attempt to ensure each other's long-term survival at the expense of those left on the outside.
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress