As wrap continues to prove its worth and beds into the market, says Christopher Salih, will 2007 be the year providers prepare to jump into the ring?
Dubbed one of the most promising innovations in the market for years, wrap finally appears to have shaken off the title of being The Next Big Thing. Indeed, as 2006 has progressed, so has the presence - not to mention assets under management - of these big game players as they look to transpose wrap's success in the US and Australia on to these shores.
The last month or so has been no exception, as new providers continue to ply their trade in an arena that now has more than £35bn in client money coursing through what is becoming almost the coronary artery of many advisers' businesses.
This time it's Tilney Asset Management's turn to launch a new wealth management service, in the shape of its MasterAccount, thereby joining the long list of the likes of Nucleus, Praemium and Standard Life to open wrap businesses in the UK over the course of the past 12 months.
Rather like professional boxers at the weigh-in, most of 2006 has seen wrap businesses simply flexing their muscles rather than trying to blow their opponents away with an onslaught that would make any heavyweight champion proud. Cofunds was the latest provider to tip the scales, announcing it has broken through the £10bn barrier of assets under management.
But as 2006 draws to a close, the impression is that wrap is entering a new stage of development, with new products such as separately managed accounts (SMAs) and 'master accounts' - mooted as the next stage of the product in the UK - coinciding with a couple of drop-outs and the formation of a Platform Committee that brings together some of wrap's bigger players, casting a shadow over some of the more niche businesses.
So with numerous wraps upping their game, through the addition of new features, and barriers to entry certain to rise sooner rather than later, are we finally seeing a real transition in the market?
Most providers in the UK started their respective businesses by staking their claims in the Isa and Pep markets, offering greater choice and, perhaps more importantly, improved functionality to access everything in one place. However, with the likes of Cofunds, Funds-Network and Transact having operated in the market since 2000, it's quickly becoming a tapped resource.
"If you look at the Isa season in 2006 you can see that 70% of dealing came via the use of a platform," says Richard Eats, head of communications at Cofunds. "This uptake is beginning to become universal and it's almost guaranteed that figure will rise in 2007."
According to Ian Thomas, head of marketing at Skandia MultiFunds and Selestia, this is simply a reflection of the market's growth. "The attitude is that it is not just a niche product any more," he says. "It has gone well and truly mainstream - something that is reflected by the number of advisers, clients and subsequently assets on the platforms."
So what are the new models offering to avoid becoming 'me too' wraps? Tilney's MasterAccount is designed as a white-labelled investment reporting and administration platform with an investment management service, while Praemium has come to the UK market from Australia with the hugely successful SMA, which only uses the shares in a fund manager's portfolio, eliminating all the servicing around the fund itself and thus lowering the price.
Perhaps the most interesting newcomer to the scene is adviser-backed group Nucleus, which came to the market with £3bn under management from seven firms. Nucleus's mission upon its introduction was to address the huge disparity between the value of the UK life sector and the IFA sector - that is, £100bn and £500m respectively. Add Standard Life's new service and the picture for wrap has changed dramatically in 2006.
The demise of the likes of the Amex Wrap earlier this year, the launch of the Platform Committee and the merger of Skandia MultiFunds and Selestia have also been touted as the beginnings of a consolidation in the market.
Eats argues this is certain to happen at some point. "This business is about high-volume, low-margin process," he says. "We are a utility and a utility business never usually has a large number of players - typically it is three or four big ones and a couple of niche offerings, who do the likes of derivatives and other more exotic developments."
For his part, Thomas believes that, with so many offerings now on the market, the days of the box-ticking mentality are over. "As a business, wrap has come a long way in the past two years," he says. "Whatever approach you come from, those who are really committed to the market now have all the bases covered in terms of wrappers and administration.
"What advisers really want now is a good service with a partner they can trust. They want to know how fast and keen providers are to do the best by them and their business. The days of a box-ticking mentality are now well and truly over. Is the product easy to use? Is the technology up to scratch? Does it provide an all-round service in the widest context? That is what advisers really want to know."
The life and pensions sector is one area wraps are beginning to attack in force. Says Eats: "Cofunds has been working in the market throughout 2006 with launches both in February and April, while FundsNetwork has done a similar thing in its partnership with Standard Life."
As assets and providers soared, 2006 was definitely the year wrap went mainstream. 2007 could well be the year providers come to realise that, even if you're lucky enough to find a pie that keeps growing, not everyone can take a bite out of it.
HL and Liberty SIPP slowest
Lifetime and annual allowances
'IFAs bore the brunt'
'Recovery or boom'