The scramble for the wrap market has started in earnest. There were rumours this week that a number of adviser firms have received backing from an un-named US sponsor to build their own wrap platform in an attempt to cut out providers. This is a reflection of the fact that previous attempts at wrap have generally been inadequate. If this group is successful it would have a huge impact on the industry - it could cut out the life offices completely and the group would wield huge power in negotiations with fund management groups.
No wonder life offices have been falling over themselves to tap into the market. The L&G/Cofunds and Norwich Union/Lifetime deals (the subject of Real Adviser's news analysis this week) are just the start. But the trouble with all of these is that there are lots of people wanting a slice of the pie. An adviser platform could undoubtedly offer wrap cheaper.
But building a wrap platform is tough. The technology is complex and many systems need to be integrated. The real winners are likely to be those who can create an efficient and user-friendly system, rather than those who offer the cheapest solution. The biggest argument against wrap so far is that the systems do not work.
Of course this assumes that wrap will be as good as promised. There are lots of visionary statements about how they can transform an adviser's business and improve profits, but advisers are often reluctant to alter a tried-and-tested formula. Our research report this month shows that business transacted through fund supermarkets is now huge. Will advisers simply stick with what they know?
Wrap is likely to come about by degrees. Advisers are unlikely to be seduced by the first provider who comes along offering a whizzy new wrap. They are likely to go for the brand names they know and convert their business in increments. They have built strong relationships with the fund supermarkets and are comfortable using them. Many of these are now building wrap products and have proved themselves capable of building technology. In the end these may be the biggest winners in the wrap marketplace.
Cherry Reynard, editor, RealAdviser
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