Too much energy is wasted in trying to define what a wrap is, when all advisers should be asking is what a wrap needs to be able to do to add value to their business, suggests James Hay.
Shaun Sandiford, regional sales director at James Hay Wealth Management, says as soon where financial services is concerned ideas tend to become overly complicated, and argues this has happened with wraps where advisers and even some providers are confused about what is on offer.
Essentially, he argues, there are three tiers of technology proposition open to the intermediary market.
At the basic level is product in-fill, where a product is developed and then sold, equivalent says Sandiford to a bedside television with five terrestrial channels.
Secondly, there is the fund catalogue or supermarket level, where there is more choice but doesn’t cater for everything - equivalent to a widescreen TV with freeview - while the top level is wrap which offers choice from the whole market and is compared to a giant plasma, with a Sky-HD package.
“Wrap is not complicated, if you have a choice between a bedside TV, a widescreen or a plasma, and they all cost the same amount, which would you choose? It’s just that the industry tends to make things complicated,” says Sandiford.
He suggests the key to wrap is to make it simple, and to encourage or ‘empower’ advisers to make use of the new technology, by getting them to ask what a wrap has to do to make advisers use it.
Sandiford says: “Too many providers tell advisers their wrap can do everything for everybody and is cheap as chips, but that’s just not possible, it doesn’t make economic sense.”
He claims some providers are entering the wrap space for the wrong reasons and they see it as a way of reducing churning and recouping losses, but Sandiford says in some cases it is just a case of ‘recycling’ existing systems.
“They are providing a shiny front end system for advisers to look at, but the systems behind it are all the old life assurance systems which we’re trying to get away from. It’s a bit like Charlie and the Chocolate Factory with all the Oompaloompas behind the scenes.
“Some providers are continuing in the same way with the same processes, while we’re trying to reduce the number of Oompaloompas we need.”
In addition, Sandiford believes the business model IFAs use can sometimes cause problems when looking at wraps, but he argues in the debate over fees versus commission, the industry cannot ask advisers to change their business model overnight without providing support.
He thinks some firms just aren’t ready to remodel their business and make that change, which “is not a bad thing, it just means they’re not there yet”.
As a result, he says James Hay will only work with ‘brass-plate’ IFAs who are prepared to embrace the technology and make use of wrap systems, as he says its like being a personal trainer “you can only work with those who want to get fit otherwise they continually fight against the change”.
James Hay says the issue of trust between advisers and wrap providers has been one of the driving factors in the company’s recent decision to ‘flatten’ its management structure.
“Once people understand what wrap is and how it can benefit them, even if it’s only cutting down the time taken to write a client report, they don’t have to choose our wrap, they can pick something which is suited to them.
“Wrap development is not going to suddenly stop, and it's going to slowly creep up on us without us realising it, just like fund supermarkets and reality television. They’re everywhere and we don’t really know how it happened. The next year or so is going to be a very exciting time for the market,” adds Sandiford.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Nyree Stewart on 020 7034 2681 or email [email protected]IFAonline
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