Wrap platforms have now reached a ‘proliferation peak', and the industry will begin to consolidate, according to Nick Blake, wrap sales manager at Standard Life.
Blake says many wrap providers were ill prepared for the long development cycle and continual support costs that go with creating a successful wrap platform, and believes more providers will begin to leave the market.
“We’ve seen a lot of platforms coming to market in recent years, but I think we’re now reaching a proliferation peak. The number of providers offering wrap platforms will dwindle to a few big players. Perhaps between four and six will succeed,” he says.
According to Blake, many players in the market believe they can put a wrap together in a few months, but he says it can take years of work to put in place everything an adviser needs to make the platform a viable part of their business.
However, Clive Waller, head of CWC Research, believes the market still has some way to go before consolidation begins.
"I think the platform industry is continuing to expand and expect to see around a dozen major players in the market within the next five years."
Blake says it is important to target firms that have a good understanding of what the platform offers and where it can add value to a business, rather than distributing more widely to any firm that expresses an interest.
“We like to ensure that firms get the proposition and its value and it’s also important they have a good asset base to warrant the use of such a costly system,” adds Blake.
“We then work with a firm for three to six months to understand what they want to offer their clients and to customise the platform to suit their needs.”
Blake believes that wrap platforms will become a bigger part of an adviser's toolset in the future as the industry increasingly moves towards full financial planning.
He says the wrap platform should enable an adviser to assess quickly all the assets a client has, not just those within the wrap. It must give advisers more time to spend with their clients, which is where they can add the most value.
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