Wrap accounts have an important role to play in ensuring an adviser's business processes are fully compliant says Alison Everett
The UK adviser market can be seen as broadly having three main advice models - product led advice, holistic financial planning and the mixed business model, which operates both of the previous models for different clients, perhaps via different registered individuals for example.
The trend in the market is a move away from the model that is reliant on stand alone product sales towards a model that relies on long term client relationships and ongoing holistic advice. The focus of the financial planning model of the future will be on managing client wealth, not finding sales opportunities.
This business model will deliver value for money to clients with the advisers being remunerated via annualised revenue, as opposed to high initial commissions. Wrap services or platforms can help this process by enabling advisers to deliver quality service to a larger pool of clients while, crucially, ensuring they remain compliant in an increasingly competitive industry.
Financial planning is more of an art than a process so you should never expect the same answer for different clients. Nonetheless, there needs to be a process within a business and platforms can be key to that. This process can enable advisers to maintain successful, long-term and profitable relationships with their clients while providing a permanent audit trail of their research and recommendations for compliance purposes.
Ease of use
Central to this are e-business services that can automate key tasks during the advice process, giving advisers more time to focus on their clients' needs and requirements. Platforms can deliver these tools via a single point of access and provide advisers with an efficient process that enables them to take information and determine the client's attitude to risk, ascertain an asset allocation, select the right tax wrapper solutions and come up with a comprehensive recommendation backed up by detailed reports.
At the beginning of this cycle advisers can use risk profiling questionnaires to assess their client's attitude to risk.
Once the attitude to risk is determined, there are a number of ways the adviser can build the asset allocation:
- tailor a bespoke asset allocation from the sectors on offer
- choose one of a number of asset allocation analysis models available
- use the client's risk description together with their proposed investment term to obtain an asset allocation based on efficient portfolio modelling
- delegate the choice of asset allocation and fund manager selection to a multi-manager fund group
Multi-manager investment solutions are increasing in popularity within the adviser market. For advisers not wanting to make asset allocation decisions themselves, multi-manager solutions enable them to select a managed investment fund that matches their client's risk profile and the multi-manager provider is responsible for the selection and monitoring of the fund managers within the fund. Alternatively, if the adviser wants to delegate fund manager selection but retain asset allocation decisions there are some multi-manager sector solutions that enable them to do this.
Advisers who choose to retain asset allocation responsibility can select individual funds themselves from the range of funds that are available on the platform they are using.
As soon as the policy goes live, it should appear on the wrap service so that valuations are available instantly at the click of a button and updated daily. Management information should also be available so not only can advisers view their business by client, but also by funds under management and by product.
Portfolio management tools can also be used to analyse the underlying stocks and assets of clients at fund, plan or portfolio level, this combined with the consolidated valuation statement gives a comprehensive overview of a client's portfolio and all by clicking just two buttons.
With a client relationship management system at the heart of the platform, everything done from quote through application to ongoing monitoring and reviews is saved against that client record on the system. This can enable advisers to demonstrate to their clients the value of the advice and wealth management services they are providing as well as demonstrating a compliant and fully documented advice process to their compliance officer or the regulator.
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