Imago Blog

Scheme Pension Illustrations

2009-06-23T10:23:00.000+01:00

Rowanmoor Pensions has rolled out a pension scheme illustration service to allow advisers to offer clients a projection of their income from a scheme pension compared to USP and ASP.

Designed for anyone wanting to set up a Rowanmoor Pensions SIPP or Family Pension Trust, the service has been launched in response to increased demand for scheme pensions. The boost in pensioner interest in scheme pensions is linked to the potential for taking higher levels of income and the fact it can be paid with a guaranteed period of up to ten years.

TCF Failures

2009-06-05T08:38:00.001+01:00

Christopher Read, chairman of pensions software company Dunstan Thomas, said advisers should be cautious about the way they transfer their clients onto a wrap platform

He said the regulator underlined concerns around customer migration strategies of adviser firms.

Mr Read said: "The survey indicates that 71 per cent of IFAs may be in breach of treating customers fairly by selecting specific groups of customers to migrate to wrap rather than explaining the pros and cons of wrap to all customers and helping them to make the right decision for them."

He said a comment on this issue made by the FSA had underlined concern about customer migration strategies of adviser firms.

It said: "If advisers do not offer wrap when it is considered to be suitable, that may call into question the suitability of their recommendation."

One of the reasons for some advisers only transferring new clients into wraps may be to do with the burden of transfer existing assets onto the platforms, Mr Read said.

Corporate WRAP

2009-06-04T20:46:00.000+01:00

Life insurers will increasingly look to the workplace wrap market, as their platforms fail to make ground in the individual arena, according to e-business specialists, Dunstan Thomas.

Its prediction comes as Friends Provident hinted it may revive its wrap platform to target the corporate market.

Corporate platforms, often known as workplace wraps, allow employers to offer a range of employee benefits through a single, online portal.

They are intended to go beyond traditional benefits such as life insurance and a group pension, and allow employees to purchase financial products such as ISAs and other investment vehicles.

Chris Read, chairman of Dunstan Thomas, believes the wrap market will divide in the future, with large insurers opting to provide for the corporate market, while independent firms continue to focus on individual business sold through advisers.

"I think advisers will continue to attract the attention of independent wrap providers in the future, while the insurers will have to look to new markets, and workplace wrap seems a good place to start," says Read.

Friends Provident is one insurer which is currently exploring opportunities to create a corporate platform, after abandoning its adviser-focused wrap in early 2008.

A Friends Provident spokesman says: "We think the corporate platform could be the next stage in the corporate pensions market, and is a means to offer other products to potential customers.

WRAP platforms - transforming the way advisers do business

2009-04-30T09:25:00.002+01:00

In a kind response to comments to the new Dunstan Thomas business guide - "WRAP platforms - transforming the way advisers do business" from Kevin Jack of Enhance Solutions.....

Thanks for your email below and the WRAP publication which is very thorough and ticks all the boxes as far as I can tell regarding the development of the Wrap market.

Assuming RDR is delivered on time, I can see potential chaos as IFAs who wish to remain independent struggle to divorce themselves from commission payments - it's bad enough effecting a change of agency let alone rewriting the whole commission model. Therefore, your point about IFAs unbundling commission arrangements sooner rather than later has resonance and will place them at an advantage over their competitors.

Although it was given a thumbs down in the survey results, one of the results of RDR is the potential for Wrap providers to take the place of Bancassurers or life companies as 'direct to consumer' distributors of product. I can see people flocking from banks for advice and also many consumers wishing to take control of their own affairs ('what do I need to pay an adviser for?') - maybe a Wrap provider may become the new 'man from the Pru' (possibly the 'man from Novia'?). Wraps lend themselves to online distribution, so direct to consumer via the web must be a route under consideration.

My final observation, also highlighted in your report, relates to Wrap flexibility to accommodate esoteric investments; this appears especially pertinent now as many advisers look to alternative investments for positive returns, such as structured products, life settlement funds and film partnerships to name a few. Any Wrap that can accommodate these within their tax wrappers will be at an advantage.

FSA will replace it’s “principles-based” regime with “outcomes-focussed” regulation

2009-03-12T13:03:00.002Z

Well this has just come across the wires, and what a surprise - a movememnt away from Principles based regulation. We were expecting a return to a more prescribes bsaed approach. But to my surprise they have chosen an outcome based approach. Sounds a bit too fluffy for me. To support the outcomes a more prescribed regime will called for. So the news story is:

FSA chief executive Hector Sants has warned that he is determined to ensure people are frightened of the regulator.

Speaking at the Reuters Newsmakers event today, Sants said the FSA will replace it’s “principles-based” regime with “outcomes-focussed” regulation, signifying a move from regulation based on observable facts to governance based on judgments about the future.
Sants described the switch as a fundamental change and said the FSA will make “judgments on the judgments of senior management” and take actions if they risk statutory objectives.

He said this approach will carry “significant risk” and judgments will not always be correct with hindsight, but society expects regulators to be acting in that way.

Sants said: “Historically, the FSA characterised its approach as evidence-based, risk-based and principles-based. We remain, and must remain, evidence- and risk-based but the phrase ‘principles-based’ has, I think, been misunderstood.

"To suggest that we can operate on principles alone is illusory, particularly because the policy-making framework does not allow it. Europe, in particular, has a particular penchant for rules and in any case in a number of key areas such as prudential they are indeed necessary.

“Furthermore, the limitations of a pure principles-based regime have to be recognised. I continue to believe the majority of market participants are decent people; however, a principles-based approach does not work with individuals who have no principles.”

Wrap Trends – 2009 and beyond

2009-03-11T09:33:00.001Z

Stan Kirk, an independent expert on wrap platforms, looks into his crystal ball and offers some insights based on experiences over the last 10 years.
The potential for growth and success of wrap platforms looks, on the face of it, very strong. My view is that wrap platform providers that want to attract New Model Adviser (NMA) firms need to offer the following:
 Unbundled and fully transparent charging
 Open access to Unit Trusts extending to UK shares, ETFs and Investment Trusts as a minimum
 A good range of tax wrappers including ISA, Pensions, General Accounts and ideally Insured Company Bonds
 Model portfolios to enable IFAs to group clients by characteristics and offer them packages of investments which can then be tailored as required
 Bulk Transaction capability to effectively automate the process of moving groups of clients into these portfolios whilst securing appropriate client agreements
 Use proven componentised tools rather than through bespoke coding will probably cost a tenth of the price to develop and is simultaneously easier to upgrade, improve and integrate with other systems. Ultimately platforms built this way will be the winners and the notable failures have been those that have tried to go it alone.
 An independent, service-led platform. A wrap that is owned by AXA or Prudential is never likely to be favoured by a NMA.
Of the top 10 true wrap platforms that are well established only Transact, Nucleus and now Novia have ticked all the above boxes. In our view there is still scope for one or two more new entrants if they are prepared to stick to the rules. The deep pocketed IFA firm consolidators like Focus Financial Partners may well be the place to look. These groups are already working with IFAs to help them plan exit strategies and will need to offer platforms to entice them.
If you assume that a good adviser today will look after assets (AUM) worth at least £20 million. An IFA firm with five advisers could achieve AUM of £100 million. A platform only needs to attract 50 adviser firms of that size to achieve AUM of £1 billion. Our estimates are that a platform with AUM or AUD of over £1 billion will be in strong and positive profitability. Wrap platform providers with real focus and on independence-led service should be able to reach this target quite quickly.
Real opportunities for established platform expansion lie in extending beyond offering pensions and investments and into protection and even mortgage products. ‘Workplace Wrap’, sometimes called employee wealth or corporate platforms, offer the other clear route to growth. The employee benefits consultants such as Hewitt Associates and Mercer have an opportunity to step beyond their employee benefit consultancy roles into provision of a corporate wrap platform.
However they need to do it in such as way as not to upset their customers - the employers - or the product providers which already have a big stake in the employee benefits market. We don’t yet know what will happen in this sector but there is certainly a great deal of interest in it as final salary Defined Benefit schemes face increasingly pressure, whilst employers recognise that the way to fill the widening pensions gap is through offering employees flexible and functionally-rich employee benefits environments that look more like SIPPs than the endangered ‘all eggs in one basket’ DB schemes.
Despite the great success of wrap there remains a significant minority of advisers focused on independence who will not be prepared to transfer client assets into wrap platform because they would rather pick funds and negotiate charges direct with fund managers. Wrap platforms need to think hard about reaching this group through clear focus on broadening the choice; increasing the services and tools offered; reducing management charges; and educating them about the benefits of automating so many tasks to the point where efficiencies gained are undeniable to the adviser and ultimately the customer.

the future of WRAP

2009-03-09T16:17:00.000Z

The potential for growth and success of wrap platforms looks, on the face of it, very strong. My view is that wrap platform providers that want to attract New Model Adviser (NMA) firms need to offer the following:
 Unbundled and fully transparent charging
 Open access to Unit Trusts extending to UK shares, ETFs and Investment Trusts as a minimum
 A good range of tax wrappers including ISA, Pensions, General Accounts and ideally Insured Company Bonds
 Model portfolios to enable IFAs to group clients by characteristics and offer them packages of investments which can then be tailored as required
 Bulk Transaction capability to effectively automate the process of moving groups of clients into these portfolios whilst securing appropriate client agreements
 Use proven componentised tools rather than through bespoke coding will probably cost a tenth of the price to develop and is simultaneously easier to upgrade, improve and integrate with other systems. Ultimately platforms built this way will be the winners and the notable failures have been those that have tried to go it alone.
 An independent, service-led platform. A wrap that is owned by AXA or Prudential is never likely to be favoured by a NMA.
Of the top 10 true wrap platforms that are well established only Transact, Nucleus and now Novia have ticked all the above boxes. In our view there is still scope for one or two more new entrants if they are prepared to stick to the rules. The deep pocketed IFA firm consolidators like Focus Financial Partners may well be the place to look. These groups are already working with IFAs to help them plan exit strategies and will need to offer platforms to entice them.
If you assume that a good adviser today will look after assets (AUM) worth at least £20 million. An IFA firm with five advisers could achieve AUM of £100 million. A platform only needs to attract 50 adviser firms of that size to achieve AUM of £1 billion. Our estimates are that a platform with AUM or AUD of over £1 billion will be in strong and positive profitability. Wrap platform providers with real focus and on independence-led service should be able to reach this target quite quickly.
Real opportunities for established platform expansion lie in extending beyond offering pensions and investments and into protection and even mortgage products. ‘Workplace Wrap’, sometimes called employee wealth or corporate platforms, offer the other clear route to growth. The employee benefits consultants such as Hewitt Associates and Mercer have an opportunity to step beyond their employee benefit consultancy roles into provision of a corporate wrap platform.
However they need to do it in such as way as not to upset their customers - the employers - or the product providers which already have a big stake in the employee benefits market. We don’t yet know what will happen in this sector but there is certainly a great deal of interest in it as final salary Defined Benefit schemes face increasingly pressure, whilst employers recognise that the way to fill the widening pensions gap is through offering employees flexible and functionally-rich employee benefits environments that look more like SIPPs than the endangered ‘all eggs in one basket’ DB schemes.
Despite the great success of wrap there remains a significant minority of advisers focused on independence who will not be prepared to transfer client assets into wrap platform because they would rather pick funds and negotiate charges direct with fund managers. Wrap platforms need to think hard about reaching this group through clear focus on broadening the choice; increasing the services and tools offered; reducing management charges; and educating them about the benefits of automating so many tasks to the point where efficiencies gained are undeniable to the adviser and ultimately the customer.

Wrap IFAs expect to migrate at least 80% of their customers

2009-03-02T16:00:00.000Z

Wrap IFAs expect to migrate at least 80% of their customers, finds new
Dunstan Thomas survey

A telephone survey of wrap platform-using financial advisers, commissioned by Dunstan Thomas last month, reveals that nearly three quarters (73 per cent) of IFAs that are using wrap platforms today, expect at least 80 per cent of their customer-base to move their assets onto their selected wrap platform. Most firms expect to have completed migration work by the end of 2010.

The main criteria for selection of a wrap platform is the quality of service being offered by platform providers (53 per cent of the sample saw this as their most important criteria). The second most significant criteria for wrap selection was the breadth of investment choices being offered (26 per cent said this was the key criteria for selection). Nearly three quarters (73 per cent) of firms have offered clients’ investment trusts for the first time as a result of wrap migration. The offer of an unbundled and transparent charging structure was the next most important issue for wrap platform users (20 per cent).

Difficulties involved in migrating assets onto wrap still remain with the movement of legacy assets from life assurers’ being cited as the primary frustration (by 53 per cent). The second largest frustration remains the fact that several platforms do not universally accept in specie transfers (26 per cent).

The majority of IFAs agreed that moving onto wraps had enabled them to offer a more holistic service to their customers whilst cutting their administrative burden significantly.

James Roberts at Partners Wealth commented on the benefits to his firm: “Wrap platform migration has enabled us to lay down and communicate our service proposition to clients very clearly. We now guarantee an annual review meeting for all wrap clients. We also offer six monthly reviews, combined with clearly defining all clients’ risk profiles and offering continuous, even daily, valuations via our website which is powered by one of the platforms.”
Andy Jervis of Chesterton House, explains: “Wraps have enabled us to pre-agree Client Remuneration based on a simple and understandable charging structure and to only charge for service and expertise rather than to execute a transaction. We can now tell the client exactly what percentage of Assets Under Management they are paying us, the wrap and the fund manager, annually and per transaction. This kind of transparency also enables us to be both more flexible and more consistent with our charging.”
Christopher Read, chairman, Dunstan Thomas, commented:
“It is quite clear that the converts to wrap platforms are already deriving considerable benefits in terms of the service and range of broadening investment choices they’re able to offer their clients. The fact that the majority of their client-base is happy to migrate their assets to their adviser’s-selected wrap reveals a great deal about their increasing success.”

Evolution of the platform market in the UK

2009-02-27T16:36:00.002Z

How do you see the platform market evolving in the UK? Can you see platforms becoming a vital part of how advisers do business?

Our research into advisers who are already doing business through the platforms suggests that firms which are migrating clients onto wrap platforms are already reaping real benefits. The majority of IFAs said that moving clients onto a platform had enabled them to offer a more holistic service whilst cutting their administrative burden significantly.
Using platforms, advisers are often able to offer their clients a wider range of investment options. Unbundled and transparent charging offered by ‘deep’ wrap platforms was also seen as a real advantage to IFAs striving to be paid through fees for advice rather than via commission payments.
Some are even using wrap migration as the catalyst for laying out their service proposition to clients very clearly for the first time - meeting clients face to face more regularly, defining clients’ risk profiles and offering continuous, even daily, valuations via the chosen platform.
All these benefits generate real customer benefits very fast. The IFAs we spoke to are seeing an average of four out of five of their clients migrating their assets across to a wrap when the benefits have been fully explained to them.
Most people believe that migration to wraps will accelerate over the next two years as platform providers improve their offerings and both the costs and time-scales, associated with migrating assets onto them, continue to fall. We personally think that deep wraps offerings have a very bright future and this perhaps explains why we are still seeing new platform offerings coming to market recently.

Migration to Wrap - Legacy Asset Migration

2009-02-27T14:42:00.000Z

Wrap IFAs expect to migrate at least 80% of their customers, finds new Dunstan Thomas survey
A telephone survey of wrap platform-using financial advisers, commissioned by Dunstan Thomas last month, reveals that nearly three quarters (73 per cent) of IFAs that are using wrap platforms today, expect at least 80 per cent of their customer-base to move their assets onto their selected wrap platform. Most firms expect to have completed migration work by the end of 2010.
The main criteria for selection of a wrap platform is the quality of service being offered by platform providers (53 per cent of the sample saw this as their most important criteria). The second most significant criteria for wrap selection was the breadth of investment choices being offered (26 per cent said this was the key criteria for selection). Nearly three quarters (73 per cent) of firms have offered clients’ investment trusts for the first time as a result of wrap migration. The offer of an unbundled and transparent charging structure was the next most important issue for wrap platform users (20 per cent).
Difficulties involved in migrating assets onto wrap still remain with the movement of legacy assets from life assurers’ being cited as the primary frustration (by 53 per cent). The second largest frustration remains the fact that several platforms do not universally accept in specie transfers (26 per cent).
The majority of IFAs agreed that moving onto wraps had enabled them to offer a more holistic service to their customers whilst cutting their administrative burden significantly.
James Roberts at Partners Wealth commented on the benefits to his firm: “Wrap platform migration has enabled us to lay down and communicate our service proposition to clients very clearly. We now guarantee an annual review meeting for all wrap clients. We also offer six monthly reviews, combined with clearly defining all clients’ risk profiles and offering continuous, even daily, valuations via our website which is powered by one of the platforms.”Andy Jervis of Chesterton House, explains: “Wraps have enabled us to pre-agree Client Remuneration based on a simple and understandable charging structure and to only charge for service and expertise rather than to execute a transaction. We can now tell the client exactly what percentage of Assets Under Management they are paying us, the wrap and the fund manager, annually and per transaction. This kind of transparency also enables us to be both more flexible and more consistent with our charging.”Christopher Read, chairman, Dunstan Thomas, commented:“It is quite clear that the converts to wrap platforms are already deriving considerable benefits in terms of the service and range of broadening investment choices they’re able to offer their clients. The fact that the majority of their client-base is happy to migrate their assets to their adviser’s-selected wrap reveals a great deal about their increasing success.”

Hundreds of thousands of 'Babygloomers' are sacrificing their own pensions to help their parents financially amid the savings crisis

2009-02-23T10:15:00.000Z

Figures for The Daily Telegraph reveal that a typical Babygloomers - defined as someone who is having to support both their children and their parents - will forego more than £100,000 of their own pension pot by helping their parents financially in retirement instead.
It is the starkest evidence yet of how the group is feeling the financial squeeze.
The figures, calculated by wealth managers Hargreaves Lansdown, suggest that a 45-year-old who gives £250 a month to their parents instead of putting into their pension pot, will lose out on £104,007 by the time they reach 65.
And for those who give up to £1,000 a month to their parents, the figures are even more dramatic, with Babygloomers losing out on £415,363 towards their pension.
It comes after The Daily Telegraph revealed earlier this month that more three million people are helping their parents financially.
That separate research, carried out by Norwich Union, revealed that 1.3m adults aged between 17 and 65 are paying their parents more than £250 each month, with many paying up to £1,000.
Tom McPhail, a pensions expert at Hargreaves Lansdown, said: "Middle-age is the stage in life when people will be hoping to increase their retirement savings having been through the costs of having a young family and setting up home.
"The last thing they want to be doing is to find that have to redirect their own retirement savings to support their parents."
He added: "This also highlights how important it is to get on with your retirement planning as early as possible and not leave it until later on in life."
Babygloomers are also facing a massive increase in their own cost of living.
The average gas and electricity bill, for example, rose from £912 at the beginning of 2008 to £1,293 during last year. Recent cuts in energy prices have brought this bill down, but only to £1,253.
Those aged between 40 and 49 are particularly badly hit, with one in 10 in this group helping out their parents financially, according to the Norwich Union research.
Financial experts urged Babygloomers not to overlook their own retirement planning.
Dominic Fraser-Smith, a product manager at Norwich Union, said: "These latest figures provide further shocking evidence of the difficult trap that Babygloomers can find themselves in.
"While this generation is understandably keen to help its parents in the current economic climate, there is a very real possibility that they could be leaving themselves short in the future. This then creates a vicious circle as the problem is passed on to the next generation."
Richard Norman, director of savings at Post Office, said: "This is obviously a very difficult situation, as although it is understandable that Babygloomers want to help their parents out, they are leaving themselves seriously at risk.
"From Post Office's own research for The Daily Telegraph we suspect that one of the hardest hit age-groups is those aged 35-54 who are currently saving far less than 18- to 34-year-olds and therefore bearing the brunt of their parents' financial struggles. As a group far nearer to retirement it is essential they save whatever they can; they should also be ensuring their parents are making the most of all their existing assets - such as looking at benefit entitlement."

Twittergen and the retirement market

2009-02-13T22:45:00.001Z

I am interested in figuring out how many people in the industry are twittering. It is all the rage at the moment. I can see some real business benefit.

Legacy asset migration to platforns - Treating Customers Fairly (TCF)

2009-02-03T14:27:00.001Z

The current economic downturn has presented real challenges to the retail financial services industry as much as any other industry. Confidence as well as fund performance has taken a real beating. We know that there is not a great deal of new money coming into the market and a good deal is flowing out into cash accounts. With falling portfolio valuations and nightmare economic scenarios being played out in the media daily it is hardly surprising that some IFAs are feeling a little gloomy right now.

Nevertheless, there are two opportunities currently conspiring with the stock market performance shock to create a massive opportunity for the IFA industry in 2009: untapped legacy assets and the emergence of now mature wrap platforms after eight years of trial and error since the first was launched. The first element is a massive book of untapped, not actively managed legacy assets. We know there are literally billions of pounds of customers’ money lying in ageing personal pension plans and other products which are not being actively managed for the client at this point and are stuck in failing ‘buy and hold’ equity strategies, including traditional ‘balanced managed funds’ run by many life assurers. Advisers with old filing cabinets full of these cases gradually growing mildew in their basements will need a particularly good action plan when the annual reports and valuations start to land on the doormats of these clients this year…….but one is available.

The total UK retail investment market, life company funds, mutual funds and quoted investments (excluding what’s left of the defined benefit/final salary pensions market) is still valued at several trillion pounds. Much of this is still sitting in underperforming, largely unmanaged portfolios which are having their worst run in nearly 20 years. Clients will be looking for new answers to make their money work harder, IFAs who can offer this will be the winners.

The second element is the emergence of maturing wrap platforms. Wrap has moved from theory to reality through a sometimes painful learning curve experienced by the pioneers and pioneer users who have sorted out the ‘how to’ from the ‘how not to’. The mature wraps now offer a genuine opportunity for IFAs to define and deliver much more impressive and sophisticated combined service and investment proposition to their clients. These propositions can include meeting clients more regularly; defining their risk profiles; actively and regularly rebalancing portfolios; offering dynamic, even daily, valuations, and offering a wider range of asset classes and investment opportunities..
The mature platforms now offer much more transparency around pricing than was previously offered. The ‘unbundling’ of pricing which some of the more mature platforms offer is firmly in line with FSA proposals for independent Adviser Charging and offers IFAs a clear break with commissions dependency. For the first time fees can be linked to the amount and complexity of advice being given and are transparently assigned to parties involved. For example one major platform charges 0.25% of total assets under direction (AUD) as an annual management charge. The IFA advising on these assets may charge 0.5% of AUD by agreement with the client. With this sort of level of charging it is possible for the platform to pass on rebates, given by the fund manager involved, to the client. Fund managers typically charge 1.5% Annual Management Charge for a direct investor, but through a wrap platform this can be cut to 0.75% by rebating the difference. Although some platforms are still pocketing the difference, the more enlightened ones are passing these on and charge separately for their services.
If you are thinking that typical wrap costs are still significantly more than your average customer who has less than £100,000 in liquid assets is comfortable to pay; you may be right for a percentage of your customer-base. But for those above a certain threshold (which could now be as low as £60,000 in reality) it is surely worth identifying potential wrap platform providers; reviewing the services they offer; and then sharing the results of that exploration with some of your more active customers, even if their asset base is below this notional threshold.
Some clients may have less than £100,000 with you now but they often have more assets currently only vaguely recorded on your last fact find but not within the scope of your advice today. They may have funds in poorly performing deposit accounts or shares (inheritance, or denationalisation or demutalisation issues from the 80’s and 90’s). They may even have bought into funds directly (perhaps having succumbed to a third party ISA mailing or offer), paying unnecessarily high charges for this direct access. Some IFAs have experienced an average ‘wrap uplift’ of as much as a third when they transfer existing clients through the addition of these other assets, now all earning a fee for the adviser.
In researching emerging attitudes towards wraps, we interviewed a number of IFAs that are already actively migrating customers onto a range wraps. Our discussions revealed the take-up from clients they had offered it to has been nearly universal. Most expect to complete their discussions about the opportunities offered by migrating portfolios onto wraps with their entire client-base within two years of starting the process. The minimum percentage of customers that our straw poll of IFAs expected to migrate was 50 per cent.
So for the wrap converts what are the key advantages? The ability to offer higher quality service, without necessarily increasing charges to clients, comes through loud and clear.
James Roberts at Partners Wealth goes further: “Wrap platform migration has enabled us to lay down and communicate our service proposition to clients very clearly. We now guarantee an annual review meeting for all wrap clients. We also offer six monthly reviews, combined with clearly defining all clients’ risk profiles and offering continuous, even daily, valuations via our website which is powered by one of the platforms.”
Others say that transparency around the ‘unbundling’ of charges is a key benefit which is transforming their relationships with clients.
Andy Jervis of Chesterton House explains: “Wraps have enabled us to pre-agree Client Remuneration based on a simple and understandable charging structure and to only charge for service and expertise rather than to execute a transaction. We get a formal audit trail of charges from our wrap provider which tells the client exactly what percentage of AUM they are paying us, the wrap and the fund manager, annually and per transaction. This kind of transparency also enables us to be both more flexible and more consistent with our charging.”
It is becoming clear that some early adopter companies are transforming their businesses and re-energising the relationships they have with their clients through migrating them onto wrap platforms.
Other key benefits, according to the IFAs we spoke to, include an ability to offer a broader range of investments to clients on a wrap platform. They said they had been able to broaden their portfolio advice to include ETFs, investment trusts, FSA-approved offshore funds, even commodities and ground rent funds. Others said that wraps offer a consolidated position which makes it much easier to assess income levels for those already in retirement that need to create a stable income from their savings and investments.
What is clear from our investigations is that the benefits of wrap migration for IFAs genuinely committed to remaining independent (and not going down the guided advice route) are multitudinous and heavily outweigh any initial costs and time involved in transferring assets. The vast legacy asset pool must give all IFAs, even those which have not yet embraced wraps, an opportunity to investigate a number of the mature wrap offerings that are now competing with each other for IFAs’ business. Frankly if they don’t, they may well be staring at a problem that could affect the growth of their firm not only this year but for many years to come.

WRAP assets under management

2009-01-13T13:50:00.001Z

The £140 million was a rough estimate of the total ‘platform’ market consisting of pure wrap, fund supermarkets, SIPP and life companies offering large investment choices – often several hundred funds, and was to be compared with the total retail investment market estimate (all life cos, mutual funds, retail stock market, SIPP etc) which is several trillion pounds.

Skandia Life started the latter in 1984 and has been much copied since. Before the Selestia merger they had (from memory) circa £25 billion, now a bit more or maybe the same owing to asset market value shrinkage. The 2 big fund supermarkets arrived in 2000 just after Transact launched, both new concepts at the time. Fidelity and Cofunds have similar levels of assets approaching £15 billion each I believe with Cofunds just the bigger of the two. Both have marketing budgets several hundred times greater than Transact and also much simpler propositions which largely explains the difference in accumulated funds.

Of the ‘proper’ Wraps, Transact was the largest at £5.8 billion late summer and with inflows of about £100 million per month, despite market falls will now be above £6 billion. Standard Life is heading towards £5 bn I understand, NU has about £3 bn (although still closed to new business), Abbey/James Hay/Santander claim £11 bn but that includes the SIPP which existed at the same level before the wrap was launched so the guess is they have little on the wrap. Nucleus and Ascentric are smaller players with a couple of billion between them.

£140 bn is still a reasonable estimate for this lot added up, most of it being Skandia and other life companies copying the ‘hundreds of funds’ approach which is itself now approaching legacy status although really only became firmly established in the mid 90’s (i.e just over 10 years).

Assets are also cascading down this chain from Skandia like propositions to fund supermarkets and then ‘full monty’ (unbundled pricing and full open architecture investment choice) SIPPs and Wrap like Transact.

Money in them there hills - the opportunity of legacy asset migration

2008-12-22T08:56:00.003Z

The economic cycle we find ourselves in has challenged the savings industry. There is not a great deal of new money comming into the market. With falling portflio valuations, and nightmare economic scenarions being played out it is hardly surprising.

A beam of hope for the industry is in the massive book of untapped value in legacy assets. These are assets in which there is no active advice being performed for the clients interest. There is a further argument that states that TCF disciplines are not being performed on these clients.

Let's look at the size of the opportunity. There are about 24,000 advisers in the UK, each with an average of £15 million AUM. Effectively this means there are £350 billion of AUM through the advice channel. It is calculated that active advice is being performed on £150 billio (i.e. those assets that have migrated to a platfrom). This leaves £210 billion as legacy assets.

The challenge now is how to create a process that is industrialised enough to provide business intelligence to present convincing arguemtns for migration of legacy assets into an environment that is being actively managed and enhanced.

Social networking and savings

2008-12-22T08:36:00.004Z

For some time now I've been looking at social networking to see how its application can be applied to the savings industry. There are some spine tingling statistics surrounding social network usage such as Facebook.

Facebook has over 12.6 million users in the UK, a third of the online population. There are a further 120 million globally. The numbers are trully phenomenal. Facebook receives 15 billion page views per month, the third most visited site on the web. 50% of users, return multiple time per day.

34% are professionals, with each user having an average social networking group of 120 peers. Facebook, like many social networking sites works on the basis of shared voyeuristic activities and experiences, such as game playing and other applications. There are thousands of applications written and being written for Faceboook today.

Within this plethora of applciations there just has to be a place for encouraging savings and a new paradigm for the delivery of financial services products. For instance, RDR appears to open the door to social networking with the de-coupling of advise from sale creating the potential for web-based execution-only that link to transaction engines and to wrap platforms.

There is the potential for financial education and advisory tools that link into transaction environments, this could be massive.

There is an Opportunity to Twitter / Yammer i.e. to communicate in an active participatory way.

Social Networking continues to be an enigma to many Chief executives and managers in the financial services market, however, slowly we are seeing an awakening to the opportunity that they offer. Coupled with the deterioration of new money comming into the market, social networking may provide the platform to address an 18-30 demographic, currently alienated from saving, so as to eventually become the client base of the next thirty years.

Corporate Twitter

2008-09-08T13:25:00.000+01:00

Take advantage of Protected Rights and SIPPs

2008-09-03T15:45:00.000+01:00

As you know, from 1st October 2008 it will become possible to transfer Protected Rights funds out of S2P/SERPS schemes. To date these funds have only been allowed to be held in insured funds, bank deposits or mutual funds. The industry is quite rightly expecting a surge of activity. The size of the market for this on coming opportunity is significant. According to the Financial Services Authority some eight million people have contracted out of S2P/SERPS since 1997. Just as many people may have contracted out via occupational defined contribution schemes going back to 1987. Sources close to this put the estimated value of PR funds at close to £100 billion. However, from 1st October it will be possible to transfer PR funds and associated tax rebates into Appropriate Personal Pension Schemes (APPPs) and many predict large-scale movement into Self Invested Personal Pensions (SIPPs).

We have added Protected Rights capabilities to Imago Front Office, with illustrations able to support transfers of Protected Rights (PR) funds and rebate contributions from HMRC associated with S2P schemes.

We offer Imago Front Office as a web based solution that can be installed at your site, or at our site, or can be used as a bureau service. Furthermore the calculation engine that delivers the computations for the illustrations can be integrated and embedded into host systems for a truly seamless solution.

If you would like to find more about Imago Front Office, please drop me a line or contact me on 023 9282 2254.

TCF and Illustrations

2008-07-18T17:13:00.002+01:00

TCF (Treating Customers Fairly) driving new sales of Imago Front Office to satisfy outcome 3 - Consumers are provided with clear information and are kept appropriately informed before during and after the point of sale. Imago Front Office provides theplatform to service this regulatory requirement.

Comparative quotes, comparative illustrations

2008-07-08T18:15:00.002+01:00

I've just got back from a brainstorm meeting with a wrap provider ... who are doing quite nicely, looking into providing a comparitive illustration services to show the difference between on and off plan tax wrappers and funds. The solution we provide will have to show the full effect of charges on both wrappers as seperate socumetns and then a summary - more easier to read docume twith graphics to illustrate the savings by going on plan.

SIPP Illustration systems and SMPI

2008-07-04T15:27:00.004+01:00

Dunstan Thomas has been developing illustrations and projection systems for the SIPP and wide pensions and investment market place for over a decade. Clients are spread throughout the SIPP market from banks, life & pensions companies to TPA'a and wealth managers.

Today the Illustrations are part of the Imago Front Office suite developed around a set of SOA architectures are incredibly flexibly to deploy and manage.

http://www.dthomas.co.uk/imago/illustrations/Frontoffice.html

Structured drawdown or variable annuity

2008-07-04T15:23:00.003+01:00

A recent Citywire round table event, I note that John Moret asks the question "Sttructured drawdown or variable annuity" ? I think it would be helpful for the consumer to have a level of definition consistiency.

SIPP Administration Systems

2008-07-04T09:01:00.003+01:00

Imago Back Office has been on the market for over a year now.
We are finding that the opportunity for us to also provide the administration service is very strong. I would be interested in thoughts and opinions on software provider turning its hand to administration.

Effect of RDR on the UK Life Industry

2008-06-25T11:00:00.002+01:00

There are 5 key areas that RDR is llikely to effect UK Life industry.
1. Distribution competition - the model for most financial adviser is not sustainable
2. Consumer Forces - consumer access at an all time low with poor public perception market and mistrust. Furthermore consumers are looking for commoditised transparent products, demanding high services level. Most consumers do not seek advice.
3. Wraps and Technology - platforms regarded as the solution as the compete for AUM and scale to make the economics work.
4. Regulation - FSA RDR, TCF, National Pensions Saving Scheme.
5. Providers - manufacturers are at risk through - Capital shortage, margin erosion, disinermediation and consolidation.

Size of the retirement market and "At Retirement" market

2008-06-25T10:04:00.003+01:00

The size of retirement market in the UK is predicted to more than double within five years to over £30Billion
The At Retirement market was worth £13.6Billion in 2007. It is expected to grow by 20% over the next 5 years.
The At Retirement market is clearly an enourmous growth aera that in my opinion is underserved with technology.