Wrap accounts Opportunity or threat? David Ferguson 2 March 2005 [email protected] +44 7974...
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Transcript of Wrap accounts Opportunity or threat? David Ferguson 2 March 2005 [email protected] +44 7974...
Agenda
o What is a wrap account?
o How is the UK market developing?
o What are the key issues in the UK?
o Value transfer
o How might you best prepare and respond?
Definition of wrap
A service that allows IFAs tomanage all their clients’ assets
and liabilities to best effect
UK market background
Wrap model - a UK definition
CashDeposit a/cTrading a/cIncome a/cLoan a/c
Mortgage a/c
AssetsMutual funds
EquitiesGilts
BondsOther
PropertyCommercialResidential
Direct Pep/IsaSipp/
post-2006pension
Offshorebond
User interface
Analytical and support tools
Wrap model - UK real world
CashDeposit a/cTrading a/cIncome a/cLoan a/c
Mortgage a/c
AssetsMutual funds
EquitiesGilts
BondsOther
PropertyCommercialResidential
Direct Pep/Isa SippOffshore
bond
User interface
Analytical and support tools Restricted tools
Legacy products
Key issues
o Enhanced client proposition
o Back office efficiency
o Logical conclusion of open architecture
o Margin - magnitude and ownership
o Value
Evolution
o Fund supermarkets
o US / Australian experience
o Sipps
o Convergence of life, pensions and mutual fund savings ‘products’
Pricing
o Becoming transparent
o In headline terms• asset management - 75bps• financial advice - 50bps• wrap manufacturing - 50bps
o Total cost in line with naked fund cost
Current providers
o Pure wrap• Transact• Abbey• American Express
o Supermarket-based• Selestia (Old Mutual)• Skandia
o Wealth management• Seven Investment Management
Current issues
o Speed of adoption
o Historic IT spend
o Regulation
o Re-registration
o Business models
Salesimpact
Legacyimpact
A-Day+= x
Intransigence
Fn {margin drift, distribution quality}
Fn {persistency, performance, distribution model}
The impact!
IFA drivers
Clientproposition
Businessvalue
IFA opportunity
Clientproposition
Administrationcosts
Asset-basedrevenue
IMPROVED INCREASED
REDUCED
Market value
UK life industryc£100bn
UK IFA sectorc£500m?
Legacy issues
o Value of client
o Surrender penalties
o Market value reductions
o Tax
o Specialist products and assets
Isa Pep
Directholdings
Personalpension
Sipp
Offshorebond
Endowment
Onshorebond
EPPAnnuity
Section32
Market value
UK life industryc£100bn
UK IFA sectorc£500m?
Wrap
Market value - now
UK life industryc£100bn
UK IFA sectorc£500m
Market value - post wrap
UK IFA sectorc£3-5bn
UK life industryc£80bn
How might you respond?
Understand your business model
What do you really add to the asset accumulation market?
Consider your commitment to open architecture
Are you shifting on more than just the buck?
Leverage your distribution relationships
Is this is where your future lies?
Appreciate emerging technology
Do you really need to invest at historic levels?
Wrap accountsOpportunity or threat?
Questions
