A range of fully fledged 'wrap services' are being developed ready for launch in the UK later this year, according to a new survey by Datamonitor on behalf of JPMorgan FundsHub, a provider of technology for online financial platforms.
The new wrap products are expected to bring to the life, pensions and investment markets the same 'joined-up' approach that Barclays Open Plan, Egg and Intelligent Finance brought to banking and mortgages.
Although wrap services have been sold widely in the USA and Australia since the 1970s, the new generation of wrap services being prepared for the UK will allow a larger range of financial products with different tax classes to be actively managed as a coherent single portfolio of underlying assets. It is expected that wrap service customers and their advisers will be able to view their funds, pensions, life insurance as well as individual equities, and also take buying and selling decisions about the best balance of products within the portfolio, all while maximising their tax benefits.
Commenting on the new generation of wrap services, Mark Lund, chief executive of JPMorgan FundsHub, says: "Many funds, pensions or life insurance products have very different tax implications and asset classes but the beauty of the proposed new wrap services is that customers will be able to manage the underlying assets as if they were a single pool of assets."
JPMorgan FundsHub's research pinpoints key drivers for the new market in wrap services. These include recent advances in online technology as well as regulatory pressures (CP121 and the Sandler review) for price transparency and for financial advisers to derive revenues for the provision of ongoing rather than one-off advice.
However, despite market conditions being ripe for wrap service, the survey shows a large percentage of IFAs are still not aware of them. Of the 100 IFAs questioned, including both large and small entities, only 21 per cent claimed to have heard of the wrap proposition.
More encouragingly, 39 per cent of those IFAs who knew how these services work and who would be interested in offering them, said they would be prepared to manage clients' assets themselves, rather than just offering advice. JPMorgan FundsHub expects the majority of wrap services to be offered by existing life and pensions providers and sold by IFAs, with customers paying fees rather than front-end commission in a post-CP121 environment. The fees paid by customers are likely to be based on the total value of the wrap portfolio and the extent of each customer's requirement for portfolio management.
Lund continues, "Our research shows there is clearly a growing momentum in the UK for wrap services. Some companies are expected to launch their services this year, but we expect by 2003/4 customers will be have much wider choice as the market for wrap services matures."