Investors are turning to wrap platforms in greater numbers in a bid to take control of their investments, says financial research company De...

Investors are turning to wrap platforms in greater numbers in a bid to take control of their investments, says financial research company Defaqto: wraps, or web-based portfolio administration services, are going to be the driving force behind the future of the investment industry, having already grown by approximately 60 per cent in 12 months. According to Defaqto, the popularity of wrap platforms “will enable more people to have access to top investment advice, so that even people with relatively modest means will be in the sights of advisors who will aim to attract them with superior levels of service and a promise of long-term wealth management”. Report co-author and Defaqto’s head of investments Fraser Donaldson said: “Wrap platforms keep clients in the know about their investments, enabling them to become more trusting and involved in important decisions”. Defaqto estimates that there are approximately £40 billion ($78 billion) of assets under advice in the platforms market which has grown from £25 billion last year. The majority of the growth in assets was owing to the transactional platforms of Skandia, Cofunds and FundsNetwork. Other key findings dealt with in detail in the report include: Improvements to propositions will continue apace and an ability to acknowledge and satisfy enhancement requests from IFA users on a regular basis will prove a strong business retention strategy. Advisors should not be expected to move large swathes of businesses to ‘viable prototypes’ and until they are able to commit to tried and tested technology will continue to trial a handful of platforms. Competition for high net worth clients is extremely aggressive, and stretches far further than just the perceived wrap market. Private banks, asset and wealth management businesses have all plied their trade in this arena for some time now and will respond to any perceived threat from the platform propositions. The sights of platform propositions may well have been set too high as they are experiencing average case sizes of £70,000 to £100,000 which indicates that IFAs are not hitting the heights of the wealthy population. Future focus on the mass affluent market may be more applicable to achieving scale, and hence profits, via platforms. The Financial Services Authority position on wrap needs to be further clarified in 2007 for the good of both IFAs and providers. The IFA community is split on the issue of whether or not the selection of only one platform for their business compromises their independent status.