There is a whiff of cordite over the wrap and platform world these days. The latest strong words come from Nucleus’s chief David Ferguson. He sets out 2010 as a battle between true wraps – I’m going to put some words in his mouth – that could be Nucleus, Transact, Novia and perhaps Ascentric which probably makes the grade despite its Royal London parentage – and the rest who I assume must lose the battle.
Nucleus makes its case to be a winner because its interests are aligned with advisers, there are clear charging structures, little conflict of interest, it complies with the RDR and of course most if not all potential assets are available on its platform. Staples such as a a cash account are taken as read. This has not always been the case with other firms. Firms of Nucleus’s ilk do have an advantage in many respects especially given the fact that FSA won’t let the giants abuse their position to asset grab using commission or at least not after 2012/13. It always seems to be making good signings of IFAs too, if ’signings’ is the correct term.
But what I wonder about the potential losers? In these spats they never get mentioned by name. In this I see an implication that Skandia, FundsNetwork and Cofunds may be the losers. I’m not sure if Standard Life would be included too.
Yet I cannot see what losing in this context means, though I assume losers must exist in Ferguson’s analysis, if there are to be winners.
Do they go bust anytime soon? I don’t think so and for everyone’s sake I hope not.
Do the various owners pull out because of the capital cost? Perhaps but it still in the realms of the extremely unlikely.
Do they close to new business, shut up shop because the strains are too much in the manner of say Royal&SunAlliance or NPI years back on the life and pensions side. I don’t see this anytime soon. These firms are aiming for profitability determined on assets under management. Last time I looked the trend for most of them was in the right direction. They have all faced various travails – I suspect the set up and continuing costs have been underestimated in many cases – but enough to give up? Anyway in this context, closing is surely different from the closure of with profits life offices where the corporate ownership and policyholder and shareholder interests were all mixed up and the coffers were bare.
So I will venture that Mr Ferguson means that his firm and its similar rivals will see more IFA business, more market share and profitability. I am pleased about this. First many IFAs’ fortunes are linked with these wrap firms. They bring all manner of fresh thinking and seem to allow their advisers to deliver good if not excellent advice certainly for a certain group of wealthy or at least affluent clients.
But will rest of the market lose? I admit that RDR compliance is not going to be a walk in the park. You can hear some grinding gear changes already. Certainly platforms need to evolve what they offer mainly to IFAs but also of course to the fund managers they ’stock’ as well. However that transition is also one that many advisers are making too. Do these platforms offer advisers a better way to achieve that transition i.e. is it better if their platform is in step with them and making the same changes rather than being a few years ahead?
As fund supermarkets begin to look more like wraps will the leading pack begin to lose their lead. Will there still be a need for something that offers many of the features of a supermarket for certain types of client? Not all are going to want a fully advised ongoing relationship and they certainly won’t want to pay for it.
Anyway back to Mr Ferguson. It was a very short press release. I welcome a chat with him on this. But it is the nature of blogs to sometimes set out the arguments first like I’ve just done.
My instinct is that some firms will accelerate, some will continue to evolve. I admit that for the latter group, it will have to be pretty fast evolution. I don’t see extinction. And winners and losers? I think it’s at least two or three years away before we really know.
