wrap accounts opportunity or threat? david ferguson 2 march 2005 [email protected] +44 7974...
TRANSCRIPT
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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?
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Definition of wrap
A service that allows IFAs tomanage all their clients’ assets
and liabilities to best effect
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UK market background
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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
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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
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Key issues
o Enhanced client proposition
o Back office efficiency
o Logical conclusion of open architecture
o Margin - magnitude and ownership
o Value
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Evolution
o Fund supermarkets
o US / Australian experience
o Sipps
o Convergence of life, pensions and mutual fund savings ‘products’
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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
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Current providers
o Pure wrap• Transact• Abbey• American Express
o Supermarket-based• Selestia (Old Mutual)• Skandia
o Wealth management• Seven Investment Management
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Current issues
o Speed of adoption
o Historic IT spend
o Regulation
o Re-registration
o Business models
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Salesimpact
Legacyimpact
A-Day+= x
Intransigence
Fn {margin drift, distribution quality}
Fn {persistency, performance, distribution model}
The impact!
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IFA drivers
Clientproposition
Businessvalue
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IFA opportunity
Clientproposition
Administrationcosts
Asset-basedrevenue
IMPROVED INCREASED
REDUCED
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Market value
UK life industryc£100bn
UK IFA sectorc£500m?
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Legacy issues
o Value of client
o Surrender penalties
o Market value reductions
o Tax
o Specialist products and assets
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Isa Pep
Directholdings
Personalpension
Sipp
Offshorebond
Endowment
Onshorebond
EPPAnnuity
Section32
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Market value
UK life industryc£100bn
UK IFA sectorc£500m?
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Wrap
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Market value - now
UK life industryc£100bn
UK IFA sectorc£500m
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Market value - post wrap
UK IFA sectorc£3-5bn
UK life industryc£80bn
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How might you respond?
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Understand your business model
What do you really add to the asset accumulation market?
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Consider your commitment to open architecture
Are you shifting on more than just the buck?
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Leverage your distribution relationships
Is this is where your future lies?
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Appreciate emerging technology
Do you really need to invest at historic levels?
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Wrap accountsOpportunity or threat?
Questions