National manager of AMP’s PortfolioCare platform, John Pascoe, says the good point about wrap accounts is the ability of products to offer a diversified portfolio efficiently and simply.
“Advisers want the ease of online transactions that will provide a diversified portfolio, including direct shares, and deliver a consolidated review,” he says.
“And consolidation is still an important factor when using wrap accounts.”
Pascoe says it is hard to list the negatives of wrap accounts as the PortfolioCare platform has only added features that advisers have requested.
“The only area that needs some attention is the turnaround time of transactions and that is more an issue with some of the individual fund mangers on the platform,” he says.
Norwich Union Navigator managing director Marc Mengler says the good point about wrap platforms is the ability to supply back-office consolidation on investment portfolios.
The ability to add additional services, such as direct share trading and cash accounts, also heightens the attractiveness of the platforms, he adds.
“Advisers choose master trusts and wraps to ease that back office burden, but some are now forgetting why they originally used the services.”
The arrival of many new platforms is causing some advisers to switch providers or use a variety of platforms.
Mengler says he has no problem with changing platform providers on a one-for-one basis, but he sees problems in the future for advisers using a variety of providers.
“In the past, advisers aligned themselves with one platform, but today advisers are willing to change due to such things as price considerations,” he says.
“The negative of using more than one platform is the cost and complexity of the back office for the advisers, which was the reason why they chose one provider in the first place.”
Mengler says an adviser should research the choice of platforms before making a decision.
“I have no problem with people wanting to make a change, but they should look carefully at the provider and ask about back office problems with changing platforms,” he says.
“I welcome anybody to come to Navigator and ask about our commitment to the platform, our back-office systems and where Navigator will be in three years.”
Netwealth managing director Michael Heine says the tax reporting systems in some wraps have been seen as one of the positives of using a platform.
“People have problems with tax recording of various different investments and a platform like ours that enables them to see their investments at all times live is of great benefit,” he says.
Another attraction of the Netwealth platform is the ability to use wholesale funds which results in lower management costs, according to Heine.
“By using wholesale funds, the Management Expense Ratios (MERs) can be up to 1 per cent less than a similar retail product,” he says. “We can also offer a flat $20 fee for share trading, regardless of transaction size, which also brings down the cost of using a platform.”
Heine says the savings in MERs cover the cost of using a platform many times over.
He would like to see a reduction in the high transaction costs incurred when moving investments between platforms.
Some of these are introduced to discourage investors moving, but Heine argues these costs are not justified.
“I would also like to see the time taken by fund managers in dealing with applications and redemptions reduced,” he says.“I see no reason why the broking system of T+3 cannot be applied to fund management transactions.”
Most platform providers deal with transactions quickly due to their newer back office technology, but the process slows down once it leaves the platform.
Online trade is one feature that dealer groups want for their advisers. Netwealth has introduced the service but it hasn’t yet achieved widespread usage.
Heine says the company decided from day one to make all transactions online to reduce the paper trail.
“Unfortunately advisers are slow to change so we still receive considerable amounts of paper concerning transactions,” he says. “But this will change as advisers become more comfortable with the service.”
The centralisation of reporting and investment options is the big selling point of wrap platforms, says IOOF Funds Management head of product Emile Blasetti.
“Centralisation effectively allows advisers to reduce their back office costs,” he says. “Consolidation of reporting also brings benefits for both the adviser and the investor.”
Blasetti says a further benefit for advisers has been the bundling of investments to suit certain clients’ investment strategies.
“Some platforms have put together packages of different investment products to suit a particular risk group,” he says.
“Advisers that are happy with the construction of the package are now relying more on this investment option in platforms and it is a growing trend.”
The amount of investment options on some platforms is questioned, especially in today’s tougher business environment. It is expected that during the next couple of years, products attracting low inflows will be culled by the platforms to save costs.
Blasetti says IOOF has automated its back office so looking after products with low inflows is not a major problem.
“We are very much automated with not much manual processing, so that does keep the costs of looking after product offerings down,” he says.
Summit general manager Annette King says flexibility is a key point of wrap platform.
“The platform should offer a complete administration service that should also cover areas such as insurance and self-managed superannuation funds,” she says.
King says platform providers will still have to offer paper options with transactions because advisers are still seeking this option with online services.
“Offering these options with above average service is very important,” King says.
“Most platform providers’ service ratings vary one year from the next, but Summit has always been consistent in its service ratings.”
King says advisers should also look at the financial stability of the provider because technology costs alone mean keeping platforms up-to-date is very expensive.
“Online development costs are huge and the financial risks for the company developing the platform are high,” she says.
“Wrap platforms are continually evolving so there needs to be continual investment in technology.”
