Netwealth has already signed up five dealer groups for the adviser version of its online wrap service, says managing director Michael Heine, and has plans to extend that number to between 15 and 20 in the coming year.
“So far we have attracted dealer groups that have not used wrap accounts and some that are dissatisfied with their existing wrap supplier,” Heine says.
The adviser version of the service will become operational during January and additional services will be added throughout the year.
Heine says he believes the proposal concept between adviser and client is unique and provides Netwealth with a serious competitive advantage.
The proposal system is based on the adviser creating a document which details the client’s investment instructions. An e-mail is sent to the client to say the proposal is on the site. The client logs in, checks the proposal and either accepts or rejects it. If it is accepted, the adviser proceeds with the investment instructions.
The proposal has a 14-day life on the system and all its details are stored on the system, including the client’s accept or reject request. Advisers can add staff and their authorisation limits on the systems electronically. Heine says the only hard copy of any transaction required for Networth is the direct debit paperwork, because that is required by the banks.
“Everything is generated by the adviser on the system, including the fee structure,” he says.
The entry fee for using the investments in the wrap range from between 0- 4 per cent.
“Because we are using wholesale funds in the wrap, there is a saving of between 60 to 100 basis points in fees,” Heine says.
The advisers’ trail fees range from 0-1.1 per cent. Share trading has a flat $20 fee regardless of the size of the transaction.
Advisers also have the option of becoming a shareholder in Networth. Currently the company is owned by Heine, but after four years, up to 70 per cent of the shares will be passed to the advisers.
“The adviser will be given an option based on the time weighted funds have been under management in the group,” he says.
After four years, the adviser will be able to swap the option for a $1 share and, depending on how many advisers and the funds are under management, that will decide the amount of shares issued to them.
Advisers can also register for Netwealth without taking up the share option scheme. Heine says one firm of accountants that has signed up has waived the option scheme because of share-owning restrictions in that group.
Advisers will pay fees for using the wrap. These vary from 0.825 per cent for funds lodged under $100,000 to 0.44 per cent for funds above $500,000. There are no transaction fees, says Heine.
Work on interfacing the Netwealth wrap with financial planning software is due to start in the new year and will depend on what software the dealer groups are using, he says.
