After a week of Wrap conferences, perhaps the simplest explanation of why Wrap matters was expressed by an adviser – “What I like about your business is that it is about helping me do business.”
Wrap accounts have proven that they are not just flavour of the month. In just over a year, financial planner’s perceptions have moved well beyond the initial “master trust versus Wrap” argument. This reflects a more mature approach to a growing market sector. The industry is clearly coming to grips with Wrap services.
Over the past week of Wrap conferences, the wider debate has continued in earnest and a number of key issues have been raised which, quite rightly, highlight the sorts of questions planners should be asking their Wrap processor.
One issue that has been raised by various sectors of the industry is that of fees.
The retail funds management industry has traditionally been locked into an “all in” fee structure with planners having the ability to rebate or to downwardly adjust fees to match the servicing level of respective clients. Wrap provides further flexibility by enabling advisers to package their fees at a transactional level tailored on a client-by-client basis.
But Wrap is not just being talked about. Financial planning groups are already offering Wrap accounts to their clients. These dealer groups are already enjoying the branding, control and ownership advantages of a Wrap processing service.
So why are these planners using Wrap? The growing popularity of Wrap stems from its ability to reduce the burden of back office processes and maximise the adviser’s value proposition to clients. Wrap servicing has begun to reverse the old 80:20 rule which traditionally afflicted financial adviser businesses. An estimated 80 per cent of a planner’s time was tied up with administration, with only 20 per cent remaining for face to face contact with clients.
With ASIC approval, the market take-up of Wrap accounts has cut the time and effort involved in administration, giving planners an open platform on which to build a better service.
Efficiencies come from reduced paperwork and the move to on-line transactions and reporting. This is being accelerated as planners prepare to give Internet access directly to clients. Most importantly, ownership of the client remains fairly and squarely with the adviser.
Operating on an e-commerce technology platform, Wrap has marked a major change in the way advisers do business; moving significantly away from the traditional paper-based system.
Wrap consolidates the reporting of super, managed funds and equities including corporate actions and distributions. Other assets (such as real property) and liabilities (such as mortgages) can also be included in the consolidated reporting facility. Once these are entered into the system, Wrap provides the functionality to revalue these securities with a single entry of market price, automated across the entire client base.
In addition, Wrap provides the flexibility to leverage off an adviser groups’ existing business practices. Wrap has not been designed to impose a “one-size-fits-all” administration system. Instead, the services are packaged to suit the client. For example, our Wrap service interfaces into a number of independent financial planning software systems
Despite being well into our third generation of the service, BT Portfolio Services know that Wrap will never be a static service and will always be building enhancements to deliver tangible benefits to both advisers and consumers. We believe that Wrap will revolutionise the Australian financial services industry.
Those who spend too much time deliberating run the risk of being left behind.
<I>Ron Scott is head of BT Portfolio Services Limited.
