Just less than a month away from IFA’s seventh annual Masterfunds, Wraps and Platforms Conference, I have been pondering what has changed in the wrap space.
Since Asgard was launched by Sealcorp, now almost 20 years ago, what has changed? The advisers or distribution arms of financial services firms have seen their parts of the pie increase while the fund managers have faced a squeeze of sorts.
Sealcorp was the first to use the volume bonus structure now so common with wrap provision. After the big $272 million sale to St George in 1997, the company was faced with a group of eight advisers who were upset that they didn’t get a part of the money.
They argued that it was their clients’ money that allowed Sealcorp to achieve such a high sale price. After threatening to leave and take the money with them, they were given what is now known as volume bonuses. The master trust certainly used its distribution to build funds under management and rewarded its users for such.
While conflict of interest has stopped advisers receiving more by referring one product over another, volume bonuses continue to exist and are typically distributed in a more equitable way between dealer group and adviser. Yet, it is rare for the consumer to feel the real benefit of the rebates.
However, it may be argued that wraps have enabled advisers to spend more time with clients, giving them advice and focusing on their portfolios. It has also allowed them to use a wider range of products for clients.
In other news this week, the FPA has been given a rap by its members. Almost three-fifths of its members believe it has changed for the better, with nine out of 10 areas showing signs of improvement in terms of FPA performance, the exception being the promotion of the certified financial planner designation.
