UK providers are in danger of being duped by Australian wrap companies that have little to back-up grand claims of super-performing platforms back home, according to experts.

In the face of aggressive marketing from Australian technology firms, would-be entrants to the UK wrap market have been warned to be sure of their due diligence before hopping into bed with a new partner.

The comments - from reputable players in the Australian financial services sector - come amid heightened excitement over the development of the fledging UK wrap market.  Standard Life and Norwich Union have established platforms and aired intentions to dominate, while smaller providers are beginning to put their toes in the market.

Only last month, for example, a wrap service was launched by the new IFA-backed financial services firm Nucleus. But despite the growing prevalence of the vehicles and subsequent hype, the FSA has said it is not seeking to bring in wrap-specific regulations. Andrew Inwood, principal of CoreData Research in Australia, said that as a result, companies needed to be sure of making the right choice in the face of aggressive Australian wrap companies.

Mr Inwood said: "No wrap offering is perfect. Any wrap that is promoting itself as flawless and that can do anything, ought to be viewed with a healthy scepticism." He said although wraps well established in Australia, the failure of some models should not be forgotten.

According to Mr Inwood, original wrap providers tried to satisfy all their clients’ needs by having a huge range of products and multiple systems. These proved almost impossible to manage, however, and often required teams of people to manage software and to conduct manual work when the systems failed, he added.

Rob DeDominicis, chief executive of wrap service provider InfoComp - which has branched into the UK from Australia, echoed some of Mr Inwood's fears. Mr DeDominicis said: "People are figuring out that the UK is a growing market and are trying to take advantage of that.

“But people have just landed and say that they are UK ready - that is a nonsense. The amount of work you need to do is huge," he continued.  “It does not happen overnight. It is very easy to come to the UK and make bold statements. "There is a possibility that people are being duped. It is easy to do," he concluded.

David Ferguson, chief executive of Nucleus, said that a gap in knowledge could lead to problems for UK providers. He said: "I have no doubt that some Australians firms will capitalise on the lack of knowledge in the UK."

By Matt Williams
Financial Adviser