If we could cut out all the flimflam, life for professional advisers and their clients could be a lot simpler – and the wrap is one product that will be at the forefront of any future progress.

Many practitioners in the financial services industry – arguably pension specialists are at the forefront – have every reason to feel bogged down by the pace of change. Maybe the avalanche of proposals and reports is not about to end. But one thing is certain: more than a few providers and players have already been wholly thwarted in their attempts to make progress.

Many businesses have found that their legacy systems are dragging them down, their future being rendered doubtful on two counts: a relentless focus on protecting their own interests and a dogged reluctance to let go of historic systems on which so much time and money has already been wasted. Too often, it seems, internal corporate debate is about price rather than value.

Yet it is clients and their expectations that are really taking a hammer and chisel to the industry.

What wrap is able to deliver very successfully is joined-up financial services. The delivery mechanism is a technology platform that pretty well knocks on the head administrative duplication and at the same time creates a means of linking the planning, implementation and servicing processes so that keying-in error can be virtually eliminated.

A more efficient business provides more effective service – and that is one change all professionals recognise will help to improve client confidence.

Things have evolved differently in different markets and the UK has benefited by not being the first in. It has been able to cherry-pick the most successful ideas from a number of countries to establish a best-fit for its own local regulatory environment, depending on the nature of third-party professional advisers’ businesses and their clients’ ongoing needs.

Effective wrap has the scope not only to strengthen client/adviser relationships, but it also renders advisers’ businesses more able to sustain growth with balanced revenue streams. Providers too are winners as the wrap solution enables them, through the efficient use of technology and enhanced propositions, to extend solutions that facilitate better service; products from a single source that can result in higher inflows and lower attrition rates in those products; also a more efficient operational model.

But some myths still need to be dispelled. Contrary to popular belief, you do not need deep pockets to start up a wrap service. Wrap is not only a service for companies working with professional advisers, nor are wrap facilities only relevant for very high net worth individuals.

Wrap has come a long way in a relatively short time. The old approach of product selection from myriad similar premium-priced products, with the client details duplicated on several administration platforms and a blizzard of paper necessary to implement or change anything, is simply not able to compete with the new era model on price, service standards, product satisfaction grounds or, more importantly, results.

In the new era it is understood that the real added value of financial planning is holistic. It encompasses tailor-made asset allocation, coupled with fund management delivered at close to institutional pricing; it embraces one or more commoditised tax wrappers, administered on a single system that holds all client records and orchestrates the full investment process.

To summarise, the new model realities are considerable. Wrap joins up financial services delivering a cross-function process that minimises duplication and facilitates the minimum of key strokes between planning, implementation and servicing. The facility is comprehensive and not fixed to a single market product (in due course this will include debt and insurance products as well as investment management).

To all intents and purposes, 95% of the software functionality of collecting money, collecting and recording data, making investments and disinvesting, reporting to all parties etc is common to all providers and users. Just 5% creates the unique user experience that differentiates the range of wraps on offer in the market.

Where the real difference kicks in is in terms of cost as the price of market entry plummets dramatically, (and therefore the return on capital expenditure – capex – soars), if you outsource to an experienced software house that has already done the development and is therefore in a position to share the costs between a number of users.

Wrap provides access to flexibility that all those with legacy systems simply dream about, with different sub-divisions to cater to different market segments available to almost all distribution channels. What wrap does call for though is a complete change of mindset. In the old way of things, product made the world go round. In the new era, it is the customer that is at the centre of things and the core underpinning platform technology and those with the necessary experience and knowledge to deliver on this are in short supply.

www.pensions-management.co.uk