Supermarkets face year of reckoning, say wraps

Next year will be a decisive year for fund supermarkets as they look to make the “huge transition” to the unbundled world, say wrap platforms.

Cofunds, Fundsnetwork and Skandia have all unveiled plans to launch unbundled charging models following the FSA's August policy paper, which set out plans to ban fund manager rebates - a move some argue effectively rendered the traditional supermarket model obsolete.

Wrap platforms believe the need for fund supermarkets to overhaul their business models, in addition to dealing with a ban on legacy commission, will present them with major challenges.

"We are in a weird spell at the moment where the big three fund supermarkets have got a huge transition to make into the new world," said Nucleus CEO David Ferguson (pictured). "At the moment they do not have a proposition for post-2012."

He added fund supermarkets need to deliver on their promises.

"The fund supermarkets have made statements about what they are going to do but I hope we do not get into a world where its all about people saying what they are going to do. That tends to be when people get most disappointed."

Ascentric managing director Hugo Thorman agreed supermarkets face a testing year.

"The fund supermarkets have got a lot to do and some are less well organised for it than others," he said. "The have all announced they will be introducing a new charging model and I guess that will be quite a challenge for some of them."

Whilst supermarkets face a new set of challenges in 2012, it will be very much "business as usual" for wrap platforms, said Thorman.

Meanwhile he said it is hard to know how fast the platforms industry will grow next year.

"The market is difficult to predict because there are two forces at work. One scenario is the platform market will grow very quickly as advisers get ready for adviser charging.

"The other scenario is all the guys currently selling life products for high commission will carry on until the last minute, making as much commission as they can before moving to adviser charging.

"You could get yourself really depressed or really excited depending upon which of those scenarios is right but nobody seems to have the answer to that one."

Cofunds sales and marketing director Alastair Conway said wrap platforms also face a number of challenges.

"I think it's going to be a stressful year for the whole of the financial services industry and all platforms are not immune," he said. "The regulatory uncertainty is affecting all of us and the ban on rebates would have an effect - if we saw share class movements that would involve changes for the wraps.

"I also think the support advisers need next year will be immense and the idea small platforms are immune from that is wrong. I would argue well resourced, large infrastructures are going to be better able to cope with that demand than small ones.

"The challenge for any small player is they will be more expensive typically than some of the proposals coming out of the longer, more established players. If that is not a challenge for wraps then I don't know what is."