The evolution of wrap platform technology

How can platforms improve their propositions? Logica's Andrew Lloyd shares his ideas...

The introduction of Personal Accounts planned for 2012 highlights the ongoing need for the end user to be at the core of any investment strategy. The challenge faced by wrap platforms is that of maximising convenience, while keeping the price right.

Corporate schemes will potentially introduce a new target demographic of employees to wrap platforms, and advisers can use them to build a relationship with customers and manage their investments across the lifecycle of their retirement. As this shift occurs, there will inevitably be winners and losers, depending on who most accurately understands and delivers to their clients' needs.

Complementing retail platforms

While corporate wealth management platforms may well be relatively new propositions, they are set to become the norm. They must complement existing and new retail platforms to avoid complaints on aftersales services such as difficulties with transfers and delays in redemptions.

The most publicised of these issues is the transfer process for ISAs, which can be slow and incur time out of the market, loss of interest and admin charges. These type of complaints are the most visible symptom of a wider customer service and admin cost issue that also affects subscriptions, valuations and redemptions for ISA and unwrapped investments in investment funds, pension plans, stocks and shares and cash. Therefore, a unified system between competing platform providers is essential to tackle the customer service and cost issues.

There is an obvious need to educate a new, wider group of employees and establish trust in these systems, to encourage both employee interaction and engagement. This is as much of a psychological task as it is behavioural, adopting marketing practices to encourage a willingness to embrace the opportunity.

Whether fund platforms are owned and invested in by the providers, independent investment wrap platforms or even Employee Benefit Consultant platforms, the one consistency of thought is that there has to be a radical change to the way providers of financial services do their business - there is no way back, things cannot stand still.

Value expectations in the workplace

Those that don't continue to take advantage of modern technology, and don't enable a truly open-and integrated platform service, will find themselves behind the curve. The customer - and by this I mean those who invest their hard-earned monies, not just the intermediary advisers/facilitators who help them to plan when and where to invest - must be at the core of today and tomorrow's business strategies. Enabling the right choice of investment solutions, risk protection and maximising 'convenience' at the right price for advisers and consumers are key success factors that will differentiate the leaders from the also-rans.

The strategic foresight and significant investment of capital by entrepreneurs, IFAs, traditional life and pensions providers and asset managers who were, and are, brave enough to lead the market are all helping to transform the business operating model. An operational model that enables holistic investment management services to be made accessible to all those that need to save, invest and protect for themselves and their families.

Auto-enrolment into these platforms will bring about wider interaction. Managing their own Personal Account will give customers more of a reason to engage in their portfolio, as they realise the importance of understanding where their money is, and how they can make the most of it. As such, a level of simplicity is required so that as large a percentage of the population as possible can use and reap the benefits on offer from the platform.

In my view is that there is a clear opportunity to significantly enhance retail consumers and employees' levels of interest and trust in the financial services industry. This can be made to happen through access to facilities that minimise out-of-market risk and maximise 'straight-through processing' levels of efficiency. These platforms will deliver a much-improved ability to manage accumulated wealth effectively and efficiently throughout their lifecycle of retirement.

By enticing, and even exciting, consumers to learn much more about their own needs, and empowering them to act upon those needs, the technology of today and tomorrow will help to bolster the confidence of consumers and will re-engage them in doing what's right for their own financial health. In the case of employees, corporate platforms will hopefully even encourage them to invest in something other than just extra holiday breaks!

Incorporating legacy systems

Despite all the achievements to date and the promises for the future, I must highlight a couple of issues that, if addressed by the UK financial services industry, will certainly further improve the value and efficiency of future services.

One issue that stands out is re-registration. This requires the industry to make a collective choice on technical standards and to commit as one to investing in and delivering a streamlined process for requests such as 'in-species' or other forms of asset transfer.

Fund managers need to be persuaded as to the importance of the industry coming to a consensus. Those late to the game may well miss out, as they cannot demonstrate to end-users they have the crucial ability to easily transfer and access funds.

Standards confusion, multiple interfaces and ongoing costs reduces industry momentum and make some participants and software vendors reluctant to invest. The UK retail market for investment products is different from other global wholesale markets, where distribution is usually through bigger players, with concentrated volumes and economies of scale to justify automation.

UK retail investment product distribution is much more fragmented so there is no single model to be copied from other markets. An industry-wide strategy, agreed and led by major players is needed to push automation forward. The financial services industry must agree to converge on a single set of standards for business processes and data interchange.

There are an estimated £700bn assets accumulated in legacy systems that may be targeted for transfer to wrap platforms. The integration of legacy systems can be a complex technical issue to resolve, but if providers with platforms want to protect and maintain their valued policyholders as customers, then a solution must be found. A significant portion of the products of yesterday within legacy systems may still have 20-25 years lifecycle left and providers understandably want to maintain an informed relationship with their policyholders/customers up to and beyond retirement.

As always there will be winners and losers. Not all entrants in new markets survive. It will be those that pay attention to the client's real needs who will thrive, those clients being advisers, retail consumers and employers/employees.

Andrew Lloyd is director of insurance and retail financial services at Logica