Better Business: The wrap scrap

Nucleus chief executive David Ferguson is going to sit back and enjoy developments in what is becoming THE place to be in financial services.

In the month in which Muhammad Ali visited Ireland to rediscover his ancestral roots it seems the retail financial services industry may be set for a bit of a trip back in time.

Pretty much like any period in the last three or four years, the past few weeks in platform-land have fascinated me. Alongside what looks like a subtle repositioning of Axa's Elevate, Friends Provident finally confirmed the long anticipated news that it was about to embark on the development of a corporate wrap.

I guess the bottom line is that thus far, Standard Life is the only mainstream UK insurer to make a decent fist of wrap and while I note today that the firm is unwilling to commit to a breakeven date or disclose how much has been invested in the project to date it is widely known that the sums involved have been non-trivial, even to a company that size.

Given Transact's prediction of a £14m profit on asset volumes of around £7bn it is easily evident that success can be achieved and I would suggest is more likely to be achieved with a high degree of focus and a close proximity to the adviser community.

The corporate path

Whether the news that Aegon is seeking to build a wrap team in Edinburgh offers no clues as to whether the company plans to play in the individual or group market (or indeed both) it would hardly be the greatest surprise in the world if the group pensions giant plans to wander down the corporate wrap path. In any event let‘s just hope for its sake that they avoid a committal trendy name this time!!

Now while one might wonder what is meant by ‘corporate wrap‘or indeed whether such a proposition can deliver greater shareholder value than, say, group Sipps it does feel that certain chunks of the legacy life sector are accepting that they simply cannot continue with the ‘in partnership with advisers' charade and are shifting their distribution (I hate that word) emphasis away from the IFA sector and toward worksite.

New battle lines

If this assertion is correct and we continue to see an acceleration in the breakdown of the once cosy IFA/life office relationship it only remains to be seen just how quickly it all plays out. Everyone knows the RDR is an enormous catalyst for change but with transparency the new watchword, capital in scarce supply, Clive Cowdery on the acquisition trail and Personal Accounts and Solvency II just around the corner we could soon be looking at a dramatically different landscape. Even by the end of 2010 things could be very different with new battle lines having been drawn and a raft of strategic shifts being rapidly rolled out. Bring it on!

And just in case you think I have forgotten, this was also the month in which a group of users from one the UK's largest fund supermarkets launched a tirade against the CEO and the shareholders of the company in question.

Quite whether the comments of Mr Dennehy and others lead to a change in approach (or indeed if one is necessary) would not be for me to comment on but the remarks do hint at a growing (and well-placed) confidence amongst IFAs that for the first time in history they (and their clients) will be calling the shots. And that, I suspect, while spelling good news for consumers and independent platforms will do nothing for large life company / IFA relations.

So, as ever, exciting and fascinating times. I doubt we can quite expect a Rumble in the Jungle or a Thriller in Manila but maybe we will soon find ourselves in a bit of a scrap around the wrap. Seconds away...