Blog: When should you shift to a wrap?

Shaun Sandiford, distribution director at AXA Wealth, examines how advisers know when is the right time to change from a supermarket to a full wrap.

This is a question I’ve been asked weekly since July 2003. It’s one where the answer is not easy and always requires some jargon-busting and professional conflict management. Like any good examination essay I should really define what I think the question is.

I believe IFAs, wealth managers and financial planners are asking me a profound and genuine question. Some may assume that just by asking the question they are suggesting their current supermarket or wrap platform partner is currently a poor one, but I don’t think that is the case.

Let’s first work out an acceptable definition of the two definitive choices. I have read recently that some solution providers feel the supermarket label is unfair, even derogatory. I will attempt a less emotive definition. Platforms with some tax allocation options and a fund catalogue; ranged against those with a greater range of tax allocation options and fund choice.

IFAs ask this question annually or at such time that their client profile profoundly changes or the Government and its regulators place greater burdens of responsibility on professional advisers. This question of when to ‘upgrade’ remains doggedly in the top five of questions asked of me by IFAs.

The difficulty in answering comes because most who ask want a simple binary solution. If my client now has ‘wrappable’ assets in excess of £X sterling, then yes they must move to a solution with more tax allocation and fund choice options, at sums less than this they should stay put. A simple but not a satisfactory answer.
What this response does not reflect is how engaged the client is with their money.

For example there are, I’m guessing, numerous people who have large sums of money who trust no-one. Not governments, banks, politicians, etc. They would rather their money was under the mattress or in a biscuit tin, and their level of disengagement means that would rather let the Bank of Mars manage their money than use any platform solution.

There are clients who are financially engaged, their families or partners are financially engaged too, but they don’t have the financial clout to trigger a yes from the binary equation above in their own right. These people desire and may even be able to pay for a full tax allocation platform but don’t meet the £x sterling threshold. A real shame for an IFA client strategy as they may inherit or receive sizeable sums later in life that may trigger the wrap platform selection choice, but by then it would be too late.

I would normally ascertain the IFAs’ plans for their business, the clients they have and want to attract, how they currently manage client monies and how that plan may change over time. This could lead to a segmented client base being matched against a segment multi-wrap solution. Numerous platforms, some legacy, some live, is the obvious maladministration that results from such a solution.

Although acceptable to some IFAs a better outcome might be an IT solution that has, for one business relationship, the ability to offer access to all the tax allocation vehicles, a superior investment choice to include discretionary fund managers, in-house investment research, model portfolios, passive and active fund choices coupled with family discounts and pricing to support partners, family and trustee engagement with their money. Such an offering is not prevalent today.

Engagement level

The solution offered by AXA Wealth allows numerous levels of engagement for one business relationship, with a supermarket running alongside a full wrap offering. The decision is now which part of the offering this particular client wants, rather than having to engage with a whole new supplier for what may only be a few clients. The migration within AXA Wealth from one to the other is attractively priced at no charge.

For me it feels like the engagement I expect from the London 2012 Olympics – I may not be able to afford the best seats but I will engage to the level that my budget or my passion for athletics will support. Likewise with the decision to upgrade your platform offering, it depends on what the client has and what the client feels they want. Not simply passing the tape at £x sterling level and feeling the race is won.

Of course your self-sourced or paid-for platform due diligence may mean you have chosen a different wrap partner, which means the question of when to ‘upgrade’ still remains unasked and therefore remains unanswered.