A change in the industry model can reduce cost

A change in the industry model can reduce the cost of Wrap provision.

January 2007

by Jan Regnart CEO Wealthtime

It amuses me to think that fund managers are still passing back rebates to administrators, advisers and platform providers instead of correcting their systems to charge on an institutional pricing basis. All this passing backwards and forwards of small amounts of money adds to the cost and burden for Wrap platforms. It would be much better for the industry and the client, if the retail fund managers would allow institutional pricing on their retail funds. This would enable the end client to suffer less cost and receive a better service. Advisers are moving towards a more transparent fee environment and now that they can invoice the Wrap providers for their fees why not stop paying rebates and commissions? They are really just a waste of effort for all the parties in the service chain. The platforms should charge fees to the end client as they are passing on the benefit of a bulk transaction and valuation process and in taking on the extra burden of this work, relieving the fund manager of the workload. This enables the investment houses to suffer less cost and charge less for their fund management service. The life office fund managers are already charging on an institutional basis with their trustee investment plan and pension vehicles. I am sure that to change the current process is a considerable systems issue for the non-life office investment houses but in the long run it makes so much sense and I am looking forward to the first retail fund manager to take this step.

Another strange anomaly is that we still have double reporting to the end customer. Why, when the client and adviser are both using a Wrap platform is it necessary for the investment houses and discretionary fund managers to duplicate the reporting to the client? Surely it would cut down cost for the industry if the Wrap provider displayed the relevant regulatory information online. Where duplication exists, it would be beneficial for the client and all concerned in the service delivery, if the regulator agreed to waive the requirement for the external investment house to provide the information. This is particularly relevant where the Wrap provider is custodian. 

Also unless I am mistaken, we still seem to require a wet signature on application forms for pensions and ISAs.  Recently, I set up a new online bank account and provided an existing current account was in place with a UK high street bank and the appropriate money laundering checks had been done, no wet signature was required. Is there any way that the wet signature could be waived? After all, if you can set up a new bank account without a signature, it should be possible to set up an ISA and SIPP This would I am sure encourage individuals to apply on line and cut down the cost of the process.

My last point has been made several times in previous articles and that is, to reduce costs and improve efficiency we all need to build standards for electronic sharing of information compatible with systems throughout the industry. This is a time consuming exercise both in a relationship sense and in terms of technology but unless we can communicate investment holding, valuation and pricing information electronically we will never find the holy grail and without this, the Wrap proposition will need to become a lot less open-architecture than it is today.

 

This article represents the views of Jan Regnart and is not intended as a substitute for professional financial advice.  


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