Investec: "Wrap Platforms Growing in Popularity Among IFAS"

According to new research from Investec Bank, financial advisers are increasingly turning to wrap platforms as a means to manage their clients' funds. End Quote

(1888PressRelease) June 24, 2011 - Almost three quarters of IFAs now using wrap platforms

Financial advisers are increasingly turning to wrap platforms as a means to manage their clients' funds, according to new research1 from Investec Bank. The survey among investment-focused IFAs reveals that 70% are now using wrap platforms, compared to 63% in September 2010.

Almost two thirds (62%) of those using wrap platforms do so to consolidate their client's investment portfolios, while around a third (31%) say that they use platforms to free up more time to spend on asset allocation and investment management. Almost a third of the IFAs surveyed use two different wrap platforms although 15% said that they regularly use four or more different platforms.

The majority of IFAs surveyed said that up to 10% of their clients' wrapped assets are currently in cash, with the average amount being around 8%. Some 4% of IFAs said that they have clients with more than a quarter of their wrapped assets in cash.

Proportion of clients' wrapped assets currently placed in cash Proportion of IFAs surveyed who use a wrap platform for client investments
0 - 10% 59%
11 - 25% 13%
26 - 50% 3%
51 or more 1%
Don't know 10%
None 14%
Source: Investec Bank, March 2011

However, Investec's research shows that returns on cash deposits held within some wrap platforms remain very low. On average, IFAs say that their clients are receiving a return of 1.15% on their cash deposits invested through a wrap platform, with more than a fifth (21%) seeing returns of less than 0.5%, the current Bank of England base rate.

Lionel Ross, Investec Bank commented, "Wrap platforms are growing in popularity among IFAs who recognise that they are a great tool to use to manage clients' funds more efficiently. However, in this low interest rate environment, it is even more important that the cash element of an investment portfolio is delivering competitive returns.

Lionel Ross continued, "Consumers now have greater access to information and are better placed to challenge their IFAs on the returns they are receiving on their investments, and this includes cash deposits within an investment portfolio. It is important that IFAs use platforms which best support them but which also offer the best possible rates of interest."

Fraser Donaldson, Defaqto's Insight Analyst for Funds, said, "There is no question that platform use is growing among IFAs. The RDR has been a major catalyst for this, and our own research has found that 40% of IFAs are now planning to move to a platform-based business model as part of their RDR preparations. In addition, not only are more IFAs now using platforms, but we have also found evidence that those using them are putting more investment business through them than ever before.

"When considering platform adoption, IFAs need to ensure they consider the needs of their business and client segments. After that, they will need to identify platforms that will best meet these needs. Key to successful platform selection is robust due diligence to ensure an effective appraisal of the capability and suitability of potential platform solutions."

Investec Bank's Specialist Cash Products team offers a range of cash management products to meet the various requirements within the pension portfolio, for both IFAs and pension advisers. These include Fixed Term Deposits, the Investec Pension and Trust Reserve Account and the Investec Income Account.

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