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Nucleus Financial Group has said the UK will see 10 new wrap platforms by 2010, but predicted consolidation would follow in the sector.

David Ferguson, chief executive of the independent IFA-backed platform, said as many as five insurers and a minimum of three independent organisations would launch products in 2008 or early 2009.

He said new offerings from Novia and Macquarie had set a precedent for large players like Axa, Prudential, Friends Provident and Norwich Union.

But he said there were already too many wrap platforms in the UK and that the industry was due for merger activity.

"A lot of markets see a period of proliferation before a period of consolidation. There's enough capital to be injected without the debt market having to calm down."

He said wrap platform rationalisations could occur as the result of wider corporate deals.

"Major life insurers will have a platform and then consolidate from there."

Four to five years from now, he saw the market reducing to between six and eight participants. But he said he was not including open-architecture solutions from discretionary wealth managers in his analysis.

Richard Eats, communications consultant at Cofunds, agreed with Mr Ferguson's assessment. He said consolidation had already occurred in a number of developed markets, partly because there are a limited number of ways platforms can differentiate their business models.

"It's a commoditised business, so, in the long run, propositions will begin to look similar."

But he cautioned on the difficulties of launching new platforms and said mergers between larger players remained difficult.

"Amalgamating platforms is not an easy thing to do," he said. "We process huge volumes of business each day."

Nor was he optimistic about larger players trying to buy smaller, less successful businesses. He pointed out the larger platforms could expand rapidly by acquiring assets organically rather than resorting to buying a small rival.

"A lot of them might be less successful at gathering assets or maintaining their systems, so acquiring them may not be a very attractive option."

He did not currently see a market area in which small platforms excelled so strongly that larger platforms would need to buy them to move forward. He took the example of platforms specialising in Sicavs, which already feature on Cofunds.

"If UK IFAs want more, we can put them on. We know how to do it."

Mr Eats said it was difficult to predict how many new propositions would launch before consolidation took off, including in the insurance market.

"It's hard to say how many people will come and go in the interim. If insurers think it's a good way of selling proprietary products, then they will be disappointed."

However, he said the large players were likely to retain market share.

"As long as platforms continue to work effectively and be cost-competitive, why would IFAs bother moving? There's an advantage to being a first mover."

For more on Nucleus, see p21