Wrap new business doubles fund supermarkets for first time

Net new business to wrap platforms has more than doubled that of fund supermarkets for the first time, with wrap net sales accounting for 30.6 per cent of total net sales compared to fund platforms making only 14.8 per cent of total sales in the three months to the end of September.

According to Fundscape’s quarterly Platform Report, net sales to wraps reached £2.7bn in the third quarter of 2013, more than twice the £1.3bn net sales to the larger “fund supermarkets”.

However, fund platforms such as Skandia and Cofunds still hold the lion’s share of market assets with a 37.4 per cent slice of the pie in Q3 2013 (£100bn) compared with wraps’ 21.8 per cent (£58bn).

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This represents a rebound for fund platforms, whose total assets fell from £102bn to £95bn in the second quarter of 2013.

Gross sales for fund platforms continued to outweigh those of wraps, with the former pulling in £4.7bn and the latter £4.3bn.

Bella Caridade-Ferriera, director of Fundscape, pointed out that the increase in new assets to wraps does not necessarily represent a flight from the larger fund supermarkets, but rather an increase in the size of the market altogether brought about by the Retail Distribution Review.

She also outlined several other reasons this might be taking place.

Ms Caridade-Ferriera said: “There’s a very important point to be made here. Wraps are a new type of platform so their business is not as mature. [Fund platforms such as] Skandia, Fidelity and Cofunds have mature business on board. People’s investments have matured, they may have retired, they may have died, so that is why assets are coming off.

“RDR has really levelled the playing field. Fund supermarkets have been running on a commission based model and... they have had to play a bit of catch-up and get their systems ready and move across [to fee-based models].”

She added that the introduction of re-registration regulations has led to an increase in transfers and consolidation by advisers and clients.

Finally, Ms Caridade-Ferriera believes an overall improvement in investor sentiment could also be clouding the figures.

David Ferguson, chief executive officer of wrap platform Nucleus, felt the new research was less ambiguous.

He said: “The market data confirm that more open platforms are winning in the adviser market. This is entirely consistent with the direction of the regulator and indeed of the wider world.”