Shift from fund supermarkets to wraps to continue: Novia

Wrap platforms that have a broader array of capabilities and investment options will continue to grab market share from their larger ‘fund supermarket’ competitors in the coming year, wrap operator Novia has said.

Speaking to FTAdviser, Bill Vasilieff, Novia chief executive, said that since the implementation of the Retail Distribution Review, there has been a big increase in the amount of money going in to platforms in general and he believes this trend is set to continue throughout 2014.

He added that advisers are also increasingly focusing on the broader value platforms can offer and are seeking to outsource “investment capabilities” to, for example, off-the-shelf DFM options and extract further efficiencies from moving on-platform, which will benefit wraps at the expense of larger rivals.

In November a quarterly report from Fundscape revealed that net new business to wrap platforms had more than doubled that of fund supermarkets for the first time, with wraps accounting for 30.6 per cent, or £2.7bn, of all net fund sales for the three months to the end of September.

The larger fund supermarkets, such as Fidelity FundsNetwork, Cofunds, Skandia and Hargreaves Lansdown, accounted for only 14.8 per cent with total net sales of £1.3bn. However, these platforms sstill 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).

Mr Vasilieff said: “There is little doubt that the recent market turbulence, volatile markets, and decreasing margins will have taken its toll on a number of businesses in the market, with some choosing to pull out altogether.

“However the future for wrap platforms such as ours is, without doubt, a positive one. The Retail Distribution review has created a tremendous opportunity with more and more advisers choosing to outsource their investment capabilities and capitalise on services and efficiencies that platforms can provide for their businesses.”

New business inflows on the Novia platform are up by over 75 per cent from the same period last year and Mr Vasilieff says this trend looks set to continue throughout next year. Novia’s assets under management have also increased significantly and now stand at over £2.25bn.

Mr Vasilieff also said the wrap platform is also attracting significant levels of re-registration business, with this accounting for 11.3 per cent of its business inflows so far this year.

He said: “Our forward plans will be to continue with the rapid organic growth that we have witnessed since launch five years ago. But in addition, 2014 will also see us focusing on consolidating what we have developed, with a strong and continued emphasis on our first class service proposition, as well as continuing to build up our new discretionary fund manager, Copia Capital Management.

“The expansion of the Copia Capital Management brand will be a strong focus for 2014.”