Aussie planners sell wraps to the world

They’re a tough crowd those UK financial advisers. Just ask Scott Brouwer, a partner with Melbourne-based Aspire Financial Services.

Brouwer was one of a number of Australian financial advisers recently taken to the UK by the Abbey Bank on a promotional visit to market wrap platforms to British independent financial advisers.

Abbey offers a wrap product in the UK, but the platform concept is yet to fully take off there and the group was keen for Australian advisers to tell their British counterparts why they have embraced them so wholeheartedly.

If Brouwer’s experience is anything to go by, Abbey may have its work cut out for it.

Brouwer says the market in the UK is developing, but needs a “trailblazer” wrap provider to come in and overcome widespread scepticism among advisers towards platforms.

However, for Australian groups eyeing off the UK wrap arena, he warns it could be a “little too early”, considering it is eight or nine years behind Australia in terms of development.

“You need only ask why Norwich Union, a major brand in the UK, hasn’t rolled out its Navigator platform over there,” Brouwer says.

“You could also ask why National Australia Bank, which has a presence in the UK, albeit through a subsidiary, hasn’t rolled out its MasterKey product.”

Brouwer says on his visit he “sensed it was almost abhorrent to be talking of a service model and not getting huge commissions”.

“There’s a lot of advisers selling high-commission products in the UK and they struggle to see the efficiencies of the advice model.

“You’re trying to tell advisers about multiple products under the one banner, but they’re only thinking of today’s money rather than being in a long-term business.”

Since Brouwer’s visit, Abbey has been taken over by Spanish bank BSCH, and there is market speculation that BSCH is looking to offload the Abbey wrap.

Even so, there are those who believe the UK wrap market presents major opportunities for Australian groups.

Datamonitor head of financial services Asia Pacific Alan Shields is one of them.

Shields believes Australian platform providers must move “relatively soon” into the UK market or risk missing out on a potential multi-million dollar windfall from its emergence.

He is the author of a recent Datamonitor research report that predicts the value of the UK wrap market will grow from today’s $8 billion to $385 billion by 2008, which is more than double the size of the current Australian market.

UK financial institutions are launching wraps “left, right and centre”, Shields says, and in doing so are grabbing distribution through independent financial advisers.

This similarity with the Australian market leaves local providers well placed to capitalise on the projected growth in the UK, but Shields says there are few, if any, Australian-owned platforms operating there.

While Australian technology is powering some of the UK’s platforms, including the Abbey wrap and competitor Transact, these are still generally owned by UK companies.

Australian providers would, however, be making a “big mistake” to transplant their platform directly into the UK market, he says, due to significant market differences.

At the simplest level, there are different tax structures, which would impact significantly on an adviser’s ability to calculate a client’s tax standing and minimise tax.

A second basic market difference lies in the wide range of financial products available in the UK, Shields says.

“The typical platform in Australia offers mutual funds and stocks and superannuation and maybe cash — but not much else.

“In the UK, by contrast, there’s nine or 10 different pension structures to consider, as well as numerous types of life assurance, offshore bonds, tax efficient savings vehicles, mutual funds, cash, and debt, and so on.”