Aussie wraps to conquer UK

Wraps based on the Australian model will replace self-managed accounts in the UK financial services market, a new British report says.

London-based Forrester Research says the wrap accounts will succeed because they are aimed at a wider audience compared to the US-developed self-managed accounts products, and attract discretionary advisers.

“Australian-style wrap accounts like Transact, launched in the UK, will supersede US-style self-managed accounts as discretionary advisors promote cheap, aggregated portfolios to the mass-affluent,” the report says.

Transact has been developed byObjectMasteryin Australia and now has more than 700 UK independent advisers using the wrap.

Forrester says the advisers are attracted by the consolidation of clients’ portfolios into a single report, cheap on-line trades and separate dealing and portfolio management costs.

Transact charges only 0.5 per cent initial commission for online trading of listed equities and managed funds. This compares to the self-managed account fees of between 1 to 3 per cent, Forrester notes.

The minimum investment on the Transact wrap is £5000, compared to a self-managed account, such as Killik’s 71M product, which has a minimum of £150,000 and is aimed at the wealthy, the report says.

“The popularity of the Australian wrap concept in the UK is evidenced by Transact’s strong growth and acceptance in what can only be described as dour market conditions,” ObjectMastery general manager Ian Craig says.

Forrester says UK advisers will move to wraps as the services they can offer electronically to clients will justify their fees, even in market downturns.

“Discretionary advisers will seek even more functionally from platforms, such as Transact, to enable them to add value, precipitating demands from electronic data to aid real-time portfolio management,” the report says.

However, the report says there needs to be more features added to UK wraps if they are to remain attractive to advisers.

These include on-line pricing of investments to enable instant portfolio valuations, automatic transaction histories for reconciliation and on-line tax statements for portfolio reporting.

Craig says Transact links with First software, which feeds into the platform to provide transactional client information.

“We will already provide transactions histories for clients and on-line tax statements,” he says.

“The Australian model is proving superior, as clients pay a fee for advice and administration — a model with which all Australians would be familiar. Other business models are proving less robust.”

Transact has about £250 million of funds under advice in the UK.