Your Wrap
How it used to be done
Historically investments have always been held in separate accounts or products. A client may have a portfolio spread across a bank account(s), unit trust(s), ISA(s), Pension(s), Investment Bond(s) etc.
A lot of these products will only offer a limited range of funds and provide very little online access often relying on signed correspondence to exercise the most basic instructions. This creates a large amount of paperwork and makes the process of valuing or making changes to the portfolio cumbersome.
What are wrap platforms?
Wrap Accounts have been used extensively for a number of years in Australia and North America. They are effectively a single wrapper within which all a client’s investments can be held. The investments can be spread across the main product types such as unit trusts, pensions, ISAs and investment bonds to benefit from the various tax advantages offered.
Wraps are a relatively new way to administer your investments in the UK. They enable private clients and their professional advisers to streamline portfolio administration significantly, allowing both parties to concentrate on the more important matters of achieving their financial plans, goals and aspirations.
Structures and Investments Used
A Wrap is designed to give you almost unlimited investment choice and flexibility whilst consolidating and simplifying your transactions, reporting and the administration of your investments.
This is achieved by holding your investments within one portfolio or ‘Wrap Account,’ providing you with a single view of all your portfolio holdings and transactions. You can hold simply your pension funds within a Wrap or include your other savings and investments within the portfolio.
The full range of assets and investment that can be held within a Wrap is shown below:
The Benefits
It is anticipated that Wraps will revolutionise the UK investment and financial planning market place due to the range of benefits that they offer private clients and their professional investment advisers.
Benefits include:
- Investment tools, aiding a more holistic approach to financial planning and wealth management, ensuring personally designed portfolios
- Single portfolio and asset allocation strategy
- Access to an almost unlimited range of funds, many of which have discounted charges at institutional prices
- Access to a wide range of product and tax ‘wrappers’
- Online administration and reporting, including consolidated tax reporting
- Online monitoring and trading
- Single fee structure removes commission bias
- Very low transaction costs allow investment decisions to be made on merit
- Timely transactions enable effective asset allocation
- Ease of administration
- A single statement and valuation reducing paperwork
What are the risks?
As with many new developments, there are some potential issues about which you must be aware.
With any investment there are risks and rewards. Investment portfolios can be tailored to meet with your desired attitude to investment risk. Wrap allows us to choose from a very wide range of structures and investments ensuring that you will be provided for in the short and longer term.
How do I set up a Wrap?
It is possible to move many existing investments into a Wrap in order that they can benefit from the features already described without suffering tax by in specie transfer.
However, with some types of investment, particularly With Profits funds, it is not possible to in specie transfer and clients will either have to encash the fund or leave it where it is.
With careful planning most assets can be consolidated onto a Wrap without suffering tax. Where this is not possible however, some Wraps allow assets held outside the Wrap to be notionally entered into the portfolio so that the value and asset type can be included for reporting and management purposes.
The importance of Advice
The benefits of Wraps are considerable for most people. As with all financial services however, it is still important to seek and receive quality ongoing financial advice to give you the best chance of achieving your financial objectives.
In recent years the Wrap phenomenon has led to a proliferation of different Wrap providers. It is important that the right Wrap is selected for your particular circumstances and you and your adviser can get on with the business of managing your wealth.