Friday, 26 October 2007

Life and Pensions Wrap Providers

Life and Pensions providers, these days, are rightly concerned about the inroads that wrap providers are making into their territory. However, I think that they might do better to realise that they are wrap providers themselves - they just haven't been very good at it. What they have not done well is that they have failed to provide their customers with the investment choice and transparency that the newer competitors offer.

This, I believe, is a problem that is relatively easily remedied by changing the relationships that the life and pensions providers currently have with their, by now mostly third party, investment management providers, and updating their sales proposition to match.

As an corrolary to this, I think it will be interesting to see what happens to the wrap providers as they start to include more structured products (as opposed to vanilla mutual funds) in their wrap products. I am talking about things like rising floor, capital gaurantee and "130 30" funds. I think it is a matter of time before customers start to realise that they have invested in funds that they don't fully understand, and where the returns they get don't match their expectations. That could well put as back into the space we got to with With Profits bonds and Mortgage Endowments.