Wrap platforms set to treble in AUM over next five years

The value of assets held on UK wrap platforms is set to treble over the next five years to more than £300bn, says Navigant Consultancy.

The global consultancy firm has announced new research which demonstrates the projected popularity of wrap platforms.

Leader of Navigant Financial Services Europe, Andrew Stewart, explained: "It's taken time for the market to understand the role the platforms can play. Now it does so, there is considerable potential to accelerate the growth of assets on platforms over the next five years.

"We believe that a combination of ongoing investment in collectives combined with the transfer of assets from investment bonds and existing pension schemes mean that assets on platforms will increase to more than £300bn by 2014."

However, the UK platform sector is being challenged by other aspects of the sector: significant investment has been required in order to deliver these platforms, of which there are estimated to be around £600m to date, but further investment required to remain competitive. Coupled with low margins, this means that much of the industry is still recording losses, and therefore may require long timescales to deliver expected returns. The fear is that the industry cannot support a large number of platforms, and Hymans Robertson said we should expect to see providers both existing and consolidating in the future.

Stewart added: "Two thirds of the UK's liquid wealth, estimated at £1.5tn, is held by 11 per cent of the population typically aged 55+. Typically less than 20 per cent of their non-pension assets are invested in collectives and investment bonds, providing considerable scope for platforms to gain market share through a combination of supporting a broader set of asset classes and converting investment to existing platform financial solutions.

"In conclusion we estimate that the combination of ongoing success in attracting collectives plus greater penetration of pension and investment bond assets could help platforms grow to £300bn within the next five year."

- Pensions Age April 2009

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