Lifetime Portfolio Services, one of the latest entrants to the UK wrap account market, is to target the defined contribution employee pension market with its technology.
The Lifetime online wrap to be launched in the summer will integrate all of a person’s financial investments, including their Lifetime self-invested personal pension (SIPP), funds, bank accounts and property, on one platform so a financial intermediary can advise on the best tax planning and asset allocation on a person’s total wealth.
The wrap will offer a Lifetime SIPP and a general investment facility to hold all other assets. It will provide a daily update on a person’s net worth statement where there is a price feed or list their loans or other pensions if it is not transferred.
Michael Short, managing director at Lifetime, says the technology behind the system was being designed as “a private banking platform for the mass affluent”. The value of assets being transferred to the Lifetime portfolio wrap could be an average of £50,000 (E74,000) or as little as £1,000, he added.
Traditional SIPPs charge a set up fee of about £300 to £500 and then a flat £500 to £600 per year to administer on top of the cost of transactions. This means a SIPP only becomes worthwhile, when measured against percentage costs, for those investing more than £100,000.
The Lifetime wrap, however, levies a flat fee on total assets within the wrap, which, although it has not been formally decided before launch, is expected to be 1.25 to 1.55%. This levy will be collected from a cash management account to pay the financial intermediary for their advice and the account will receive any rebate from a fund’s initial or annual management charge that would otherwise had gone to the intermediary as commission.
Short says by charging a flat levy rather than a set fee the Lifetime portfolio became suitable for all company employees in a DC pension scheme, not just for key workers. “As companies move from DB to DC there is an opportunity for corporates to encompass the wrap service we present. Human resources could default to us as the investment option and feed the payroll into Lifetime. Lifetime could even be used for vesting equity under a ‘save-as-you-earn’ company share scheme.”
He said other wraps on the market already used a set-fee Sipp and so were propositions for the more high net worth individuals. Prudential, Abbey National, Skandia and Fidelity had launched wraps as platforms “for the companies to parade their own wares” as manufacturers, Short said, rather than setting up a wrap for distributors, thereby supporting intermediaries. He counted Lifetime, Transact and Seven Investment Management as distribution-led wraps.
A number of other firms, such as AMP and Selestia, are looking to launch wraps into the UK. The UK market is growing slowly, despite the prediction late last year by market research firm Datamonitor that wraps could grow to hold £150bn of assets by 2008, from an unspecified level currently.
Even Aviva, which through its Norwich Union brand raised its stake in Lifetime to 49.9% from 7.4% in December, admitted the UK market had developed more slowly than expected. Aviva had decided against developing its Australian wrap service, Navigator, for the UK market. Richard Harvey, group chief executive of Aviva, was quoted in the Australian Financial Review in November as saying when it tried to introduced Navigator in the UK “the timing there was about as bad as you can get” as the equity market slumped.
Australia and the US have the most developed wrap programmes, containing £125bn and £400bn of assets, respectively, although the wraps are also being developed in Singapore, Italy, South Africa and the Netherlands. Short says Lifetime would be available on the continent late next year.
He says the Lifetime technology had been developed by a team of analysts in Sydney. The front end, called the Bureau, is java-based bespoke software to allow a fact find and then select the investments and place the funds order, which is then aggregated with those orders from other wraps and, using JPMorgan’s Fundshub, settled with the manager as a straight-through process.
The back end of Lifetime uses a configured package of Hi-Portfolio from Kansas-based DST International. As a result, Short expects Lifetime to be resilient.