The wrap concept was initially developed in the US by EF Hutton, a mutual fund provider for their high net worth (HNW) clients.Today the US wrap market is very different to that found in Australia, New Zealand or even the more recent wrap market developing in the UK. Two main providers of wraps exist - Fidelity and Charles Schwab. These products are also orientated towards more HNW individuals and the overall business model strengthens the relationship with the broker rather than individual financial advisers.
In Australia wraps evolved out of master trusts. These products were developed in the late 1980s and helped to develop existing wrap structures which dominate the financial landscape. In the past ten years Australia, New Zealand, and to a lesser extent the US, have switched to financial service distribution via wrap platforms.Further innovations have seen Australia develop Managed Discretionary Accounts (MDAs) similar in structure to the Individually Managed Accounts found in the US.
Providers have approached wrap development in a number of ways:
- software adaptation where an in-house wrap is built from existing pieces of software.This approach can often be exposed to budget overruns and not be receptive to IFA needs and demands.
- wrap software providing middle ware and back office
- administration solutions. The front end tool construction and adaptation is left to the financial services entity to develop or modify.
- a fully integrated, end-to-end wrap that has front-end tools, core wrap middle ware and back office administration functionality.Such an overall design approach has been refined in Australia and New Zealand.Emphasis is placed on the importance of front end tools.
