THE ASSET MANAGEMENT WRAP POWERED BY NUCLEUS
About Nucleus
Nucleus is a wrap provider founded in 2006 by a number of high quality IFAs who shared a commitment to creating a market where advisers have the infrastructure and the desire to place the client centre stage. Nucleus have a core central management team, minimal overheads and institutional capital backing from Sanlam, the South Africa based financial services group.
What is a Wrap?
A wrap account is basically an administrative service that combines - or wraps – all of a client’s investments into a single manageable account. This means that their total portfolio can be viewed at a glance and involves a huge reduction in the amount of paperwork. It is not a product in which to invest, but rather a service.
A wrap is available online and lets us as financial advisers manage all of our clients’ assets in one place whether these are held directly or through a ‘tax-advantaged’ wrapper such as an ISA or a pension.
As an adviser using a wrap have access 24/7 to our clients portfolios and this allows us to offer a more efficient and valuable ongoing service than has historically been possible.
Furthermore, while product recommendations have sometimes been based on investment performance and the importance of financial strength in delivering that performance, these factors have become less important as companies have increasingly offered what are known as open architecture investment propositions. This means that instead of constraining the investment choices to those offered by the product provider it is actually possible to access a range of investment groups. In some cases this approach may extend across the entire market.
To some extent, wraps have developed around the diminishing role of the product provider and the increasing appetite for greater investment choice – essentially wraps expose the ‘product’ as a commodity that is really no more than a regulated ‘box’ in which advisers can carefully tailor portfolios to meet the personal requirements and circumstances of each client.
The Nucleus wrap
The Nucleus wrap currently provides access to six ‘products’, which we refer to as ‘accounts’. These are a General account for directly-held assets, an Isa account, a Pep transfer account, a Pension account (sometimes known as a self invested personal pension or SIPP), an Appropriate Personal Pension (APP) account (for protected rights pension assets) and an Offshore Bond account.
Within each account and subject to the regulations surrounding each account type, clients may invest in a fully open range of assets including unit trusts, OEICs, cash, equities (including investment trusts and exchange traded funds) and other securities such as gilts and corporate bonds.
The changes in the market have largely reduced the role of product providers (such as life assurance companies) to that of administrators and as many of these organisations have a heavy reliance on dated technology systems, they are not always able to offer efficient, competitively-priced products.
That said, a small number of insurance companies have moved on and Nucleus are delighted to have partnered with Scottish Friendly to provide them with client administration services. Nucleus believe that Scottish Friendly is the most impressive financial administration business in the UK and this – combined with their unique word of mouth marketing strategy – allows them to keep their costs lower than other wrap providers.
Security of assets
While Nucleus are fully regulated to provide the services associated with running the Nucleus wrap, current regulations require that the APP and Offshore Bond accounts of the Nucleus wrap must be provided by an insurance company. Accordingly they have partnered with Scottish Friendly Assurance and Scottish Life International to provide these elements of the service. Furthermore, and in order to manage our capital most efficiently, Nucleus currently outsource the regulatory supervision of the ISA and PEP accounts to Scottish Friendly Insurance Services, which is also the scheme administrator of the Nucleus Pension account. All the parties involved in the administration of the Nucleus wrap are regulated by the appropriate authorities, and as such are responsible for ensuring that clients’ money is properly audited and reconciled on a regular basis.
To provide additional security ‘certificated’ assets held in a nominee name on clients’ behalf are also monitored through a ‘custody’ service provided by independent third parties. A custodian provides an additional source of reconciliation, but most importantly, holds the certificates associated with the assets. Although most collective funds such as unit trusts or OEICS no longer provide physical certificates on purchase, Nucleus has ensured that Pershing Securities Limited, a subsidiary of the Bank of New York, will hold and audit those assets that do.
What sets Nucleus apart?
We believe that Nucleus represents the fresh start the industry has been waiting for and believe that the following key factors set them apart from the rest of the financial services sector:
• as an IFA-backed and designed business the result is a crucial first for the industry and one that we believe will become the centre for excellence in the delivery of financial advice in the UK;
• Nucleus have no legacy system issues or vested interests and as such have been able to approach this venture with a blank piece of paper;
• Nucleus work for advisers and their clients NOT large insurance or fund management groups;
• Nucleus charge a fair clear fee for the service they provide and don't rely on commissions or other remuneration from third parties (as they feel these will ultimately influence platform or adviser behaviour);
• Nucleus believe the IFA brand is most important and do not believe customers should be forced to pay a premium for a large provider-brand;
• the business has been developed with adviser and client interests at heart – this saves money on dead end technology developments;
• Nucleus have taken on board the lessons of other sectors that have gone through the democratisation process and have simply applied them to retail financial services; and
• Nucleus entirely support the regulator in their current activities and believe the industry needs to change significantly in order to prosper.
The cost of the service
The total client cost of the Nucleus wrap has three components, each of which is described and disclosed explicitly prior to any investment being made. The three elements are as follows:
• an annual Nucleus charge of 0.35 per cent (falling to 0.30 per cent for any part of portfolio in excess of £1 million). You should note that the Nucleus Offshore Bond account is subject to additional charges of £100 up-front and 0.15 per cent each year;
• fees for financial advice which will be agreed in advance us and your adviser and yourself; and
• the cost of the assets that the adviser and the client choose to invest in.
At Asset Management IFA Limited, we are delighted to be at the forefront of the development of this exciting service, all the more because its development has been entirely driven by the needs of high-quality IFAs and their clients. For the first time, it provides us with the opportunity to ensure our asset management service is delivered across the whole of your portfolio. We very much hope you will make use of this new enhanced service in the future
Benefits for you
We would summarise the benefits of the wrap service as:
• The wrap service enables us to provide ongoing advice that places tax management and investment services within the context of a holistic personal financial plan, rather than the provision of a series of disjointed products.
• The wrap service shows a consolidated portfolio report of all your assets held across all products, available online at all times.
• The wrap service offers access to investment funds on semi-wholesale terms. These are normally at a substantial discount to approaching the fund manager directly as the wrap benefits form economies of scale.
• Utilising a wrap service mean that you have a single point of contact through the wrap, rather than having to deal with multiple financial product providers.
