Search

Portfolio services wrap

THE rapid growth of master funds has been one of the defining trends in financial services during the past decade.

Wrap accounts, which provide essentially the same service, also have attracted keen support in recent years.

But in future, investors can expect to hear less of these terms and more of a new term – Investor Directed Portfolio Services.

IDPS is an umbrella term to cover both wrap accounts and member discretionary master funds, where individuals retain direct control over their non-superannuation investments.

There are some legal differences between wrap accounts (which have a custodial structure) and master funds (which have a trustee structure).

However, the Australian Securities and Investments Commission has already adopted what it calls “uniform regulatory treatment of what are essentially functionally similar arrangements”.

In light of this, investors should look beyond the labels and assess closely the costs and benefits of specific IDPS services.

In most cases investors will be introduced to an IDPS by their financial adviser.

Some larger financial planning firms, such as West Perth-based Gannon Growden Schonell, have designed their own wrap account. Others use third-party services through groups like Asgard, Navigator and Summit Master Trust.

Gannon Growden Schonell’s Ben Devenish says that port-folio administration services provide benefits both for advisers, who can outsource time consuming administration functions, and their clients.

They are especially beneficial for individuals with large and diversified investment portfolios, such as direct shares and managed funds with several different managers.

Such investors can use a portfolio service to obtain consolidated, up-to-date reporting on the performance of their total portfolio.

Consolidated tax statements covering interest, dividends, franking credits and capital gains, reduce administration hassles and accounting costs when tax returns are being prepared.

GGS’s Synergy Wrap also offers a very broad selection of investments, with access to all ASX-listed securities and more than 300 wholesale managed funds, with the latter managed at low-cost wholesale rates.

An important feature of leading portfolio services is that investors can make ‘in specie’ transfers.

This means they can transfer existing assets into or out of the service without realising a capital gain.

Another valuable feature for many investors and advisers is the full online access.

This enables them to view account details, check daily valuations, perform trans-actions and receive reports via the Internet. A common perception in the market is that fees charged by portfolio administration services are high and lack transparency.

An alternative for individuals is to invest directly in shares and retail managed funds. However, Mr Devenish believes many investors underestimate the time and complexity involved in monitoring and running their own investment portfolio, particularly at tax time.

Another alternative is to use an online broker, such as Sanford or netwealth, which enables investors to buy and sell managed funds (including wholesale funds) and shares directly and also provides consolidated portfolio reporting.

The latter option applies only when investors do not use a financial adviser.

Mr Devenish believes the cost of investing through a wrap service is the same or less than the cost of investing directly in retail managed funds.

While wrap clients pay an administration fee of up to 0.8 per cent, they save by paying lower wholesale investment management and transaction fees.

Next week: Wrap accounts and master funds for superannuation.

Add your comment

BNIQ sponsored byECU School of Business and Law

Students

6th-Australian Institute of Management WA20,000
7th-Murdoch University16,584
8th-South Regional TAFE10,549
9th-Central Regional TAFE10,000
10th-The University of Notre Dame Australia6,708
47 tertiary education & training providers ranked by total number of students in WA

Number of Employees

BNiQ Disclaimer