Unless one has incredible discipline and is prepared to stay on top of the paperwork, it becomes inevitable that things start to slip through the cracks, and you start to lose touch with where each investment is located and how it is performing. One ends up looking at each investment as a separate standalone investment rather than as a consolidated portfolio with a proper asset allocation that is regularly reviewed and rebalanced back to either a strategic or tactical asset allocation that has been determined by a bevy of experts.
Increasingly, clients and financial advisers are turning to what is called a ‘wrap platform’ to find a simple solution to the issue of tracking and monitoring investments. Modern technology, faster internet speed and greater economies of scale are making wrap platforms an increasingly more sought after solution for those whose portfolios warrant it.
The two largest platforms in New Zealand are:
Wrap accounts can provide significant advantages to investors wishing to simplify their investments and their administration. Some of the advantages of a wrap account are:
|Investing directly||Investing through a wrap account|
|You have access to retail managed investments with fees as prescribed in the relevant investment statement.||Most funds available through wrap accounts are wholesale funds which generally have lower fees than retail funds or receive a management fee rebate.|
|You have access to direct assets such as shares and bonds, however it can be hard to invest in overseas direct assets.||Using a wrap account to purchase direct assets means lower fees, plus it is simple to invest in sharemarkets worldwide as wrap has ability to manage currencies.|
|Separate reports are received from different investment managers about your investments and transactions.||You receive a consolidated report with information about your investments and transactions.|
|Distributions and income are paid to you separately from each of your investments.||Distributions and income from your investments may be paid to your cash account or reinvested.|
|You may have to pay entry and exit fees when you switch between investments.||You may pay entry and exit fees when you switch between investments but these are generally lower than if investing directly.|
|Time to complete purchases is dependent on the procedures of the investment managers.||Time to complete purchases and sales is dependent on FNZ procedures and those of the underlying investment managers.|
|You receive notices and other communications directly from the investment managers.||Notices and other communications are not sent directly to you.|
|You must complete applications for each investment.||You only need to complete one application to open the wrap account, and then you are buying and sell assets.|
|You must instruct each investment manager separately to rebalance your portfolio.||You can balance your total portfolio with one instruction.|
Please contact a Milestone adviser to ascertain what is best for you and your situation.