Rapping on wraps and consolidation in the Talvest Town Hall

(March 28, 2003) Are wraps getting a bad rap, and are insurance company mergers good for the business? The pros and cons of wrap accounts and insurance industry consolidation were among the topics tossed around this week in Advisor.ca’s Talvest Town Hall.

The wrap account discussion began after one advisor asked for feedback, noting that his wholesaler has been trying to get him to consider the product.

“Wrap accounts are a great way to manage portfolios,” responded Andy Glavac, adding that he has used a number of suppliers, including CI, AGF and Templeton. “The reporting for all the plans is great.”

But an advisor identifying himself as Steve was less enthusiastic. “Does it make sense for my client to pay more for a service than what you are currently doing for clients yourself?” he asked. “Wrap programs are stupidly expensive, they provide very little flexibility in manager choices and they make advisors’ roles redundant.”

Robert-Yves Mazerolle says using asset management programs, combined with an investment policy statement, is “the best decision I’ve made so far. Focusing on process versus product frees up more time to focus on other areas of my client’s financial picture.”

The recent wave of consolidation in Canada’s insurance industry also prompted some debate in the online forum.

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An advisor named Leon noted that the sharing of risk is one of the basis principles of insurance. “Companies should also share the risk,” he wrote. “If a company garners a 50% share of the market, it becomes a problem in large catastrophic losses where one company has to absorb 50% of the total loss.”

Leon also pointed out that fewer insurance firms means less innovative products.

But D’Arcy Baker said a company with 50% of market share should also have the required “market buffer” to absorb catastrophic losses, assuming the company is properly managed. “Such companies will be more selective of the risks they take on and are less likely to be caught holding majority risk in any catastrophic situation,” he added.

Make tax season not so taxing

Ask your peers for their advice on tax-related issues or conundrums in the new “Tax Time Tactics” forum in the Talvest Town Hall just in time for tax season. Click here to start the tax talk now.

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Share your thoughts on these topics or start a new discussion in one of the four forums if the Talvest Town Hall on Advisor.ca.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca

(03/28/03)

The opinions expressed in the online messages posted to any of the forums of the Talvest Town Hall are strictly those of the participants and do not necessarily reflect the views and opinions of the staff of Talvest Fund Management, Advisor.ca or Rogers Media. Material contained in the Talvest Town Hall forums is for information purposes only.

Doug Watt