Actually, there are some similarities between an investment wrap and the soft dough used to enclose various foods.

The similarity lies in the fact that you can put lots of different things together inside them and enjoy the benefits. Just like the edible variety, there are various types of investment ‘wrap’ and it is really no more than a generic description.

The most obvious sorts of wraps are those like Individual Savings Accounts (ISAs) and pensions (particularly the ‘self invested’ sort), which provide a specific tax efficient vehicle within which investments can be held and in respect of which special rules apply.

The more modern Wrap
The term Wrap with a capital “W” generally applies these days to an idea imported from Australia and US. This new way of managing your investments is based primarily on the internet (although these by no means exclude use for ISAs and pensions). They are platforms which allow investors to manage their investments through one portal and, because of the way most of them are set up, they can be highly flexible.

In principle, a Wrap is a mechanism set up by an IFA that allows clients access to their investments 24 hours a day, seven days a week. The main advantage of this is that you can, if you want to, get access to information about what your investments are worth and how they are actually distributed between different funds.

Switching fund managers
One of the principal advantages is that many Wraps make it much easier to move your investments from one investment manager – which may not be performing as well as when you made your original investment – to another that is faring better.

Outside a wrap, particularly where the investment is within an ISA or pension, this can be a complex matter and could in some cases count against your annual investment or contribution limit. Because of the way Wraps are set up, this is seldom the case with most investments, because they are held on your behalf by the trustees of the Wrap and all they are doing is altering the investment on your behalf, rather than making a structural change that involves realising one asset and purchasing another.

Some Wraps enable you to record assets via the website that are not held by the trustees; this might include some forms of insurance bonds and pension plans and your home, for example. The benefit of including these is that it can give you a more comprehensive picture of your overall assts, even if you cannot make changes on-line.

Giving instructions
In some cases it is possible to give instructions over the internet for funds to be switched and new investments made or existing holdings sold. This is something that you should always discuss with your Independent Financial Adviser, not least because transactions executed without his or her knowledge may affect asset allocation strategies.

Tax certificates
One other benefit of a Wrap is that it allows the operator to produce a consolidated tax certificate for the year covering investments held within the Wrap (but not those simply recorded on it) in respect of any income and capital gains that may be liable to tax. This can save a considerable amount of work, for those with a relatively diverse range of assets.

It is important always to seek individual professional advice before making any decision relating to your personal finances.

NOTHING CONTAINED IN THE ARTICLE SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE. PLEASE NOTE THAT THERE MAY BE VARIATIONS FOR THOSE LIVING IN SCOTLAND AND NORTHERN IRELAND.