Aegon is to buy L&G-owned platform Cofunds for £140m, becoming the biggest platform provider in the UK.
Money Marketing first revealed Aegon had made a verbal agreement to acquire Cofunds in February.
The deal, announced this morning in Aegon’s results, ends months of speculation and will create a platform with assets under administration of around £85bn.
Cofunds has around 17,000 registered individuals and 800,000 investors, compared to Aegon’s 12,105 and 286,000.
The combined business will have three million customers. Advisers using Cofunds will be upgraded to an enhanced version of Aegon’s platform.
Aegon UK chief executive Adrian Grace says: “From a standing start a few short years ago, we have transformed our business beyond all recognition. Aegon is now well on the journey from a traditional life and pensions provider to the largest workplace and retail platform business.
“We are committed to growing our business alongside the intermediaries that we depend on and will use our enhanced scale to improve user experience, drive proposition enhancement and lower the cost over time.”
Cofunds chief executive David Hobbs says: “Cofunds was a pioneer in the platform market and has built a strong franchise with over 750,000 retail clients plus an enviable institutional business.
“We’re delighted with our new ownership and the combined proposition that we’ll be able to bring to intermediaries.
“The combination of Aegon’s retirement expertise and technology alongside our deep knowledge and experience of platforms positions us uniquely in the market. This is a strong endorsement of our team and our proposition, and is a clear signal that our business is here for the long-term.”
Cofunds uses technology provider IFDS, while Aegon has a contract with GBST.
Aegon has been moving away from a traditional life office and towards the platform market for some time. In May it acquired BlackRock’s defined contribution platform along with 350,000 customers.
AJ Bell had been the front runner for Cofunds but talks fell through in September 2015.
In June, Money Marketing revealed Cofunds had lost around £500m in assets amid uncertainty about the sale.
Expert view: Platforum
Platforum senior researcher Miranda Seath says:
“After a prolonged period of uncertainty, Aegon’s acquisition of Cofunds is good news for Cofunds users and good news for the industry.
“One of the potential risks that prospective buyers will have weighed is the relatively mixed nature of Cofunds’ retail book. There is likely to be a reasonable percentage of orphan clients in the mix. But Aegon needs customers in the funnel. Its horizontally integrated proposition spans direct, advised and workplace, meaning that it can service the whole spectrum of Cofunds’ clients.
“And advisory firms wanting to head for the exit are likely to have done so by now. We think that many firms will wait to see what Aegon can bring to the table rather than immediately voting with their feet.”
She adds: “Cofunds users will care about functionality and Aegon has a more comprehensive range of tax wrappers and products to offer, including ETFs. They will also care about price. For low to average portfolio sizes, Cofunds pricing is at the cheaper end of the scale whilst Aegon’s is a lot punchier at around 45bps.
“But Aegon’s fees are 0 per cent for assets over £250,000 – effectively capping charges at £1,215. For portfolios of £500,000 and up, Aegon is cheaper than Cofunds. Aegon is clearly making a play for larger portfolios.”