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Alliance Trust says fierce competition prompted platform sale

Alliance Trust has said that fierce competition among platforms, as well as the cost of maintaining the right technology, were some of the factors that led the board to sell the business last year.

Direct to consumer platform Interactive Investor bought ATS and its Dundee office space for £40m in October.

In results this morning, parent Alliance Trust Plc notes that while revenue for the platform grew by 10 per cent to £29.6m in 2018, up from £27m in 2017, the right moment had come for a sale due to competitive and cost pressures in the platform market.

The results read: “Although the business is now one of the major UK share-trading platforms, the market in which ATS operates is very competitive and high technology costs make it difficult to achieve profitability without significant scale.

“There has been considerable consolidation within this market in recent years and the board received a number of expressions of interest in the business. The board, after long and careful consideration, decided that it would be an appropriate time for this business to be transferred to new owners.”

Operating losses were over £19m in 2017 after a writedown on ATS’ Stocktrade business, but ATS returned to a pre-tax profit of £1.1m in 2018.

Income on the platform was up despite a fall in customer accounts and assets under administration.

ATS, which was best-known to advisers for pioneering a fixed-fee proposition, did not detail in its results what plans Interactive Investor could have for the advised side of the business.

The results note that ATS considers Interactive Investor to be a “highly complementary” business, noting that it operates a “similar flat-fee structure”.

ATS adds that it saw complaints fall 76 per cent as it made operational improvements.

ATS chief executive Peter Docherty says: “2018 was a tremendous year for ATS. It was a year where we invested heavily in the business and our people to deliver improved customer service and position ourselves for growth. The results announced today clearly demonstrate that this has worked. They also make it clear that there’s an obvious need for flat fees, in particular in the advised market, and we look forward to continuing to offer all our customers a genuinely different, and desired platform proposition, based on transparency and fairness.”

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  1. Alliance Trust’s platform is/was so cheap that one has to wonder how it could have ever done anything other than lose money. There’s a going price for running a platform, like anything else, and the immutable laws of economic gravity can be defied only for so long. Sooner or later, reality bites.

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