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Charlie Eppinger

Cofunds’ chief executive believes the key to success in the turbulent investment platform market over the next decade will be to offer the ability to aggregate products.

As far as the platform business in the UK goes, Cofunds chief executive officer Charlie Eppinger, can compare it with only one thing – “the Wild West.”

He explains: “It is brand new and evolving and nobody knows where it is going to end up. It is an industry which people did not really know existed three years ago . It took 15 years for it to evolve in the UK, where now Schwab and Fidelity are the dominant platforms, but this happened in about two years in the UK.”

This month, he celebrates his first year as CEO at Cofunds. Eppinger was formerly CEO of third-party fund admin business, International Financial Data Services and took over the reins at Cofunds from Stuart Dyer in June 2005. Eppinger remains executive chairman at IFDS.

He grew up in Massachusetts and spent the first decade of his career in accountancy, initially working as a chartered accountant for Arthur Young & Co, now Ernst & Young.

He moved into the operational side of mutual fund business in the late 1980s and then worked for as chief operating officer and finance director at Bank of Ireland in the US. In 1993, he went to work for a mutual fund processing business, Boston Financial Data Services, owned by DST and State Street, which within 15 months of his arrival, was beginning to look at entering the UK marketIn November 1995, Eppinger arrived in Britain on what was meant to have been a two-year stint has gradually turned into 11 years and counting.

Eppinger built International Financial Data Services (IFDS), a joint venture with DTS and State Street into the largest third party administrator in the UK for mutual funds.

But in 2002, the market started to change and the supermarkets exploded, notes Eppinger. The onslaught of the platform market caused an issue for IFDS. “We had built a successful dinosaur. We worked for years to create a successful business but now suddenly administration had taken a stage left – it was all going to the platforms. We had a problem.”

Eppinger looked for opportunities to get into the platform space but this was not easy.

“We ended up talking to Cofunds. One of the reasons we did was that three of the owners were my good customers – Jupiter, M&G and Gartmore – and I had worked with them for a good part of 10 years.”

At the end of 2002, IFDS came in and bought about 31 per cent of Cofunds. At the time, there was no plans for Eppinger to be the chief executive of Cofunds but the shareholders asked if he would become chairman as he had a decade in the admin market. In spring 2005, Legal & General became an investor in the business and today owns a 25 per cent stake.

Eppinger admits that Cofunds is playing in an already crowded marketplace and believes there are only going to be two or three general-purpose platforms which will really serve the entire market, with perhaps a couple of niche players serving the high-net-worth community.

“I don’t necessarily like the expression but there is a little bit of a land grab going on within the IFA community.”

With regard to the likely survivors, alongside Cofunds, he lists FundsNetwork and the Selestia/Skandia operation.

“I think those will be the three of scale. After that, it is just conjecture. But we are the only one that is independent of product. Others are selling product as well as servicing IFAs and I think there is an Achilles heel there. Independence is going to be our differentiator and this was an early Cofunds’ principle.”

When questioned on whether he sees the imminent arrival of the Standard Life wrap as a threat, Eppinger offers only a generic answer.

“I never ever underestimate insurance companies. They have been around for a long time, they have a lot of loyal customers and they usually have capital. They have a lot of things going for them but saying that some of them are coming to the market late and they are not product neutral.”

In terms of the funding and profitability, Eppinger says Cofunds will need funding at the end of the year but it will be first time that he has revised lower the amount of cash required.

Cofunds estimates that, in the first quarter of this year, it accounted for around 25 per cent of all Isa purchases through IFAs – on and off-platform.

“This is sign of the maturity of the business. We have around 7.7bn on unit trusts, Peps and Isas. There has been a tremendous response to the bond launch and we are very optimistic in regard to the pension we have. I think as a company I would be very disappointed if within eight quarters we were not cashflowing.”

Eppinger says that in a speech he recently delivered, he joked that wrap is merely a figment of a consultant’s imagination but he says he would imagine the reality is probably as short as two years but more likely three years before the market witness a proper wrap model.

“Then we will all know what distribution will look like for the following 10 years. It is about a hierarchy of needs – we are going for Isas, bonds, pensions, unwrapped funds but then there are other things which would be quite nice to have. But we do not use the word wrap. What we sell is the ability to aggregate products. If you want to combine products we can service them. A lot of people are using wrap as a term and no matter what they say, it is just another means to levy a charge.”

He admits to being an impatient person and is an enthusiastic golfer with a handicap of 10. “I just have high expectations both for the company and my people. What gets me down is that sometimes my expectations might be wrong but impatience has always served me well because you are never satisfied. I do have a fear of failure.”

Born: 1948. Worcester, Massachusetts

Lives: Hutton. Essex

Education: BA Economics and Accounting, Holy Cross College

Career: Chartered accountant – Ernst & Young, various senior financial, system and operation positions in the US, chief executive, IFDS, 1995-2005, currently, Chief Executive Cofunds, Executive Chairman, IFDS

Career ambition: “To do the best I can wherever I am, then the job will take care of itself.”

Life ambition: “Certainly to get my golf handicap down to single figures again, sometimes to run a marathon.”

Likes: My family, golf, reading history (and airport novels), sport in general.

Dislikes: Under-achievers and fakers

Favourite films: Casablanca, Hoosiers

Favourite Album: Anything by Jimmy Buffet

Favourite books: John Adams by David McCullough, The Constant Gardener by John Le Carre

Heroes: My parents

If I were not doing this job I would have been… A teacher and basketball coach


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