Aegon is trying to keep advisers’ faith in its platform as it parts ways with the Cofunds brand.
The announcement last week that it would ditch the name of one of the oldest and most prestigious players in the platform space as it continues its integration project is the start of a significant period of transition at what is now the largest platform in the market.
The combined Aegon and Cofunds platform has more than £100bn-worth of assets on board already, but will it continue to please existing users of both legacy brands, and will it be able to curry favour with new ones as several of its competitors struggle with technology upgrades?
From minnow to mammoth
Cofunds’ history dates all the way back to 2001, when it started life as an independent, before Legal & General took its stake four years later, and before Aegon eventually took control in 2016. Cofunds was by far the senior partner in the deal, having amassed around £80bn of assets compared to around £13bn at Aegon.
Former Cofunds staffers sounded an emotional note over the brand’s demise on LinkedIn after it was announced that, as part of the integration project of Cofunds with the existing Aegon Retirement Choices platform, the firm had decided to go with the Aegon moniker from here on out.
The platform’s first chief executive Sam Jensen, wrote: “When we started Cofunds in a conference room, we all knew it would be the largest platform in the UK, we just needed to get it done despite the many obstacles, and we did it.
“For myself, the most important part of it all was the terrific relationships I made: our team, our terrific clients (both IFAs and fund companies) and our investors. I will treasure the experience forever.”
His post attracted more than 12,000 views.
Former Cofunds head of IT development Jim McGlynn added: “The name is ending but the invention will carry on. We all disrupted the market before disruption became the trendy word. Such a great team, we all had a lot of fun, and we got so much done with so little.”
Andrew Bottomley, Cofunds’ head of IT architecture, will be stepping down in December. “I guess in a way you could say I saw it through to the end,” he wrote.
The models are going to be the same between both businesses and advisers will ask why we were keeping two names on what is the same service
But does dropping the brand actually matter? For some it may not, but those with an already unfavourable opinion of Cofunds will see it as vindication of their view.
Rose and North financial planner Hayley North says: “This feels like the beginning of the end for Cofunds. When I started in the profession a decade ago, it was young, independent and exciting but sadly I feel that L&G has squeezed the life out of it. We have moved our clients away from the platform over time. We find service and functionality to be slow, outdated and frankly, appalling.
“Aegon is wise to drop the brand as it has become more of a liability than an asset, but I have very little faith in either company to deliver to the standards demanded by clients and advisers based on our experience.”
Expanding the service
Aegon’s pitch to advisers is that there are several features that both sets of users will benefit from. For Aegon users, Cofunds’ natural income feature, which allows the separation of dividend and capital growth payments, will be available shortly alongside pre-funding of switches and debit card acceptance.
Cofunds users will get an integrated pension and wider investment range, including ETFs and investment trusts.
Cofunds: A history
January 2001: Cofunds launches after support from a quartet of fund managers including Jupiter and M&G
2002: Cofunds becomes the first to launch re-registration
2004: Cofunds picks IFDS, an early shareholder, as its technology provider
2005: L&G takes a stake in the platform as assets under administration pass £5bn
2009: AUA passes £20bn after launching a cash account service
2010: Cofunds launches a pension account and makes model portfolios available
2011: Platform turns £20m profit as it breaks the £30bn AUA mark
2012: Platform moves to unbundled pricing ahead of RDR
2013: L&G takes full ownership of Cofunds
August 2016: Aegon confirms acquisition
October 2017: Aegon begins phasing out Cofunds branding
End of 2017: Cofunds users set to move to upgraded technology
First half of 2018: Aegon users set to move to upgraded technology
The message that Aegon distribution chief Mark Till is keen to emphasise is that the firm is simply reacting to adviser feedback with these developments.
The firm set up an advisory board of 30 intermediaries to contribute to the platform’s development in the wake of the acquisition, and is now rolling out functionality based on their responses, including on dropping the Cofunds name.
Till tells Money Marketing: “We are coming to a position where both the Aegon and Cofunds advisers will be receiving a consistent proposition. That means the things that we do, the technology we run it on, and the service models we operate are going to be the same between both businesses and therefore most advisers would turn around and ask us why we were keeping two names on what is the same service.
“It reduces cost in the long run. If you think about what would have to happen if we had two brands we would have to have two sets of documents that we run through the platform. In the long run this reduces cost and there is no demonstrable implementation cost because we have a platform that has got the Aegon brand built within it so to take that and add Cofunds to it would have added cost rather than not introducing cost.”
There was “no dissent” when the firm shared the plans with its advisory board, Till says. Aegon also showed advisers the communication plan they have in place so that they can relay to clients what is changing and why.
Filling in the puzzle
There are several unanswered questions, however. One surrounds price. Till says he could not share any future plans at this time, but is committed to the idea that “nobody who uses the service today will pay more”.
This idea is built on the notion that the integration will come in on budget. Other replatforming exercises have seen costs spiral, but Till says the firm is on track in that regard. The cost of the technology upgrade is currently expected to be £80m compared to at least £140m in replatforming costs for St James’s Place and £330m for Old Mutual. Analysts at RBC Capital argue that Aegon would need £240m to complete the upgrade.
Forty-Two Financial Planning
In the past what’s really got me about Cofunds is the lack of integration. If it’s now going to be properly integrated into one thing and it’s seamless, that’s effectively making it like Transact, which is a big step forward. It’s a real pain in the backside using one thing for a pension and something else for the Isa, when in my mind I see it as one investment portfolio. The only thing we have done is drop a different tax wrapper over that. The branding makes no difference to me, and I don’t think it makes a difference to my clients either. The vast majority of our assets are with Transact. Clients have never heard of them but it doesn’t bother them.
Till says: “We ran an agile project management process, we have a good understanding of the systems we operate and an understanding of the requirements we need to build to and that broadly allows us to operate within the parameters of the project finances and aspirations that we have.”
The scale of the integration remains unprecedented, however.
Former Ascentric chief executive Hugo Thorman, who now heads fintech start-up Seccl Technology, says: “They will be seriously clever if they move the money and provide the service without something going wrong. They are hugely confident and they have certainly talked it up so good luck to them.
“If they provide to Cofunds users proper platform functionality, with all the options, they are going to be happy. Cofunds were the least sophisticated of users, but they were increasingly saying why can’t it do this or that. ARC will do that for them.”
The second question surrounds how advisers will react to training on the new platform. How advisers adapt to the combined service will be key. While Till did not have the training plans to hand when speaking to Money Marketing, he says making sure advisers make full use of the new tools available to them in the integrated platform will take centre stage.
Till says: “We have got a lot of users of this system. Our intention is to make sure we are giving those users a better service experience than they have at the moment. We will be making sure they get to use the additional features and that the functionality works for them so they can start using it for their customers.
“We need to bring the integrated pension because Cofunds users have said the pension isn’t integrated, the wider investment range like ETFs and investment trusts needs to be brought to market, and we need to take paper out of the system. We need to help people understand how to do that so that is what we will be focusing the training on.”
As Forty-Two Financial Planning director and former Institute of Financial Planning president Alan Dick says: “If it takes two to three days of hard work to get their head around it, there’s a danger people will be turned off it because they’ve got something that’s already working.”
However, Thorman is more optimistic. He says: “There will be training issues. There is going to be a new user experience, which comes with its own problems, but that won’t be insurmountable.”
After consolidating Cofunds’ Hove office to Aegon’s Witham office, Till says there are no further office closure plans, which will reassure internal staff. But will the pitch work for advisers? Early data suggests it might. The latest flows statistics covering the second quarter of 2017 show that combined outflows at Aegon and Cofunds were up marginally from £5.6bn to £6.1bn. However, these were more than offset by increased inflows, with the combined platform adding around £3bn in net assets.
Cofunds also reported that even during a period where merger rumours were circulating and there was much uncertainty, assets increased from £76.9bn at the end of 2015 to £83.6bn at the end of 2016.
While Cofunds came in 16th position for adviser satisfaction among platforms, according to Platforum data for the second quarter of this year, Aegon does perform better, in 11th position.
Platforum says the integration may improve adviser scores from both sets of users.
Platforum says: “We have seen some convergence of adviser ratings from Aegon and Cofunds users, but as assets are migrated onto Aegon over the rest of this year, advisers will benefit from a platform with higher ratings and ongoing investment in functionality.
“In addition, some of the good stuff is being retained from Cofunds and the new platform will have more pre-funding, family linking and straight-through processing.”
Heather Hopkins, head of Platforum
The Cofunds brand is set to all but disappear. While sad news for those who loved the brand into being, it is good news for customers.
Aegon, Cofunds’ new parent, is upgrading the back-end technology and will run the combined retail assets on a single technology platform. While a massive technology project, we think it makes sense. The acquisition only works if efficiencies can be gained. Upgrading the technology will allow Aegon to grow the business and reap rewards from more efficient processes. We also think the Cofunds technology was in need of a makeover.
Cofunds was one of the first platforms to launch in the UK and retail investment distribution has never been the same.
Advisers will remember the painful process of requesting valuations from life companies and asset managers and the revolution that platforms brought.
While a sad day for those that poured their blood, sweat and tears into building the Cofunds business, Aegon is investing to modernise the offering and has ambitions to grow the business. Just two years ago, many questioned whether Cofunds would be left to die a slow death. This is a far better outcome for investors, advisers and those that worked so hard to build the business.