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Ian McKenna: Invesco deal removes question mark over Intelliflo’s future

The inevitable question for any Intelliflo customer this morning, after the news that the business has been acquired by Invesco is, what does this mean for me?

It is almost exactly five years since Hg Capital invested in Intelliflo and the business has gone from strength to strength in that period.

Private equity firms typically only invest for a limited period, so for some time people have been asking questions over its potential exit.

This subject has come up in several large system review processes FTRC has been involved in over the past year, which is why getting clarity is valuable. It removes a big question mark over Intelliflo as a potential supplier.

Had, for example, Intelliflo been bought by St James Place, which is known to be making major investments in advice technology, many customers would be thinking very differently today.

Adviser technology is finally beginning to deliver on the promise it has offered for decades, but to do so requires heavy investment. Having an owner like Invesco, with deep pockets, to be able to support major investment is a real benefit for both the business and its customers.

Intelliflo has done a really good job over the past few years of anticipating the technology its advisers will need to evolve their propositions and having it ready for when the adviser needs it.

In this respect Intelliflo has been proactive compared to many of its competitors more reactive stance. To be developing in all the different areas that need to be advanced takes a lot of cash.

Intelliflo: Advisers shouldn’t worry about Invesco deal

This deal means Intelliflo can also grow internationally as well as in the UK. Development costs can therefore be spread over a larger constituency. That should help keep costs down for Intelliflo the UK customers. All this investment is great but it has to be recouped at some point so spreading the cost across multiple jurisdictions is welcome.

Invesco already has a good track record of acquiring technology firms and allowing them to continue doing what they’re good at without interfering. Jemstep, the US automated advice provider, is a great example. There will be obvious synergies between the two businesses, which can only be good news.

There will also be a small halo benefit for Invesco. If you are an advice firm that has put Intelliflo at the heart of its operations, there will be some attraction in placing investments through its new parent. That said, this is not anything that should concern anyone.

Over the past couple of years other life offices and platforms were becoming increasingly concerned at Intelliflo’s footprint, and if the business ever chose to pivot and become a platform itself.

Invesco has had ample opportunity previously to get into that space but has chosen not to. Intelliflo being owned by an organisation that has decided not to own a platform will remove major concerns among quite a few platforms.

The clear commitment from the new owner to continue developing on an open architecture basis, allowing investment and other product providers to integrate using APIs is a really important factor.

It means those platforms that want to invest in deep integration between platform and adviser technology can do so confidently. Research will be published imminently that demonstrates a very strong link between such integration and adviser profitability so this is an area all platforms must develop further if they really want to support adviser’s growth.

It is likely there will be significant further investment by Intelliflo in open banking. Given the size of its adviser client base it is ideally placed to help the adviser community grasp this huge opportunity, not just in the individual advice area, but also by extending the current service to include members of workplace pensions schemes advisers have delivered.

This in turn can provide valuable synergies in using digital advice to reach consumers who cannot afford traditional advice. Invesco ownership of Jemstep is very significant in this context.

A growing group of adviser technology suppliers have been acquired by investment managers, so far the outcome has always been positive. Focus has certainly come on in leaps and bounds since it was acquired by Standard Life.

Equally, Plum has seen the sort of development it had historically been starved of after it was bought by Praemium and it is understood Benchmark Capital’s Creative Technology unit is making positive progress since Schroders invested in it.

Overall, this deal seems to be that very rare beast, a transaction that brings benefits for everyone. Intelliflo as a business now has a new owner with deep pockets that can afford to fund the major level of investment adviser technology systems and their customers will need over the next few years.

While this is good news for the firm’s staff and its customers it also helps Intelliflo’s competitors.

Although the price has not been disclosed, if prices being touted in the media are correct it sets a new value for UK advice technology firms. There are only so many of these available to buy so institutions wanting to take a foothold in this space now have fewer options available. I would not be surprised to see this transaction trigger a round of further deals as there are still a few gems out there to be bought.

Ian McKenna is director of the Finance & Technology Research Centre



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There is one comment at the moment, we would love to hear your opinion too.

  1. Clive Steggel 6th June 2018 at 5:17 pm

    I look forward to the I/O meeting tomorrow at Manchester

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