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Old Mutual Wealth: Why we pulled out of IFDS deal

Chief exec Paul Feeney says project has been difficult but costs proved “unacceptable”

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Old Mutual Wealth chief executive Paul Feeney has admitted the company’s replatforming project has been “a difficult journey” as he sets out why IFDS has been dropped as its technology provider.

Old Mutual Wealth announced this morning it had terminated its contract with IFDS in favour of a deal with FNZ.

Last week the company said it would update the market on its replatforming exercise no later than the company’s AGM on 25 May.

Speaking to Money Marketing today, Feeney said the timescales and costs of the project under IFDS, which had hit £330m as at the end of April, had become “unacceptable.”

He says: “We had concerns that remaining with existing suppliers would have extended timescales and led to additional costs. We told the market earlier this year we were in sensitive, commercial negotiations to try and address timescale and cost risks. Those talks have not borne fruit.

“This is the right decision for our customers, their advisers and our shareholders. It substantially derisks our UK platform transformation programme.

“It was going to take longer and cost more than the guidance we had given the market, and that was unacceptable after such a long time in this programme. We have made a definitive decision today, and one that will provide greater functionality within an earlier time and at a better cost than would have been the case had we stayed on the route we were on.”

Asked if Old Mutual Wealth had to pay to break the contract with IFDS, Feeney said the contract had been terminated in accordance with Old Mutual Wealth’s rights.

FNZ already has replatforming agreements in place with Standard Life Elevate, Aviva, Santander and Barclays. Feeney says FNZ has committed sufficient resources to the Old Mutual Wealth project.

He says as part of the transition to FNZ, advisers can expect greater functionality such as linking to advisers’ back office systems, exchange-traded funds, investment trusts and cash accounts.

He says: “Advisers and their customers have been at the forefront of our minds as to why we have made this decision in terms of timescales, and the functionality and service proposition we want to deliver to advisers, and the service support we want to continue to provide.

“We have made the decision to go with FNZ, and believe it is the best and most appropriate provider for us. We believe this will get us there quicker, and with a richer proposition.”

Feeney adds: “It has been a difficult journey for all of us so far. At the same time, a lot of the previous learnings have enabled us to come out of the traps very quickly with FNZ.

“As the chief executive of this business, I am responsible for the overall strategy of the firm and delivering on that strategy, and that includes the transformation of our UK platform. We are completely committed to delivering that strategy, and we will deliver.

“We have made a tough decision, but we’ve made the right one.”

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Wow, after the most expensive software provider, let’s try the second most expensive – out of the frying pan… etc.

    • Regardless of software provider, I’m just astonished at that £330m figure. What were they doing? Did the heating pack up forcing them to burn piles of £50 notes to keep warm all winter?

      • The figures are crazy arent they? This cant surely represent actual cash handed over to IFDS. It must be made up of opportunity costs etc.

        For example, 100 programmers @ 100k pa each, 10 project managers at 100k pa each, 30 support and 30 admin @50k pa each, all employed for 5 years solid wouldn’t even be a quarter of this?!?! What are we missing here?

        Can someone a bit smarter than us two please give us a steer?

        • I’d heard from someone else, who’d heard from someone else, is that as it’s IT the contract wasn’t fixed and was charged on an ‘hours spent’ basis. still hard to picture how it amounted to this figure but as it’s been going on for years behind the scenes it starts to paint a clearer picture.

        • You need to factor internal SME costs too, including internal contractors. I’ve seen indecision/poor decisions/poor specifications/lack of coherent direction lead to a lot of redundant work

  2. James Hurdman 2nd May 2017 at 2:47 pm

    What is an adviser to make of this when undertaking their due diligence on platforms? Outsourcing to IFDS = bad? Might those platforms that are already, or are in the process of, outsourcing to FNZ see slower development in their proposition? Is in-house tech the only way to go? Can the advice profession make any meaningful assessment at all anyway (other than cost of platform, service levels, functionality, support etc)?

    Meanwhile, some commentators believe that IFA’s should pay for platforms, not the client.

  3. Anthony Smith 2nd May 2017 at 4:09 pm

    It does seem to have spiralled out of control. I am sure FNZ will do a much better job.

  4. It does lead onto the next logical question – why did OMW decide to go ahead with IFDS in the first place, without getting cost comparisons from other platforms, like FNZ? Who signed off the original deal and are they still working there? It does seem to show very poor planning and decision making by some of the management at OMW.

    • Old Mutual already have (or partly had) a 20 year contract with IFDS for their direct business for collective investments. That part is staying, this attempt at building a platform has cost them a fortune, but IFDS have only lost out on potential business.

      This has been coming for months and has been known for a while, as most IT contractors were laid off recently which would only have happened if there was no chance of Bluedoor continuing.

  5. I bet OMW thought they were playing safe being second onto the IFDS Bluedoor platform. St James Place were first, migrating their ISA and general investment accounts over 18 months ago. Will they be able to get their retirement account live on Bluedoor now that OM are no longer sharing the resources, or are they looking for the exit too? It’s a bit harder to pull out when you have some products already on the new platform, but given the OM decision it’s a possibility. At the very least they must be concerned about spiralling costs.

  6. IFDS actually only quote for around 10% profit on their project work. This is in reality abysmally low and I can see more clients ditching IFDS as DST quote for around 30%.

    Opens the sector up for new competition which should benefit the end client and bring some rejuvenation to the arena.

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