Cofunds found itself in choppy waters in Q2 this year, following rumours of a sale. Significant institutional outflows stunted net sales as a result but, as we approach the end of the year, the platform has steadied its ship.
At the beginning of November, Legal & General quashed the rumours in a statement that confirmed it will focus “on improving operational efficiency in Cofunds”. This provided a welcome mandate for the Cofunds team to focus on delivering its strategic priorities and it is now very much business as usual at the platform.
Cofunds’ assets under administration declined by 2.17 per cent in Q3, a reasonable result given the poor performance of financial markets. The platform sector as a whole saw AUA decline by 0.84 per cent. Cofunds’ net sales were significantly up from £361.6m in Q2 to £1.42bn in Q3, rebounding to Q3 2014 levels.
We continue to see the pension freedoms as a key driver of asset flows into pension wrappers and Cofunds is optimistic it can capitalise on this trend. Assets in the platform’s pension wrapper sit at 5 per cent. While this is still a relatively low percentage, Cofunds tells us it is seeing a significant lift in interest in pension sales, and gross sales for its pension account are up 73 per cent year-to-date.
Uncertainties over Cofunds’ ownership have caused some to question whether advisers would consider placing new business with it. Interestingly, it appears this may be more of a preoccupation for industry commentators than it is for advisers. When we asked advisers in Q2 which platforms they would consider placing new business with, 44 per cent of those that did not use Cofunds at the time said they would consider doing so.
To put this in context, 55 per cent (the highest percentage) said they would consider using Standard Life for new business. The “big three” platforms all did better than average and we think this means advisers see size as one of the most important factors when placing new business, which is a boon for Cofunds.
However, the platform remains at the bottom of our user leader board. Saying that, it has achieved improved scores in every category this quarter, with quality of customer service and technical support two of the most significant areas of improvement.
Advisers would like to see a better range of funds and tax wrappers, and Cofunds is taking steps to address this.
It is expanding the range of investments available on platform, with a particular focus on retirement income solutions, although it tells us it is not simply looking to on-board the slew of multi-asset income funds launched this year. It is also looking at ways of combining retirement income solutions within model portfolios.
The platform comes in for criticism consistently for its Excel-based reports and excessive paperwork. However, Cofunds is wise to this and streamlining its processes is on its list of priorities, alongside improving its service levels.
This all sounds pretty positive but after a challenging couple of quarters it is too early to say if the platform is out of the woods just yet. Cofunds is confident it has the right roadmap to lead it to being more profitable in 2016. We hope it has turned a corner and that we will see continuing investment in it.
Miranda Seath is senior researcher at Platforum