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Stuart Dyer

The chief executive of Cofunds says the tie-up with Legal & General puts it in the right position for the depolarised world, opening up access to different markets and moving the firm closer to a wrap proposition.

Stuart Dyer is as realistic about his golf handicap as he is about the inevitability of a lot of the bad press that has surrounded Cofunds over the past few years.

Dyer, chief executive of the fund supermarket which enters its fourth year next month, concedes that in the early days, it was small wonder that people questioned whether Cofunds would survive in the longer term.

But now, with over 3.5bn in assets under management and a tie-up with Legal & General which will see Cofunds broaden into a multi-product platform, he is confident that the firm is well positioned for the depolarised world – more so than he is that he will ever reach the holy grail of a scratch handicap.

“If you look back at the beginning of 2003, Cofunds had 600m in funds on the platform and annual losses of 30m. It was bumbling along with 20m-30m in monthly sales and the questions were fair. Anyone in their right mind would have said it was difficult to see the business ever taking off,” he says.

Now losses have been halved and costs are falling, with projections currently putting break-even within two years.

The timing of the launch, at the start of what was to become one of the deepest and longest bear markets in living memory, was certainly not something anyone could have predicted. But as IFAs started to realise the value of using fund supermarkets – less admin, consolidated statements and audited trail commission – confidence in platforms in general began to rise.

By the end of 2003, Cofunds had 1.8bn in assets and that figure rocketing up to over 3bn by the end of last year. It had placed itself in the top two supermarkets in sales terms along with FundsNetwork but Dyer says Cofunds had to develop a broader offering if it was to maintain this strong position.

“The biggest change for Cofunds is the L&G link-up. It said to the market that Cofunds has aspirations to be a broader platform and it also said something if L&G were keen to work with Cofunds.”

Besides L&G’s brand strength and the different tax wrappers they can build for the platform such as life bonds and personal pension products, the company will also open new distribution doors for Cofunds, not least through its salesforce.

L&G’s recent single-tie arrangement with Bradford & Bingley is just one example of opening doors, with L&G also a staple on many adviser networks’ multi-tie panels. The technological support that L&G can offer existing and future multi-tie partners is beneficial to both itself, the networks’ advisers and in turn Cofunds.

“It is a hell of a change for Cofunds really. The L&G relationship dramatically changes the outlook for Cofunds, both in profitability and access to different markets. The deal also opens access to tied markets after depolarisation.”

He signed the contract for the L&G deal while sunning himself on the balcony of his Florida holiday home but Dyer is well aware that the two companies have a lot of work ahead of them to deliver on their promises and it will not be cheap.

Dyer says he is not afraid of a challenge and is growing increasingly accustomed to having to perform in front of an expectant audience. Last year, he took part in a pro-am golf contest in Florida, teaming up with former US Open winner and American Ryder Cup star Curtis Strange and New Zealand veteran Bob Charles. The trio cruised to victory and Dyer believes the broadening of the Cofunds platform will be no less successful.

Cofunds is taking responsibility for all mutual fund aspects of the technology needed to underpin the expanded platform, with L&G funding the bond and pension product systems.

“L&G’s investment is bigger than ours and it is going to cost us several million pounds. L&G is having to make considerable changes to its systems and we are both facing the cost of linking our two systems.”

The Cofunds L&G bond and pension wrappers will be more profitable than Isa, Pep and unwrapped fund business for the platform but the fact that the two are looking to have keenly priced products and must share the spoils means that Cofunds’ margin will only be about 10 per cent higher on life wrappers than on its investment wrappers.

Such are the vagaries of fund supermarkets’ finances that market movements can significantly lift or drop profits. Purely through market-based asset growth, Cofunds increased money held on its platform by 300m. If average market growth is 5 per cent this year, Cofunds will add another 200m – roughly worth 500,000 in additional revenue.

Adding life and pension wrappers will bring Cofunds’ offering close to a wrap proposition which is the goal of many a platform but realised by very few. Dyer is not keen on the wrap term as it seems to mean so many different things to different people and he prefers to talk of Cofunds moving into a multi-product, open architecture space.

He sees Skandia as the benchmark, with FundsNetwork – for now at least – the main competitor in the pure fund supermarket stakes. Dyer is more scathing about other rivals.

“Skandia is obviously the benchmark competitor but Standard Life has Sigma, Prudential has Fundsdirect and Norwich Union has Lifetime. They are all moving into the open architecture space but we think there is enough about our offering to make it different.

“Our broader product base will be a reality, though, not just a set of diagrams, and in L&G we have a partner that can deliver results, not vapourware.”

Whatever the competition do, Dyer is confident that Cofunds is well positioned to grow into a profitable staple of the financial services industry and, as his golf prowess shows, Dyer does not just talk a good game.

Born: December 1950

Lives: London, the New Forest and Florida with wife and two children

Career: August 2001 present, Cofunds chief operating officer, then chief executive. He was previously Save & Prosper chief operating officer, Friends Provident investment marketing director, managing director at Friends Provident Unit Trust Managers and NM Unit Trust Managers and operations director at Schroders

Career ambition: “At my age?”

Hobbies: Keen golf player and has taken part in pro-am tournaments in FloridaLikes: Exotic cars and crazy ties

Dislikes: Queueing and heavy traffic when leaving London on a Friday night

Hero: Tiger Woods

Drives: Jaguar XJR, B5 Alpina and Ford Thunderbird convertible

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