Cofunds’ head of marketing said the move was “entirely consistent” with its strategy and did not mean Cofunds was launching a direct to consumer platform.
He said: “We will be using Cofunds technology to power a direct platform for L&G Group but there is no fixed timeframe for this yet and talks are still in the very early stages.”
His comments follow a note from Barclays analyst Alan Devlin written after the firm hosted a presentation by Mark Gregory, chief financial officer at Legal & General, last night.
The research note said: “Cofunds needs to be fixed. The company was honest in admitting Cofunds needs to be fixed, as there is no point in adding assets to the platform until it can build a leveragable / scaleable business.
“The company is currently focusing on fixing the business, which generates 1bps of earnings on £64bn of assets under management, and once it is scaleable, it will bring the model direct.
“The company believes digital solutions are critical in the new savings world, and are focused on making Cofunds a leading platform which can offer more than just a large fund supermarket.”
Mr Wynne-Jones added: “They didn’t get it wrong. But it needs extra context. We will be powering a D2C proposition that will be developed within the L&G group. It will not be Cofunds branded but will use our technology to power it.”
Cofunds supplies the technology behind several consumer facing brands including Chelsea Financial Services, Nationwide Building Society and Yorkshire Building Society.
Meanwhile, speaking at a Morgan Stanley conference last week, Legal & General’s group chief executive Nigel Wilson revealed he expects the group’s individual annuity sales to fall from £11.9bn to £2.8bn as a result of the Budget.
He said: “We do expect individual annuity sales to go down. But annuities will remain right for many people and with the continued secular expansion of the bulk annuity market, we are extremely confident that we will write more annuity business in 2014 than in 2013. Possibly substantially more.”
Mr Wilson added that DC fund management opportunities would expand benefitting L&G’s investment management business and he confirmed the group was considering entering both the drawdown and equity release markets.
BACKGROUND
The Platforum revised its platform growth forecasts after the budget to reflect the potential for an extra £5bn of Isa sales through platforms. Holly Mackay, the firm’s managing director, said the total value of the advised platform market was now on course to hit £495bn by December 2016.
She said providers attempting to appeal to “less confident investors” and focusing on “guidance” would benefit the most from the changes, with Axa Self Investor, Bestinvest, Fidelity, Hargreaves Lansdown, rplan and The Share Centre thought to be particularly well-positioned.
IFA quote
Ian Brown, chartered financial planner at Swansea-based Cosgrove Brown Financial Planning, said: “This seems like a natural progression for them and makes sense especially in light of the Budget announcement on annuities. I don’t see it as a threat to people who want face to face advice. It’s more likely to threaten companies that already operate in the D2C platform space.”
