Anyone following the row between the management of Alliance Trust and its single largest shareholder, Elliott Advisors, must be wondering where this is all going to end.
I’m no expert in corporate governance but I wonder if this raises a few due-diligence questions for advisers on Alliance Trust Savings (ATS), the trust’s platform business.
One of the specific concerns cited by Elliott for wanting change at board level is “the continuing losses in the company’s two operating subsidiaries, adding to the total costs borne by shareholders”.
One of the subsidiaries, which I suspect is being referenced here, is ATS. For the first time in eight years, ATS made a profit in 2013, aided by the proceeds of the sale of its full Sipp business. In 2014 ATS decided to outsource its technology to GBST, contributing to the platform’s loss before tax of £3.3m.
Here’s the question: if shareholders of the trust are worried its platform business is lossmaking, should any advisers considering using the ATS platform be concerned too?
If we agree that ATS’s primary purpose is to contribute to the trust’s bottom line, how much longer will shareholders continue to tolerate this level of losses? How much longer before the board decides to pull the plug?
The point here is that we can’t judge a platform’s sustainability by the depth of its parent company’s pockets alone.
Abraham Okusanya is principal at FinalytiQ
