Aegon UK could be set to benefit from a “game-changing” economy of scale with a potential acquisition of the Cofunds platform, a market commentator has said.
According to latest market speculation, the Legal & General-owned platform is set to end up in the hands of the Dutch-owned Aegon UK, which is headquartered in Edinburgh.
An industry source close to the negotiations has claimed the deal was signed and sealed two weeks ago, although neither company has confirmed this.
Platform specialist Mark Polson, founder of consultancy The Lang Cat, said: “Although nobody knows anything yet, this could be a very major step for Aegon UK.
“First of all, platforms are a scale game and Cofunds is enormous. With one stroke, Aegon UK could become the biggest platform provider in the UK.
“It would be a game changer, a massive explosion in platform assets for them, as well as vastly interesting for the industry.”
Aegon UK has already developed the at-retirement platform Arc, which it launched at the end of 2012, followed by the Retiready proposition in April 2014.
According to latest figures, Arc saw high levels of growth in 2015, with total assets accelerating to £5.3bn by year end.
Mr Polson added Cofunds’ book of business is quite disparate in structure, with institutional, retail (direct to consumer), white-label and advised.
“It is clear how the advised business would fit into Aegon UK’s model and you could see how the retail D2C would work, although the institutional and the white-label would be a different matter.
“There is a further complicating factor, in that Cofunds is reported to be in the process of looking at new technology and may or may not have decided on something, while Aegon UK has already got a working platform that it has invested heavily in,” he stated, adding Aegon has been transferring assets from its back book to the Arc platform.
He added that whether Arc would move onto a new tech structure, or Cofunds’ assets would be put onto the Arc platform, remained to be seen.
Mr Polson added Arc certainly has the right structure to cope with that move, if this deal were indeed to go ahead.
He said: “As is always the case when an advised platform is looking to change ownership, there is more than the daily administration to consider; there is also the strategic fit with adviser firms.”
When asked whether Aegon UK was the front-runner in a sale process, Stephen Wynne-Jones, head of marketing and digital at L&G, said: “We do not comment on market speculation”.
A spokesman for Aegon UK also said: “This is market speculation and we would not comment on it.”
At the beginning of January this year, L&G announced an agreement to sell its Suffolk Life specialist self-invested personal pension business to Curtis Banks in a deal worth £45m.
Suffolk Life had been bought by L&G in 2008, and administers about 26,500 Sipps, with assets under administration of £8.7bn.
Later in January, Cofunds revealed it planned to cut 10 jobs and move its London team to its headquarters in Witham, Essex.
These events rekindled market speculation over a potential sale of Cofunds.
In September, there had been rumours that a sale of Cofunds’ £37.9bn retail business was imminent, with several names appearing in the frame, but these were scotched after an insider told sister newspaper Financial Adviser there was no immediate deal to be struck.
At the time, it had been reported that AJ Bell and platform FNZ had both separately held talks with the provider, with AJ Bell reported to be in an exclusivity period.
However, when asked at the time whether a potential sale had been completely taken off the table, a spokesman for L&G declined to comment.
L&G bought Cofunds in 2013 in a deal that valued it at £171m.
According to its accounts for 2014, the platform underwent business-wide cost-cutting, with a view to making £80m worth of savings in 2015.
In 2014, Cofunds posted a pre-tax profit of £7.7m, although net inflows halved from £10.1bn in 2013 to £5.4bn in 2014.
To the end of June 2015, there were £37.9bn of retail assets, and £36.7bn of institutional assets.
At the time, David Hobbs, chief executive of Cofunds, said: “There is still much work to be done as we recognise that a business of our scale should be generating more profit.”
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