Platform rivals see inflows from Cofunds

According to Legal & General, which reached a deal with Aegon to sell Cofunds for £140m on 11 August, the platform suffered outflows amounting to £700m in the first six months of 2016, after reporting £1.1bn of inflows in the previous year.

The insurance giant blamed the loss of money on customers withdrawing money for income and “other purposes”.

One of the larger platforms, which wanted to remain anonymous, confirmed transfers from Cofunds onto its platform were the same in the first half of this year as they were across the full year in 2015.

Barry Neilson, business development director at Nucleus, said the large fund supermarkets were the companies where he saw the biggest bulk of money transfers coming from on a monthly basis, with Cofunds often topping the list of companies feeding in to Nucleus’s flows.

He did point out it was almost expected most of the cash would come from Cofunds, bearing in mind it is the largest platform in the UK.

Mr Neilson said the long-term reason this was happening was down to a systematic shift in the market, causing the focus to switch away from the older-style fund supermarkets.

He said newer platforms like Nucleus have begun to accumulate assets and adviser relationships more quickly, “probably because they are working on more modern technology, are able to deal with a much wider range of asset types, and have a broader range of functionality and tax wrappers”.

Pointing to Cofunds, he said the company’s corporate position has been “quite unstable”.

“If advisers do deeper due diligence on their platforms, there will be a stronger focus on the sustainability of the business model of that platform,” he said, adding previous questions over ownership would be a negative point for advisers.

With Cofunds, the comment we often hear is the platform hasn’t been developed and is quite behind the times Bill Vasilieff

Mr Neilson said the sunset clause - which effectively shut off trail commission on platforms - was another reason advisers might turn their back on larger players like Cofunds.

The likes of Old Mutual, FundsNetwork and Cofunds would have been affected by the sunset clause far more than the smaller players, he said.

Bill Vasilieff, chief executive of Novia Financial, said he had seen money come from Cofunds recently, but not as much as from other platforms like Old Mutual and Axa Elevate.

“With Cofunds, the comment we often hear is the platform hasn’t been developed and is quite behind the times. With others, the biggest complaint I’ve heard is advisers having concerns about the creation of a restricted sales force.

“I think Aegon has a massive challenge on its hands and will have to manage the change very carefully or they will lose a lot of money,” he said, adding migrations are “horrendously difficult”.

Responding to the comment, Mark Till, chief distribution and marketing officer at Aegon, said the company will create an advisory board to take on board the feedback of advisers and help them get the changes they want.

A spokeswoman for Cofunds pointed out the platform wrote over £4bn in new business from intermediaries last year.

“Our clients tell us they’re pleased the speculation over our ownership has been laid to rest and we’re going to be at the centre of Aegon’s platform strategy with a commitment for future development.”

Jonathan Gunby, chief development officer of Transact, said he hasn’t seen a spike in inflows from Cofunds, but he did note any corporate change tends to create uncertainty in advisers and clients’ minds.

“Advisers want consistency and a good service,” he said.

Alistair Wilson, head of Zurich’s retail platform strategy, said in the second quarter of this year, around 30 per cent of new money flowing into the Zurich platform came from other investment platforms, either as re-registrations or transfers.

He could not be specific about which platforms these inflows had come from.

“Second hand money, as I call it, has always been part and parcel of financial services, and platforms are no different.”

“There is a lot of old technology being used out there and much of it isn’t up to task of delivering in the 21st century,” Mr Wilson stated, adding platforms have to do the basics well, such as being able to access their money quickly.

According to CoreData Research, which provided data on the UK platform industry, the main platforms used by advisers this year are Transact, Old Mutual, Standard Life and FundsNetwork.

Gary Nettleingham, financial adviser at Catalpa Financial Planning, said: “I don’t believe the outflows are that significant.

“However, those who have pulled away seem to be as concerned about service standards as they are about the commitment of the parent.

“Yet I would wager that these are two sides of the same coin, as the lack of commitment and investment by the parent will almost inevitability drive service levels down.”

Blair Cann, senior partner and adviser for Hertforshire-based M Thurlow & Co, said: “I am not sure why uncertainty over the ownership of a platform should have any great significance to those who are using it.

He said the main factors are suitability, cost and service.

“However on the level of service I imagine I am not alone in rating Cofunds’ service levels as inferior to other platforms.

“Concerning the takeover, not many commentators have homed in on the significant difference between what L&G paid for it and what L&G have sold it for.

“Whatever L&G were hoping to achieve by its purchase, it does not appear to have been successful.”

katherine.denham@ft.com