The end of the Cofunds brand might seem a strange thing for a hard-bitten Australian to feel emotional about, especially in the week that details about its new incarnation are released, but it is part of my history. And it is actually part of the history of every financial adviser and fund manager in the UK.
Without Cofunds and a small band of like-minded revolutionaries, the advice industry would look very different today.
To understand just how influential it has been, you need to turn the clock back 20 years. I was working in Sydney at the time, for Australia’s largest investment bank, Bankers Trust, and was invited to join a small team on something mystical called a “wrap account”.
Turn back time
At the time, people were still using squeaky, creaky dial-up modems. A web page would take minutes to load. And there we were telling advisers that online trading was the future. To their credit, many of them believed us and in the next eight years we were proven correct.
When I landed in the UK and started at L&G and then Cofunds in 2006, I was shocked to discover the industry here was 10 years behind that in Australia. I thought I must be missing something. There was very little trading online, no cash accounts and – most shocking of all – most advisers were still being paid commission. It was a complete step back in time for me. Many advisers would simply buy an onshore bond with funds provided by an insurer (a strange concept to me, coming from Australia where insurers mostly focused purely on insurance). If they wanted to invest a client’s money with different fund managers they would have to fill in forms for each different fund house, clip the cheques to the forms and post them, then sit and wait for confirmation that the money was invested.
At the time of each annual review they – or an assistant – would have to ring round each firm to get a valuation to enable them to pull together a client report.
Many of the fund houses were terribly inefficient and the whole process could take weeks. It was not easy to compare performance and the hassle of switching out of funds was something few advisers embraced willingly. The upfront commission might just about compensate.
Anyone who wanted to offer a model portfolio had to engage a specialist, which would cost a fortune.
The fund supermarkets, led by Cofunds, changed everything. They offered easy access to far more funds in the market and much better reporting. Overnight, advisers could work differently. The supermarkets grew into platforms; the cash account concept was introduced and advisers were given access to an even wider range of products.
Facilities were created to calculate and administer adviser fees. Advisers could now sign a client up to a platform and instantly access all the wrappers and funds they wanted. Client reporting and charging became simpler.
The new technology had an impact on the fund management industry too. It lowered the barriers to entry for fledgling fund houses, which could now reach distribution without the need of a huge regional sales network.