CofundsNov 15 2017

Cofunds' part in platform history

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Cofunds' part in platform history

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.  

It took just three years for the UK to catch up with Australia – often on the back of Australian and New Zealand technology and systems. The retail distribution review was arguably the last nail in the coffin for the old ways of working. 

When I joined Cofunds in 2006 it had just £8bn on the platform. When I left in 2013 the figure was about £50bn. Of course, Cofunds changed as it became part of a bigger business. That was inevitable. 

From the beginning what really set Cofunds apart was the brilliant and thoroughly nice group of people I had the pleasure to work with. This has been evidenced by so many of these talented people being incredibly successful since moving on. Other businesses should look and learn: companies are only ever as good as their people.  

Looking ahead

As for the future, the demise of the Cofunds brand reminds us that change is constant. No platform provider can rest on its laurels. 

In the past, platforms built their reputations on making sure they were doing the dealing, custody and record-keeping well. Today that is taken for granted. 

The future lies in revolutionising the client experience to make it as exciting for clients to look at their investment portfolio as it is to book a holiday. It lies in supporting client engagement with their money. 

Some advisers might worry that the next-generation platform technology will make them redundant. Advisers do need to embrace new technology as it will complement their engagement with their clients. At some providers, apps are being developed that help people see clearly the projected impact of their financial plan and how small changes can make a big difference. Some use modern gaming technology to make the experience interactive and engaging. 

Individuals can use it on their own. However, the experience is so much richer for the presence of an adviser guiding the client through the process, asking supplementary questions and answering questions as they arise. 

Technology

Few advisers have the resources to build this kind of technology themselves. This is something I expect platforms to do more of, continuing the tradition of enabling advisers to do their job more easily and better.

The future lies in flexibility too – in providing advisers with the resources to meet the needs of a vast range of clients.   

It is exciting to look ahead at what might be possible and astonishing to reflect on how far the industry has come in such a short time. Advisers and their clients owe Cofunds a great deal for that. 

The platforms revolutionised financial planning and investment management. They made it cheaper for advisers to deliver their service, often increasing their profitability. They arguably made costs cheaper for clients too. Wrapper charges are substantially lower than they used to be also. The platforms enhanced transparency too. 

Cofunds might not be the business it was, but the brand has a history that deserves acknowledgement. I will be sad to see it disappear.

Verona Smith is head of platform of Seven Investment Management