Mark Polson: Transact's success and Aviva's struggles

Mark Polson: Transact's success and Aviva's struggles

Man, I hate being proved right. In last month’s column I suggested we’d see more exciting stuff in the world of platforms and adviser technology this year than we’ve seen in the past three. It’s only February, and already we’re not short of things to talk about. I’m going to pick three of the ones that have piqued my interest in the past few weeks. 

First of all, Transact has fulfilled its promise and kicked off its initial public offering (IPO). This is, as far as I know, the only IPO in the platform operator space – the only other similar company that springs to mind is Bravura Solutions, which provides the underlying tech to a range of platforms including Nucleus and Ascentric, and which listed on the Australian Stock Exchange in 2016.

That’s big news in itself, but bigger still is the valuation the selling broker, Peel Hunt, has put on the business – a forward price-to-earnings ratio of between 19 and 21 times. This gives a valuation not unadjacent to £700m or so for the UK’s first proper wrap platform. Not bad for government work. 

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Obviously, we don’t know how the listing will pan out, but this is the first time we’ve seen a proper, market-driven exercise in the platform space rather than a trade sale. By way of comparison, Cofunds sold for £140m and the promise of new carpets in Witham, and Elevate is popularly believed to have changed hands for £40m and a pound of grapes.

The IPO has now officially priced Transact parent Integrafin at £650m, which means we’re likely to see a sprint to market from a few others. AJ Bell has been mentioned in dispatches already, and the rumour mill is rife with gossip about whether the time is right for Nucleus to go for a change of ownership. 

Further down the value chain, the only major outsourced platform tech provider that isn’t listed is FNZ – which supplies tech to Standard Life, Zurich, Santander, Vanguard, Aviva, Barclays, among others – and it wouldn’t be a huge surprise to see that business test the water as well.

In less good news...

If there’s one thing that gets the platform space buzzing more than potential corporate activity, it’s when something hits the skids. There are a couple of examples of that in the form of Barclays Smart Investor on the direct-to-customer side, and Aviva’s new advised platform on the, er, advised platform side.

Both these businesses have been riding the replatforming rails for some time, and both happen to be powered by FNZ. But before anyone gets excited, problematic implementations happen and we’re not pattern-spotting here.

The Barclays issue has been well explored, but continues to cause major grief for many clients who don’t have advisers to fight their corner for them. Many clients have been unable to log in, let alone trade, for some time now (I know, because I’m one of them). 

Trust is hard won and easily lost in the direct investing sector, and we hear of many cases where people are trying to transfer out of Smart Investor (proof if ever there were any that nominative determinism doesn’t work) – into Hargreaves Lansdown, Interactive Investor and AJ Bell Youinvest in particular – with frustrating results.