When Aegon officially announced the long-anticipated acquisition of Cofunds from Legal & General for £400m in 2016, the buyer said it would be moving the Cofunds clients onto a new version of the Aegon platform that would include the "best of both" systems.
This is effectively what is termed 'replatforming' in the industry, where the company needs to upgrade its technology, so builds a slicker replacement system and migrates clients over.
Aviva is one of many platforms currently going through this, moving from its old Bravura system to one built by FNZ.
This project has been tumultuous to the point where advisers have contacted MPs to highlight problems the project’s hiccups have had on clients’ access to their funds.
Mark Till, managing director of Digital Solutions at Aegon, said the Cofunds consolidation would, “combine the best of both the existing platforms on Aegon’s technology”.
The buck stops and the problem starts with the provider making the changes, but will advisers feel they have taken all the steps to mitigate risks when they look back?Mike BarrettOne of the main reasons stated by Aegon for buying Cofunds was to get scale in the platform market.
In 2017 Mr Till told FT Adviser: “Obviously, with [Cofund’s] scale combined with Aegon’s scale and the BlackRock business we bought last year we think we can bring significant benefits, both confidence about ownership, about investment in the user experience, but also in bringing the price of the platform down over time."
The merger put Aegon in prime position in terms of UK market share. According to the company’s 2017 annual report it now has total assets of £117bn.
Aegon previously stated that later in 2018 it plans to move all current Aegon clients over to the same new version of the platform the Cofunds clients have been moved to.
Meanwhile, it is firefighting the issues that have arisen from the first stage of the migration which began in May.
These range from advisers not being able to log into their accounts, or produce reports, to advisers seeing disparities between the amount of money in an account and the amount that should have been there.
There are also reports of income payments being missed.
Pending problems
Abraham Okusanya, founder of financial services consultancy Finalytiq, says he understands some of those issues have been resolved but there are still some issues pending.
On Aegon’s part, it has responded to complaints from its users with an apology from Mr Till for the administration issues he said would be resolved as quickly as possible.
Mr Okusanya explains the different types of platform consolidations and also why they have a tendency to be so disruptive for users.
“There are both corporate and technical consolidations and we can talk about pros and cons of each," he observes.
“Standard Life assimilating Axa Elevate and Parmenion is a corporate consolidation to an extent and has not yet played out into the technical space. They have not consolidated the books of business, although the view in the industry is Standard Life will have to do so at some point.”
Lee Coates, director of Ethical Investors, feels the IFA community and its clients have borne the brunt of the commercial decision made by the platform companies involved in the Aegon Cofunds merger.
He said, by far, clients have drawn the shortest straw.
“We thought we had problems with Aviva last year but this Cofunds Aegon thing has been a nightmare," he acknowledges.
“We are at the borderline of almost breaking Financial Conduct Authority (FCA) rules because some of the things we are required to do under 'treating customers fairly' are nearly impossible to do. If I say to you ‘I think you should switch from fund A to fund B’, I do not know whether it will work.”
Cost the money it is going to take and triple it. Work out the time it will take and triple it. And be open and honest with advisers.Abraham OkusanyaMike Barrett, consulting director at Lang Cat consultancy, understands how disruptive things can be when using technology that is being overhauled.
But he believes advisers bear some responsibility as well.
"I would say to an adviser, if you are using a provider that is going through any kind of replatforming, you can expect significant problems and you should think about how to address that and mitigate risk and engage with support material provided to you," he suggests.
“In some cases that last point [engaging with support materials] has not helped.
“The buck stops and the problem starts with the provider making the changes, but will advisers feel they have taken all the steps to mitigate risks when they look back?”
When it goes well
Though on a much smaller scale than Aegon and Cofunds, it is worth noting Embark’s successful example of a platform consolidation.
After a high court case, the Avalon platform with its £300m of assets and 50,000 clients, applied to go into special administration.
Subsequently, it was bought by Embark which has its own platform run on FNZ technology.
In November 2017 Embark stated it was planning to migrate the assets it has on Avalon over to the FNZ platform. Embark managing director, Phil Smith, confirmed to FTAdviser this migration was completed towards the end of last year.
When it comes to lessons learned, Mr Okusanya says that is tricky because as yet there has been no large-scale example of platform consolidation that has gone well.
Even Old Mutual and Skandia’s technology migration was what he calls “botched and abandoned”.
His tips for any prospective platform consolidator brave enough to try this type of project were: “Be massively aware of the technology headache to come.
“Cost the money it is going to take and triple it. Work out the time it will take and triple it. And be open and honest with advisers.”
Mr Okusanya adds: “Make sure there is some kind of back-up in terms of data feed and access and have updates for advisers."
Mr Okusanya points out communication is crucial, but that even the best cannot undo all the damage caused by the disruption.
“Just telling advisers you screwed up is not going to fix the problem," he notes.
“In that case, and Aviva is a good example, you need to be seen to be making progress and making it really, really fast.”
Listen and learn
Mr Coates has some suggestions which he believes could avoid the recent disasters clients have experienced.
“My advice to any prospective platform consolidator is do it in two stages: acquire everything, including the systems and let them run. Make it very clear what penalties will be in terms of job losses and financial penalties for senior management if a merger goes wrong, then think about whether you want to merge,” he explains.
Managing director of Succession-owned Independent Advisers (Scotland), Alistair Creevy, has some legacy business on Cofunds and says his staff have found things challenging since the migration.
His words of advice for the platform companies is to listen more to advisers:
He notes: “I recommend they should talk to advisers more. They think their marketing department they spend millions on should have the answers rather than us.”
Christine Dawson is a freelance journalist
