Aegon’s platform business in the UK has cut net retail outflows by 32 per cent to £53m in the three months ending September 2021.
The firm's Q3 results, published today (November 11), showed outflows in the quarter were down 87 per cent when compared with the same quarter last year, when outflows amounted to £420m.
By comparison, in the first quarter of 2021 the platform saw outflows of £42m, but in Q2 they rose again to £78m.
"We're not net positive yet," said Mike Holliday-Williams, Aegon UK's chief executive. "But we're on the borderline of not shrinking anymore."
He continued: "We want to try and get to a positive net flow. We're almost there."
"There may be some more ups and downs to go. ...Q4 is always a bit seasonal, so we’ll see how it goes. We're in a good position with the earnings we've made this year. So we'll continue to invest in our platforms."
Aegon UK has focused on growing its retail platform business since it migrated customers of the former Cofunds businesses to its new platform.
But the improvement in retail net deposits was more than off-set by a shift in its workplace net deposits, which went from £1bn in deposits last quarter to outflows of £405m this quarter.
This meant overall net outflows totalled £459m in the third quarter of 2021 for Aegon UK, compared to £173m in the same quarter last year.
Holliday-Williams said this was down to the exit of one large institutional workplace-only client, whose identity the CEO could not reveal.
Annualised revenues lost on net retail and workplace deposits totalled £3m, up £2m on the last quarter. The firm said this was driven by the run-off of its traditional product portfolio.
Assets under administration remained at £200bn, whilst platform expenses stayed at 21 basis points in Q3 2021, the same as the previous quarter, and down from 24 basis points in Q3 last year.
'Big' investments
Today, Aegon UK posted an operating profit of £44m, up 57 per cent compared to the period July to September last year.
The uptick was driven by the firm's service charge on assets in the market, which has been recovering from its pandemic-induced lows of last year.
"This [uptick] allows us to continue to invest in the business," said Holliday-Williams. The firm has invested heavily in its platform proposition over the last year, seeing it add a Sipp on one of its platforms, introduce drip-free drawdowns, and add more DFMs.
"We've got more coming around model portfolios," the CEO confirmed.
Aegon is also in the midst of revamping its front-end dashboard, introducing features such as single sign-on, as well as simplifying annual review and portfolio management.
Holliday-Williams told FTAdviser in August there was "a lot to do" still when it came to investing in the platform's front-end experience. That same month, Aegon experienced direct debit issues on its platform which saw payments taken but no trades made.
Overall, the CEO said the firm was making "quite a big investment" across its processes and front-end experience.
Re-organising teams
Alongside platform investments, Aegon UK has also been cutting costs in line with its wider group targets.
"If our expenses are lower, we have less cost to take off that income to drive this operating profit," said Holliday-Williams, who added the firms £44m operating profit showed "good expense control" and "good flow income".
"Our model is working," he said. The firm explained in its results that it was “improving platform efficiency” through expense saving.
“Expense savings initiatives and the favourable impact from market movements on assets have more than offset the revenues lost from the gradual run-off of the traditional product portfolio,” it said.
This has included re-organising teams across the board and, according to its CEO, "getting rid of duplication".
Asked which teams have been reshuffled, Holliday-Williams said: "Pretty much all the teams in some ways. The biggest [re-organising] has been in our operations teams."
Originally, these teams were just looking at one platform, and that's where their individual focus lied, the CEO explained.
But to better scale its UK business, he said these teams needed to be able to deal with multiple skills across multiple platforms.
"So we've tried to re-scale and re-engineer those teams, so that they can work across multiple platforms," said Holliday-Williams. "And that basically gives us a better economy of scale overall."
Aegon UK has outsourced a lot of testing on a technology side. The CEO concluded: "There's no silver bullet here. We're nibbling away at making us more efficient and driving cost savings."
Lard Friese, Aegon Group’s chief executive, said the business as a whole remains on track to deliver its target of £340m (€400m) expense savings by 2023.
On its 1,200 “detailed initiatives” designed to improve the group’s operating performance around reducing costs, expanding margins and growing profitably, Aegon has completed 684 of these initiatives.
Some 549 of these relate to expense savings. The group aims to achieve half of its expense reduction target by the end of 2021.
ruby.hinchliffe@ft.com
