Big week in platform world. The industry’s worst kept secret finally became a reality as Aegon confirmed it was buying Cofunds. Experts and their mums took to Twitter, LinkedIn and blogs to share the ‘deets’ and offer their views. Having had a bit of time to reflect and to talk to both camps, here are some considered thoughts from Platforum.
£140 million. Boom.
If we look at the rumoured £50 million that Standard Life paid for AXA Wealth Elevate – a platform with £10bn in AUA – then the £140 million paid by Aegon to gain almost £80bn in AUA from Cofunds doesn’t look too expensive. But let’s remember that about 50% of Cofunds’ assets are institutional (Aegon will have to work hard to hang on to these assets), and we cannot discount the cost of upgrading Cofunds’ legacy technology. Although Aegon has budgeted £80 million all-in for the integration from the tech upgrade down to re-printing brochures, it is notoriously hard to keep a lid on integration costs. To some £140 million therefore feels pricey. Aegon’s Dutch parent paid €30 million less than it would have done in January this year – thanks to Brexit. This saving will come in handy to upgrade the tech and integrate the two propositions.
But Aegon, once the acquisition gains approval, will be the UK’s largest platform – sometimes you pay a premium price for a premium message. And one thing’s for sure – nobody can now question Aegon’s commitment to the UK market.
Advisers
Cofunds’ new owners have a huge job ahead – they will have to work on pricing, technology, and winning over advisers and personnel just for starters. Brand will be a major challenge for Aegon. Advisers have criticised Aegon for ignoring them and suspect them of having ambitions to cultivate customers direct. For over a decade, Cofunds’ sales pitch included the “We don’t go direct to clients” line, and advisers loved it! Aegon must win the trust of these advisers. To do this they will need a strong industry ‘voice’.
Aegon are clear that intermediated distribution is their focus and that the consumer portal Retiready is intended to signpost consumers to advisers in the workplace and in retail advice. Now Aegon must show advisers how horizontal integration across D2C, advised and workplace can benefit them.
Aegon have done the right thing by outlining to the market the path from here. Between now and completion of purchase (by December it is hoped), Aegon will work with advisers to develop a detailed roadmap and timeframes for the integration. Giving this level of clarity to advisers is the correct first step for Aegon to cement itself as a key partner in advisers’ businesses, which in turn will help with Aegon’s current perception by advisers.
Don’t forget the customers
With 800,000 end-investors on Cofunds’ books, this is a big deal for Aegon… and a lesser-but-still-important deal for those 800,000 investors. After more than a year of uncertainty, they will now have a new home, with a well-heeled and committed new owner.
But Aegon’s brand is also an issue with end-investors. In our latest round of consumer research, we found that only 4% of British Investors had heard of “Retiready by Aegon” – and that was from a prompted list. At a recent dinner party, amidst all the finance talk (joy!), it astonished me to hear that nobody around the table associated Aegon with investments – “They’re the tennis sponsors, right?”
And this is an issue for advisers too – one adviser we spoke to praised Aegon for its ‘at retirement’ proposition but told us that, ‘the push back [from clients] is brand. No-one has ever heard of them.’
Aegon’s pedigree in pensions (over 90% of assets currently sit in pensions), coupled with Cofunds’ ISA and collective book suddenly make Aegon a serious provider to investors looking to consolidate their portfolios. Its horizontally integrated proposition spans D2C, advised and workplace, meaning that it can service the whole spectrum of clients. The Nationwide deal will also help to bring Aegon’s investment products to a new customer-base.
Aegon is now in the perfect place to help advisers and investors navigate the occasionally opaque and complicated world of investing. All they need to do is get their tech, admin and branding right!
There is a lot at stake for the advisers and consumers that Aegon seek to serve. The teams at Cofunds and Aegon are enthusiastic and committed to this project. We wish them every success.