Grace: 'We are transforming business'
Aegon shifts focus with £140m Cofunds platform deal
It will create a platform with £85 billion of assets under administration.
Cofunds has around 17,000 registered individuals and 800,000 investors, against Aegon’s 12,105 and 286,000 respectively. The combined business will have three million customers.
The deal follows the Edinburgh-based company’s acquisition in May of BlackRock’s UK defined contribution platform which has £30 billion of funds under management.
Cofunds will continue to be led by David Hobbs and will be run from its HQ in Witham, Essex, with operational staff also located in Hove, East Sussex.
Aegon, based at the Gyle business district, said the deal is part of a considerable investment in platform technology and signal its long term commitment to retail and workplace advisers.
Intermediaries that use Cofunds will upgrade to the enhanced version of Aegon’s platform, and a plan for development and integration will be unveiled on completion of the deal in the fourth quarter.
Adrian Grace (pictured), Aegon UK chief executive said: “From a standing start a few short years ago, we have transformed our business beyond all recognition.
“Aegon is now well on the journey from a traditional life and pensions provider to the largest workplace and retail platform business.
“We are committed to growing our business alongside the intermediaries that we depend on and will use our enhanced scale to improve user experience, drive proposition enhancement and lower the cost over time.”
The sale includes the Investor Portfolio Service platform as well as Cofunds’ retail and institutional business. All employees in Cofunds and IPS will be transitioned to Aegon.
Legal & General and Aegon have worked closely this year in delivering three mutually beneficial transactions: the acquisition of Aegon’s £2.9bn back book annuity portfolio, the 5 year distribution agreement to provide individual annuities to Aegon pension customers, and the acquisition of Cofunds and IPS by Aegon.
Mark Gregory, group chief financial officer at Legal & General, said: “Cofunds is at the point where it requires a significant upgrade in technology to exploit its leadership position in the UK platform market. We have concluded that this long term commitment is best achieved under Aegon’s ownership as a specialist wealth platform provider.”
The enhanced platform will provide intermediaries – both Cofunds and Aegon users – with a range of propositional improvements.
These will include a broader investment range – including ETFs, Investment Trusts, all FTSE-350 stocks and other stocks upon request; a focus on reducing paper and straight through processing and an integrated pension. It said current pricing will be maintained or improved.
Mr Hobbs, Cofunds’ chief executive said: “Cofunds was a pioneer in the platform market and has built a strong franchise with over 750,000 retail clients plus an enviable institutional business.
“We’re delighted with our new ownership and the combined proposition that we’ll be able to bring to intermediaries.
“The combination of Aegon’s retirement expertise and technology alongside our deep knowledge and experience of platforms positions us uniquely in the market. This is a strong endorsement of our team and our proposition, and is a clear signal that our business is here for the long-term.”
The deal includes taking ownership of the Legal & General branded Investor Portfolio Service platform powered by Cofunds. Aegon will continue to work closely with and support all of Cofunds’ institutional and bancassurance clients.
Through more efficient administration and investment, Aegon expects to generate annual cost savings of £60 million. These will be spread across Aegon UK businesses and will be equivalent to 15% of the combined UK cost base.
By the time the integration programme is finished, Aegon will have the UK’s strongest platform business in all the areas that matter – adviser support, administrative efficiency, assets and profitability.
Mr Grace added: “For users of the platform, today’s deal provides certainty regarding its future and we will keep what has made Cofunds a powerhouse and the primary platform for so many advisers, and improve what needs improving.
“Our success will depend on bringing advisers with us and delivering a smooth transition. We recognise the scale of the task at hand and the importance of getting the detail right. We will work closely with advisers throughout this process to make sure we do just that.”
Commenting on the pension and saving outlook since the EU referendum, Mr Grace said: “The EU referendum result, swiftly followed by a new Prime Minister, Chancellor and Pensions Minister has created an ideal opportunity to reflect on policy and in particular pension and savings priorities.
“While the looming shadow of Brexit is likely to dominate Government time, the focus on policy changes that deliver long term security and benefit for savers can’t be allowed to slip. Focus on the roll-out of automatic enrolment must be maintained to prevent its success being destabilised and a well-designed dashboard has to remain a key element to help consumer engagement.
“While the aims of the Lifetime ISA are positive, there may be more direct and simpler means of helping younger savers prepare for home purchase and retirement. And risking consumer detriment by rushing the introduction of the secondary annuity market could lead to widespread reputational damage.”