- Aegon’s acquisition of Cofunds would create a combined entity with £87.7 billion in assets under administration (AUA). If we include the assets from the BlackRock acquisition, AUA stands at circa £97.9 billion. Taking into account retail assets only, the combined entity would have assets of £48bn.
- 17,000 RIs and 800,000 end customers use Cofunds compared with 12,105 RIs and 286,000 end customers using the Aegon platform.
- Aegon’s AUA grew by 134% in 2015, this phenomenal percentage growth has been fuelled by transitioning off-platform assets – we understand that Aegon will be moving a further £8bn in off-platform assets onto the platform.
- Aegon’s tax wrapper split is heavily weighted to pensions – 91% of assets sit in pension wrappers. This is not surprising given Aegon’s pension pedigree and strength in workplace savings. The Cofunds acquisition will significantly boost assets in ISAs and GIA. Currently only 4% of Aegon’s assets are in ISAs.
- Aegon’s technology supplier is GBST, whilst Cofunds uses IFDS – it is likely that in the longer term any integrated platform will use GBST although Aegon may use this opportunity to review its options.
- Aegon’s users rate the platform highly for its business development support and its choice of funds and tax wrappers. But the sheer number of advisory firms that Aegon will have to absorb following the Cofunds acquisition could put a strain on service and support. There has been a noticeable reduction in Cofunds staff– putting the onus on Aegon to meet the resourcing challenge.
Platforum View:
After a prolonged period of uncertainty, Aegon’s acquisition of Cofunds is good news for Cofunds users and good news for the industry.
One of the potential risks that prospective buyers will have weighed is the relatively mixed nature of Cofund’s retail book. There is likely to be a reasonable percentage of orphan clients in the mix. But Aegon needs customers in the funnel. Its horizontally integrated proposition spans D2C, advised and workplace, meaning that it can service the whole spectrum of Cofund’s clients. And advisory firms wanting to head for the exit are likely to have done so by now. We think that many firms will wait to see what Aegon can bring to the table rather than immediately voting with their feet.
Cofunds users will care about functionality and Aegon has a more comprehensive range of tax wrappers and products to offer, including ETFs. They will also care about price. For low to average portfolio sizes, Cofunds pricing is at the cheaper end of the scale whilst Aegon’s is a lot punchier at around 45bps. But Aegon’s fees are 0% for assets over £250,000 – effectively capping charges at £1,215. For portfolios of £500,000 and up, Aegon is cheaper than Cofunds. Aegon is clearly making a play for larger portfolios.
The Cofunds retail book is concentrated in ISAs and GIA – only 4% of assets are in pensions as at Q4 2015 – and Aegon has a strong pensions pedigree. Aegon’s pricing strategy suggests that it is betting that advisers using Cofunds will look to consolidate pension assets alongside ISAs and GIA on an integrated Cofunds/Aegon platform to take advantage of the attractive pricing for larger portfolios. If this strategy is to pay off, Aegon must be at the top of its game because other platforms will be circling.
There is hard graft ahead for the Aegon team – it must boost its brand and reputation with a broader base of advisers. Aegon’s platform comes in for some criticism from users for ‘not being adviser friendly’ and any D2C play for orphan clients must not come at the expense of advisers’ trust. However, we see this as ‘smart consolidation’. Far from being a naked asset grab, the Cofund’s acquisition is logical unlocking significant opportunities to drive forward Aegon’s horizontally integrated proposition. We hope that the Aegon team will rise to the challenge.