Big Interview: Cofunds CEO Brett Williams

On his first anniversary since taking over as Cofunds CEO, Brett Williams explains how he has shaken up the platform business.

Brett Williams’ first year in the top job at Cofunds has been full of drama. There was the highly publicized spat with fund groups following renegotiations on rebates, an open challenge to the life companies and a link-up with OBSR that also brought its own controversy. However, what can be said at the end of Williams’ first year is advisers are much clearer on what Cofunds’ strategy is going forward into a post-RDR world.

After moving to Cofunds from rival Skandia in January last year, Williams knew he had a challenge on his hands. The FTSE100 started the year at the 4,452.19 mark and by the end of Q1 assets under administration at Cofunds plummeted from £14.2bn to £12.6bn as markets slumped and investors withdrew.

Williams says: “The main challenge was overwhelmingly the state of the world economy and what this meant for financial services, before even thinking about what it meant for Cofunds. My challenge was working out how we went from stable to being capable of what we could be doing in very uncertain markets.”

Finding a direction

Williams’ first task was to review Cofunds’ overall strategy and decide which direction to take the business. One thing he was sure about was the need for a focused approach rather than trying to be all things to all men.

“There were so many different directions we could go in. For example, should we be powering platforms for life companies?

“However, I decided against this as I think you have to focus, and there is such a big opportunity for us now in the move towards more of a financial planning approach for advisers. From a resources point of view, we did not want to limit ourselves in that space  by trying to spread ourselves too thin.

“At some stage in the future, we could power other people’s wraps, but the big opportunity is doing what we are doing and making sure we are ready for a post-RDR world.”

Williams appears to have sent out the right message to advisers on Cofunds’ proposition. Cofunds’ sales jumped nearly 20% in 2009, with assets under administration (AUA) soaring more than 55%. The platform finished a record year with £4.7bn in net sales, an increase of 19% from 2008, and £22.7bn AUA. This was after a stable year in 2008 when Cofunds made its first operating profit of £400,000.

The rising market has undoubtedly helped boost AUA, but at a time when many advisers are reviewing their platform strategies, Cofunds appears to be tapping into some of their main concerns.

Williams says: “The RDR is a massive opportunity for platforms as a whole and a huge  challenge for life and pensions companies. The way people talk about RDR is that, on 31 December 2012, it will happen, but the event is already underway.”

Taking on the life companies has been high on Cofunds’ agenda this year with many platforms acknowledging the huge opportunity to boost their AUA if they can persuade advisers to switch out of poorly performing funds such as with-profits.

Williams adds: “A lot of advisers see life companies as the past. Whatever they develop in terms of functionality, it is not where IFAs are looking for a platform. Life companies themselves are not sure if wrap platforms are good or bad. When I talk to them, they are aware money is moving away from traditional products onto platforms. They have to create platforms to move money onto and develop newer products on their own platforms. Otherwise they will see money flood out and the RDR will increase the pace of that change.”

Crowded market

But which platform will advisers choose if they are moving money away from insurers? The platform/wrap space is one of the most competitive sectors of our industry with a range of propositions fighting for precedence.

Williams has been at the forefront of the evolution of the platform market since he launched Selestia in 2001. He then moved with the platform to Skandia following the buyout of the insurer by Selestia’s parent Old Mutual in early 2006. Cofunds, Skandia and Fidelity FundsNetwork are the accepted ‘big three’ of the platform world with the bulk of assets under management. But where does Cofunds fit into the larger debate about what is a platform and what is a wrap?

Williams says: “Cofunds is on a journey and the labels attached to our business are sometimes not terribly helpful. We have £23bn of assets compared to some of the smaller ‘wrap’ businesses with £1bn or less. What this suggests is most people don’t want the full functionality of a wrap. They want something more straightforward, which is historically what a supermarket has done, and I expect that will continue. Most people won’t require the full functionality of a wrap but we want to deal with the financial planning community as a whole.

“We will have the features of a ‘wrap’ such as unbundled pricing and other wrap functionality. We want to be the number one choice for advisers so they can pick and choose from us what they want for their clients. Our aim is to be the platform of choice to help advisers do financial planning.”

Unbundled pricing

He accepts unbundled pricing is an important feature to offer advisers, especially post-RDR, and Cofunds plans to offer the structure alongside bundled pricing. The original aim was to introduce the unbundled option towards the end of this year and beginning of 2011 but this timetable has been put back as Cofunds is still waiting for FSA guidance on the issue. This could come in the platform part of the RDR paper due to be released at the end of March.

Williams admits: “Unbundled pricing is an important option, but it is not realistic to think everyone wants it. If it was that important, it is available now so why are assets coming onto Cofunds which doesn’t offer it yet?

“Transparency of charges is very important to help clients and advisers make decisions. We will not try to be the cheapest but we will try and add value.”

Part of this added value will come from initiatives like Cofunds’ link up with OBSR  to provide a panel of researched funds and model portfolios. However, this development generated controversy last year forcing OBSR to issue a statement saying the fund selection process was entirely independent.

Williams says he was surprised by the furore: “OBSR are picking the funds independently and I would be worried if they weren’t as this is going back to the life company model of limited open architecture and funds being chosen by the rebates they were getting.

“We are offering advisers the functionality to choose their own panels or use OBSR. There is a lot of demand and interest in that pre-defined portfolio world as advisers are concerned about the risks they are taking picking funds themselves, especially in difficult market conditions.”

Evolving product

Another reason for developing unbundled pricing on Cofunds is to give the platform the option of adding vehicles such as ETFs, although Williams believes their take-up will not grow at the pace some people are suggesting.

The ability to add new products and develop is one of the key reasons why larger platforms will triumph in the future, he adds.

From talking to advisers, Williams believes two to three platforms will be the norm for advisers with many veering towards the former. However, a growing number are deciding to use one platform as a core offering, providing it passes their suitability test, with another as a satellite to service certain types of clients.  It is clear Williams believes Cofunds is well on the way to becoming that ‘core’ offering for advisers.

He says: “The next stage for us is driving through to achieve what we are capable of achieving. A few years ago we were losing a lot of money and it was all about survival. Now we are making money we want to be the most successful. We want to make money, gather assets and be sustainable. The big threat with money moving onto platforms is that it is not clear all platforms will make money and be profitable. We want to build scale through improving technology not just through people. We are well down that route but we have further to go.”

Rallying support

On this journey, Williams is also convinced he has the fund groups behind him now after negotiations on fund rebates last year turned sour. The coverage did not appear to dissuade advisers from choosing the platform but Williams admits he did receive a few anxious calls from IFAs worried about fund groups leaving if they were unhappy with the new terms.

“The smaller groups have signed up now and we are pretty much finished with the larger groups apart from a couple. It has been a really interesting process. The Press have loved it!

“When you are having conversations about charging more it is not the easiest conversation but they understand what we are trying to do. The developments we are making will add assets to fund managers as money comes out of old fashioned products.”

It remains to be seen if Williams will make as big a splash this year as he made in 2009. He has an agenda to push Cofunds to the next level and is unafraid to tackle the big issues to ensure the platform is punching at its true weight as a new era begins for its advisers.