As many of our clients will know, in common with most advisory firms, Ethical Futures tends to make use of investment platforms to manage our clients investments.
An investment platform, sometimes known as a wrap or fund supermarket, is simply an administration service to help simplify the management of investment funds and keep them all in one place. This type of service allows us to hold the investments from a wide range of different investment managers ‘under one roof’ and one ‘tax wrapper’, such as a personal pension or ISA. This allows us to give a client a more diversified investment portfolio, to easily replace underperforming funds and to manage transactions more efficiently. Clients will benefit from consolidated investment reports and valuations, reduction in paperwork as well as tax reporting.
We are posting this article today because two major platforms, Cofunds & Aegon, are about to merge and we thought that we should update you on progress and answer some questions that have arisen, as a result of changes in their terms of business.
Existing clients of Cofunds should have received communications from us about the issue last year and confirmation that we were happy with the proposals. You will also have been receiving a series of mailings from Cofunds explaining the forthcoming changes; these documents will be your main source of detailed information. This article is simply to provide an overview of the changes about to happen and to confirm the Ethical Futures view on these matters. We have listed below a number of frequently asked questions (FAQ’s). Hopefully these will answer your questions, but if you do require an answer to a more specific of personal matter, please contact your Ethical Futures adviser.
Frequently asked Questions
Are you still happy to recommend the Cofunds platform?
Yes – we carry out an annual ‘due diligence’ review of platform providers as part of our on-going Monitoring service. We completed our last review in December 2017 and were fully aware of the forthcoming changes to the Cofunds platform.
Our review identified three platforms as our ‘preferred’ services; these were Cofunds, Parmenion & Transact. These were deemed appropriate for differing needs of distinct client groups. We will still use other services where they meet clients needs as well.
Why is the merger happening and who are Aegon
The platform market has become very competitive. Cofunds was initially a collaborative venture but owners have changed several times. Although it had strong backing, most notably by Legal & General, it has suffered over the years from a lack of a strong managerial team with clear strategy and focus.
Aegon is a large financial services firm based in the Netherlands. It has a strong and well established UK division which owns the life and pension business formally known as Scottish Equitable and the investment company Kames Capital (a leading provider of ethical funds). As part of its involvement in the pension market, it has developed a strong technology base and created its own platform.
The merger provides the opportunity for the Cofunds service to have much needed investment and it gives Aegon access to an adviser focussed service, with a strong existing client bank.
When will the merge happen and what difference will I notice?
The actual merger has already happened but the impact of the changes will come into effect over the weekend of 4th – 7th May 2018. This is when the new administration platform and website goes ‘live’ and when existing Cofunds accounts are to be fully transitioned to the new Aegon platform.
From that date all correspondence, website and literature will be branded Aegon instead of Cofunds and new terms of business will apply. You should already have received a copy of the new terms of business.
Will I be able to access information over that weekend?
No - The transition requires closure of the existing Cofunds website and migration to Aegon. This is why Aegon have selected the holiday weekend, so as to allow extra time to complete the transfer. The intention is for website to be accessible from 8th May – but we’ll wait to see if this is the case, as these major transitions usually experience some glitches.
How does this affect my investments?
As explained in the introduction, a platform is purely an administrative service, therefore there is no change or impact to the actual investments that you hold. In the longer term, we hope that the merger leads to a wider range of funds and access to different types of investment services.
Will I have to change log in details?
If you are currently registered for on-line access to Cofunds, your existing login details should work on the new service. If you have not registered, then you will need to apply for new log in details form Aegon, via the new website.
Will there be a change to charges?
Aegon have gone on record to confirm that there will be no change to the current charges and charging valuation bands that apply to your use of the platform. There long term intentions is actually to reduce cost on platform services.
There will however, be some changes to their Terms of Business relating to how and when they make their charges. The main ones being:-
- Moving to end of the month valuations for service charging form daily averaged charging.
- Inclusion of cash account balances in charging calculations.
- Payment of interest on cash account balances.
- Move to paperless transactions, meaning less forms and no payment by cheque.
It is impossible for us to say whether the move to month end charging will lead to an increase or reduction in costs for clients. Aegon admit that the outcome will be varied – but the overall impact should be fairly small.
What are the implications for change of Cash accounts?
Currently Cofunds have a segregated cash account that is used for handling income arising from funds, paying withdrawals and also simply holding cash on deposit. The facility for holding cash will no longer be a segregated account but will become a ‘cash facility’ within the new General Investment Account (which replaces ‘Investment Funds’).
The cash facility will now earn interest, which it doesn’t at present. We see cash accounts as just a way to manage cash flows – not as investments. We generally do not recommend actually holding large amounts of cash on the platforms, so this should not impact clients too much.
What about taking withdrawals bank account details?
The new platform will not make payments by cheque. Payments will be made by bank transfer to your nominated bank account. If you have not given your bank account details when opening the account, or have changed your account, then you will need to confirm bank details prior to making a withdrawal. Please note that this may lead to a slight delay in payment of withdrawals due to the need to verify and update bank details.
Any more questions?
We realise that changes to your investment accounts can be unnerving. We are satisfied with both the overall offering form Aegon and the way that the transition has been managed and communicated. However, if you do have any more question please contact us to discuss them.
It is important to take professional advice before making any decision relating to your personal finances. Information within this article does not provide individual tailored investment advice and is for guidance only. We cannot assume legal liability for any errors or omissions it might contain. Ethical Futures llp is authorised and regulated by the Financial Conduct Authority.