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Cofunds makes £2.3m profit
by Iain Martin on May 26, 2010 at 11:03
Cofunds made a £2.3 million pre-tax profit in 2009, down from £2.7 million in 2008, according to its latest accounts.
The platform's turnover grew to £45.2 million, from £41.9 million in 2008. Cofunds finance director Mark Williams, who was appointed in October, has restated the 2008 accounts to reflect income from long-term deals. Cofunds made a £0.5 million pre-tax profit in 2008 before its accounts were revised and made a £12 million loss in 2007.
Watch Brett Williams discuss the results here:
Cofunds chief executive Brett Williams (pictured) said: ‘In what was a difficult year for all businesses, Cofunds maintained its profitable status, principally due to the ongoing support we receive from advisers and the hard work of the team at Cofunds.'
Income from interest on cash held on the platform dropped to £3.1 million from £5.2 million in 2008 while the accounts also include a £2.2 million charge for the long-term incentive plan for Cofunds management team.
Cofunds has meanwhile started to generate cash for the first time, producing £3.5 million last year, after £2 million flowed out of the business in 2008. Assets under management grew to £23 billion at by the end of 2009, with £4.75 billion of net inflows over the year.
Due to the profit being generated by the business, auditor PricewaterhouseCoopers has removed its question over the ability of Cofunds to continue as a going concern without shareholder support that featured in the 2008 accounts.
Cofunds would now be able to support its own development from its profits rather than calling on capital from shareholders Legal & General, IFDS and other fund management groups, said Williams.
‘The big thing we did last year was get scale which put us in a completely different situation,’ said Williams, who predicted that there would be consolidation among the smaller wraps who have struggled to grow assets under management. ‘Can they make any money? Can they make enough money to continue investing?’
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4 comments so far. Why not have your say?
pete
May 26, 2010 at 11:14
So a turnover of £41.9m from funds of £23bn. I may have got the zeros wrong, but that looks like a margin of 0.18%, not a lot of fat there! It will be very interesting to see what happens with that if they have to go unbundled. can't see it doing anything but going up for smaller investors as cross-subsidies will no longer be allowed.
report thisHarry Katz
May 26, 2010 at 12:50
Pete
But it does show the Canaries that this is a SERVICE and a very reasonable one at that and that messing with it will do nothing but disadvantage the customer - something that the FSA is there to prevent - or are they going to ignore that too?
What you need to remember that this is a service proposition to benefit providers, IFAs and clients. It is the providers who own the platform, so as long as it doesn’t make a loss, they should be happy. It makes their lives a lot easier – less admin, less call centre and therefore feeds back to their own bottom line – and in the end that’s what it’s all about. The advantages to clients and IFAs I think hardly need explaining. (At least I hope so!!)
The sad thing is that this needs spelling out to advisers and the Regulator – to both of whom this should be self evident.
Congratulations to Cofunds – well done may you go from strength to strength.
report thispete
May 26, 2010 at 13:23
Harry - I couldn't agree more. I think that the forced unbundling will be a big negative. The fact that Cofunds can make a profit from such a small margin can only be a good thing for clients who benefit from an excellent low cost service.
But, the only reason they can do so well is because of scale. Scale means that natrually there will be cross-subsidy and also will mean that Cofunds can screw down the fund management groups because of the amount of business that they do. If charges are unbundled, I don't know how they will able to continue doing that and can only see costs rising for clients, which is a great shame.
report thisRay B.
May 26, 2010 at 16:18
I wouldn't be surprised to see that some of these profits have been generated from the saved trail commission that hasn't been paid to introducers like me on re-registered funds that have taken weeks to be put onto the platform despite the inter-company confirmation having taken place weeks earlier (just look at the unit price confirmation date in the Transaction Tracker tab compared to the date the actual transaction shows up on the record). In recent months, Cofunds' service delivery has deteriorated - too many chiefs (on an incentivised profits scheme?) and not enough indians. For a business that acknowledges IFAs as a major contributor to its success, it could go a long way further to properly 'partner up' and strive for each party's future profitable existence.
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