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Advisers: Aegis needs money

Advisers say Aegis will need significant investment if it is to continue to be a viable platform option in the future.

Tuesday, May 28th 2019, 6:00AM 2 Comments

ASB revealed last week that it was reviewing the options for its investment and custody business.

That could result in a sale.

It is not the first time the bank has considered it  – it previously tried to sell the platform in 2010 but the deal was not completed.

Aegis was established by Sovereign in 1996 and became part of the ASB fold two years later.

The bank says it has had strong growth and had FUM of $15.2 billion at March 31 but sources said that its main three clients made up $12m of that.

One adviser, who previously worked with Aegis but did not want to be identified, said the big issue for the platform was that no money had been spent on it. Internationally, he said, technology firms were becoming better partners for custodians than banks.

“Access and availability of data is crucial globally and Aegis has not delivered on that.”

He said it could be hard for advisers to shift the data from the platform because they might have to redocument each client – now with full AML processes, too.

Adviser Murray Weatherston agreed Aegis needed more resources. He said the cost of the technology required was increasing rapidly, which made it hard for the platform to pay off for ASB. “It’s essentially a technology solution and they are expensive to make.”

He said the basic systems were old and ASB, with increasing pressure to hold more capital, could potentially find it was not providing the return necessary.

Simon Hassan, a retired adviser and now director of Hassan Consulting, said Aegis needed a committed, robust owner.

Stephen O'Connor said it was a "watch this space" situation. "Not much point in doing anything until we know if there is a sale and who the new owner is."

Claire Matthews, a banking specialist at Massey University, said the review was probably part of a wider process.

“The key question is whether [Aegis] is a core part of ASB’s business.  If not, it may have greater potential under different ownership, while making capital available to ASB for projects that are seen as more core to the bank’s operations.”

It was suggested that IOOF, Booster or Findex could be interested in purchasing Aegis.

Tags: Aegis

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Comments from our readers

On 28 May 2019 at 11:22 am Pragmatic said:
The only constants in the industry value chain are the investor and their investment. Everything else must justify its place, with the intermediary arguably the most important piece.

Unfortunately the administrative piece has rapidly become commoditised with industry and consumers alike expecting more for less. Price (and in some instances brand) have become the differentiator as technology increasingly meets demand, and drives prices lower. Expect zero cost platforms to arrive into NZ in the foreseeable future, whereby the investor pays a nominal fee per transaction.

I'm unsure of the incumbent or prospective owner's intentions, other than - in an industry facing margin compression and normalised returns - the administrative space is unlikely to be the most lucrative piece going forward.
On 29 May 2019 at 10:21 am Simon H said:
Yes, Pragmatic. Not an easy problem to have - offering the (or one of the) largest admin system/software technology piece in what is a rapidly changing tech environment. And as you say, there are only two immutables in this (professionally advised) portfolio investment space: investors and advisers. The tech future will belong to whoever can meet their respective needs efficiently whilst delivering value for money.

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