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ASB announced last week that it had sold its investment administration and custody businesses, Aegis and Investment Custodial Services Limited, to MMC for an undisclosed sum.
Adviser Stephen O’Connor said he thought it was a positive move.
“I’m very comfortable with the purchaser, I think it’ll be good for the business.”
He said MMC would be committed to further development of the platform which would be good for the business and the advisers who used it.
“ASB were doing enough to keep it ticking over but didn’t seem committed to any major developments.”
O’Connor said it would be useful if the platform was developed so that advisers had the ability to manage KiwiSaver investments through Aegis.
Richard Grimes, at Totara Wealth, said he also felt positive because MMC were specialists in the area and it made sense for the firm to buy Aegis and make ongoing improvements to it.
Nick Stewart, chief executive of FINZO, moved his business away from Aegis in 2017 to its own independent custodial platform, constructed in conjunction with FNZ.
He said it was positive that Aegis had been sold to someone who would invest in it.
“The risk for existing advisers is that it’s someone moving into a new area, it’s not bread and butter for them.”
He said it could also be a concern that MMC had a private equity firm as a cornerstone shareholder. “Every PE investment has a time duration. That’s how the funding mechanism works with private equity.”
But he said FNZ had had a similar issue and overcame it to achieve a long-term, stable and successful shareholder base.
”For us the reason we left Aegis is that they said they would never provide data integration."
The sale follows an announcement in May that the bank was reviewing its ownership of the wrap platform, which at that point had $15.2 billion under management.
“Aegis is a good business which requires continued investment and strategic management focus to ensure its customers continue to receive excellent levels of service in the future. As part of this review, we came to understand that Aegis would be best placed to grow and serve the interests of its customers under a new owner with a specialised focus," ASB's executive general manager, private banking, wealth and insurance Adam Boyd said.
MMC is a specialist New Zealand outsourced fund and investment administration business, based in Auckland.
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The primary features of a "platform" include a consolidated reporting system, that permits transactions, multiple access rights, and a bunch of widgets to assist with compliance, portfolio design, research etc. All of this occurs within an ecosystem whereby the assets are held by a custodian, making life more efficient for the industry. None of this really assists with consumer investment outcomes (although I accept that re-balancing, alerts etc are useful).
I'm surprised that technology hasn't yet filled the void, whereby all of the above is provided to the consumer/industry without the need for a custodian - ie: in the client's own name. Equally, this surely is a high volume/low margin business, with the biggest single threat being new technologies (albeit with the single largest strength being industry apathy/preservation).
In the upcoming environment of lower portfolio returns, and margin compression, the world of "platforms" is surely the weakest part of the value chain - and about to endure a race to the bottom.