Q: It seems there has been a big jump in growth in the use of Cofunds over the past two years. Why do think intermediaries are using these platforms more and more?A: There is no single answer to this. By virtue of the fact there are two to three credible players in the marketplace, attention has been excited and there is an increasing belief in the supermarket concept by advisers. Two to three years ago hardly any intermediaries mentioned supermarkets. A second reason for the increased interest is the cost pressure IFA businesses are now facing. Due to the recent state of the stockmarkets many intermediary firms come under profit pressure as they have struggled to pull in any business. This has led to an increased emphasis on firms decreasing their overheads and increasing their productivity, and they can do this by using a fund platform. A third element to the increased use of supermarkets is that many intermediary firms are suffering from an absence of good-quality customer data. In many circumstances they don’t have up-to-date data, making it difficult for them to provide good-quality advice. As a result, because we re-register all their clients’ assets when they move on to the platform, intermediaries use supermarkets so they can put all their clients in one place . Q: You signed a distribution deal with Legal & General last year that will see you develop both life and pension wrappers. Does this means Cofunds is going down the wrap route? A: I don’t like the wrap word. Our position is that we want to be the acknowledged provider of open-architecture solutions. Irrespective of the wrapper or product an adviser wants to use, we want them to think of us as the platform to use. We are going to roll out a series of investment wrappers, bonds and pensions – we will provide a wide choice of investment funds in these wrappers. We will also provide asset allocation tools and implementation tools so intermediaries will have the opportunity to advise at a customer level and at an individual wrapper level. We are not becoming a wrap service; we are just providing a wide range of investment wrappers or funds to advisers. Q: Are there too many fund supermarkets in the market at present? A: The market is becoming less crowded as some firms have found it tough going. The UK is big enough to support two to three platforms, although there will be room for some niche players who operate in a certain area. However, this is a scale business, meaning you have to be big to be successful. If it is not a company’s core part of its business it does not seem an attractive proposition. As the barriers to entry are large there is not much room for players who are not in this game for the long term. Q: Last month it was announced that Legal & General was to take a 25% equity stake in Cofunds. How has this helped your long-term sustainability? A: The deal has provided us with sufficient capital to go well past our break-even point, which we anticipate happening in about 18-24 months’ time; however, a lot of this depends on the markets. Additionally, we think it will provide Cofunds with the chance to take advantage of the current number of investment opportunities in the marketplace. These could be in the form of distribution deals or doing deals with technology providers. Legal & General will also be able to give us support with its industry expertise. We have no insurance or tied distribution skills, but we do now with Legal & General on our side, meaning the benefit of the deal is not just in capital terms. Q: Does this mean Cofunds now no longer needs any further funding? A: Yes. We are no longer seeking any more external financing. Q: How will Cofunds be affected by the forthcoming split of advisers adopting either multi-tie or single-tie advice models? A: We can support an infinite number of distribution models. We are at the stage where the market will fracture and firms will go in all different directions. We have seen HSBC go down the multi-tie route, while Bradford & Bingley, through its link with Legal & General, is adopting the “single-tie, multi-choice” strategy. However, for us this is irrelevant. We designed Cofunds to work well with all models. This is because we have sufficient flexibility in the way we can support all type of advisers. So we are agnostic as to the direction firms take going forward. Q: Will there be increasing consolidation among the distributors? A: It looks that way based on our current expectations. While some of the bigger groups have embraced and re-engineered their business around fund platforms, other large firms are a mile away from embracing it. Nevertheless, for small to mid-sized intermediary firms, it can work right the way through the scale. Many smaller businesses, which would not have been viable before, have now become so because of the advent of fund supermarkets. Q: The Investment Management Association reported last month that there was a 50% drop in Isa sales this tax year compared with 2004. What are your views of this year’s so-called “Isa season”? A: We had a good year last year and this year we were up nearly 10%, so we saw an increase. The issue for us is that Isa business is not our main area of focus. We have focused more on developing deep partnerships with intermediary firms, and as such we are more interested in gathering further assets under management on to the platform. In all, Isa sales represent just about 20% of the total Cofunds business. Indeed, Isas are becoming less of a main area of concern for the intermediary firms as well. It’s not surprising to see a jump in sales at the end of the tax year, as this is a time when most advisers are reviewing their clients’ portfolios, which generates activity across the sector. Q: Which types of investment funds proved to be most popular on the Cofunds platform this year? A: The funds most widely bought continue to be UK equity and equity income funds. However, there has been an increase in sales in the fund of funds sector. Q: How much of an opportunity does A-Day represent for Cofunds? A: The prospects for open-architecture pension products are significant. The pension transfer opportunities also created by A-Day will be important and we will have our own pension product ready by April 6, 2006 (A-Day). We think post-A-Day the pensions market will be much bigger than the straight mutual funds market. Cofunds is an independent fund supermarket, providing intermediaries with access to over 800 funds from 53 fund groups. Established in 2001, Cofunds is backed by Gartmore, Jupiter, M&G and Threadneedle and by fund administrator IFDS. Last month Legal & General announced it had taken a 25% stake in Cofunds, making it the platform’s largest single shareholder. Cofunds does not offer funds of its own and gives intermediaries the freedom to negotiate pricing directly with fund managers. At March 31, 2005, Cofunds had £3.9bn of assets under administration.