group ends exclusivity agreement in response to criticism from intermediaries
Cofunds has taken action to remedy the two main intermediary criticisms of its fund supermarket offering.
The exclusivity agreement that kept Fidelity off Cofunds and the four Cofunds shareholders off FundsNetwork has now ended, thereby allowing each platform to offer a more complete range of funds.
In addition, Cofunds has signed up a new shareholder, International Financial Data Systems (IFDS), the fund administration specialist, to improve service by replacing a number of its manual processing systems with IFDS's proprietary straight-through processing systems.
Darius McDermott, managing director of Chelsea Financial Services, said: 'Cofunds appears to have addressed any possible short-comings. It will be able to take the best of IFDS's technology for certain back office functions and of course intermediaries will welcome a more complete fund range.'
From mid-December, intermediaries will be able to buy Jupiter, Gartmore, M&G and Threadneedle funds through FundsNetwork and Fidelity funds via Cofunds.
As a fifth shareholder, IFDS, the US-based fund administration group, will buy into the group at a cost of £15m, giving it an equal 20% stake in the business, split 50/50 between IFDS and its US parent Boston Financial Data Services, when the deal is completed in December.
Clive Boothman, chief executive of Cofunds, said the group will use a number of IFDS's more proprietary straight through processing systems to replace its own manual versions, enabling it to streamline its admin department once the switch is made.
Boothman said Cofunds will retain its own fund and intermediary database and charge and commission payment systems, but will look to integrate IFDS's electronic reconciliation technology in 2003.
Cofunds, which made a £34.6m operating loss last year, initially used M&G's back office, before pouring millions into building its own. Boothman admitted a number of functions are still manually executed, leading the group to cut its losses and bring in outside support.
IFDS's flagship Fast third- party record system will also be integrated into Cofunds back office, although the new shareholder will not act as a third party administrator to Cofunds, more a technology partner.
Boothman said: 'Cofunds has developed a lot of its own proprietary systems over the last two years and a lot of these will continue to be used.
Many of our processes are still done manually and we will look to deploy IFDS systems in areas which we have not yet mechanised to streamline the business.' The removal of the exclusivity agreement with Fidelity effectively means the two platforms will now go head to head, with differentiation coming through marketing, online tools and service, rather than fund groups available.
This also removes the competitive advantage enjoyed by platforms such as Skandia and Selestia that already offered funds from all five fund groups involved.
Richard Wastcoat, managing director of Fidelity, said the agreement culminated from negotiations with Boothman started in Spring.
Wastcoat said: 'We are certainly competing but we both felt we were giving an unnecessary competitive advantage to Skandia and others, which was not helping intermediaries, Cofunds or Fidelity.'
A number of intermediaries have been using both sites due to the exclusivity agreement and both groups are expected to compete for the sole business of these clients.
Boothman acknowledged the level playing field argument but played down suggestions the two would slug it out for the sole business of these intermediaries.
Boothman said: 'The exclusivity agreement was only one reason why people held both platforms. It is still quite an immature market and the propositions bring different things to the intermediary market.'
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress