One of the running sores of the platform industry, for a long time, has been replatforming. This is a typically abstruse[1] term coined by the industry for moving the underlying assets on a platform from one technology firm to another.
Sound simple? Well, itâ’s not. I’ve been fond of saying for a while that ‘there is no recorded instance of a replatforming going well’, but I’ve always known that at some point someone would land a good one and prove me wrong.
Today is not that day.
Old Mutual Wealth announced today that it is severing its 20-year sweetheart deal with IFDS, a year or so before it was due to start delivering new platformy goodness into adviser firms. It is £330m into the build, and 5 years or so have gone by since the early stages of the project.
Instead of IFDS, OMW has reduced its alphabet soup count by one and gone for FNZ. The implementation date goes out by a year or more (we’d expect 18-24 months) and the costs are expected to be £120m-£160m (we’d expect a good bit more than that). This will please analysts, who have already factored in the disclosed £450m expected replatforming cost (and presumably allowed for an overrun as well).
So this is a very good day to be working at FNZ – and congratulations to them – but a very bad day to be working at IFDS. What I’m not sure about is what kind of day it is if you’re working at OMW. The guys there have got pads and a helmet on, of course, and the narrative from OMW Towers is all about going forward from here.
On the one hand, that’s exactly the right thing for them to be doing. Whatever your view on £330m of ultimately futile spend and thousands of work days wasted, and we could say plenty – the fact remains that when you’re dealing with tens of billions of real people’s money, you can’t stop to lick wounds. I’ve also got some sympathy for the OMW boys and girls – this will be the biggest replatforming since Methuselah was a boy, and nothing in it is easy.
On the other hand, though, this is £330m down the Swanee. Three. Hundred. And. Thirty. Million. Pounds. Now, the pound isn’t worth what it was, but it’s still more money than you can shake a stick at, plus the stick, as PJ O’Rourke once said.
It feels from here like there will be a reckoning for that in one way or the other. It shouldn’t be possible to get that far into a project like this and have nothing to show for it, even allowing for pensions reform eighty-sixing the project scope.
IFDS has a case to answer in terms of being a strong supplier – but OMW will have one to answer in terms of being a strong client. However it all shakes out, I suspect OMW will be a *very* strong client at FNZ – as politicians would probably say, ‘lessons will be learned’.
In terms of FNZ, we now have a business which powers most of the banks, most of the lifecos and a good number of monoline platforms and large SIPPcos. It is becoming a systemically important business, and one in which – judging by our inboxes today – advisers are taking a strong interest. We’ll take a closer look at them on your behalf soon.
I’ll leave you with a few questions. How does FNZ prioritise a client list which has Aviva, Standard Life, Old Mutual Wealth, Barclays, Santander, HSBC and other big names on it? Every one of those wants to know that it is your favourite client, with the biggest voice at the table. Very hard to walk that line. What genuine differentiation will there be between, say, Aviva’s offering and OMW’s eventual one? How likely is it that a firm would transition assets off one onto the other, given the shared underpinnings? And what does the new timeline for completing replatforming – mid-2019 for existing asset migration – mean for OMW’s conscious uncoupling from the parent group? Is that our timeline now?
Lots to ponder, but a fascinating day in this business we call show.
[1] The use of ‘abstruse’ is, in itself, abstruse. This pleases me more than a) it should and b) it does you.
