An Alliance Trust board member involved in negotiations with Interactive Investor on the sale of its platform says the intermediary client base was a big part of the appeal, alongside the Dundee offices and a compatible fixed fee charging structure.
On Monday, the £2.6bn investment trust revealed it had agreed to sell the Alliance Trust Savings to the D2C platform for £40m along with its Dundee offices.
Interactive Investor currently has no adviser assets, instead focusing on its direct-to-consumer channel.
However, speaking at an Alliance Trust investment trust presentation for professional investors, deputy chairman Gregor Stewart (pictured) said Alliance Trust Savings had relationships that Interactive Investor wanted to buy into.
“The operation includes not just the direct-to-consumer channel, which has been the main focus on Interactive Investor in the past, but it includes the operations for the other two channels of Alliance Trust Savings whereby Interactive Investor are not so well represented.
“That is the intermediary channel, which accounts for around 70% of all the sector so that’s potential growth if Interactive Investor can get that capability through. The other area Interactive Investor is not very well represented in is the corporate partnership side of the business, so big companies like Standard Life and Prudential.”
Interactive Investor and ATS are the two largest fixed price investment platforms. The combined platforms represent £35bn of assets under administration and 400,000 customers.
‘Professional clients are different to D2C’
However, running an adviser comes with a number of additional challenges, said Platform associate research director Richard Bradley.
“There are a whole raft of technology issues to consider around client management, model portfolios and reporting. There are also less tangible aspects, such as customer service having to deal with professional investors as clients.
“While Interactive Investor will get this through the retention of Alliance Trust Savings’ operations, the question is whether they ultimately attempt to integrate this with their own platform.”
The deal is subject to regulatory approval, which could take up to six months.
Fixed fee platforms
The reaction from shareholders and press had been favourable following news of the ATS sale, said Stewart.
“This is something that is good for the [Alliance Trust] shareholders in terms of it allows us to focus singularly on our growth equity portfolio. But I also think it is good from a customer point of view in terms of the investment Interactive will be able to put into the company going forward.”
Interactive Investor is the only platform in the UK with a similar flat fee charging structure, he said.
The Dundee office was also important, Stewart said. “It’s not just that Dundee has been pushed on to them, part of the reason they’ve come to Alliance Trust Savings is because they’re so wanting that Dundee operation,” he said.
Portfolio Adviser spoke to one platform that said the Scottish offices had put them off any deal.
