The rumoured nine-figure deal is an example of the vertical integration trend in the investment management industry, according to a number of sources Portfolio Adviser spoke with.
Heather Hopkins, founder and managing director of Next Wealth Management, said asset managers have lost control of distribution and have become increasingly distant from advisers and investors in recent years.
“This move is an example of an asset manager reasserting itself with a direct relationship with advisers,” Hopkins said.
Private equity firm Hg Capital has owned the firm since 2013. It reportedly achieved an internal rate of return (IRR) of 66% on the deal.
Adviser favourite
Intelliflo has a significant foothold in the advice market.
The technology provider’s most recognised product, Intelligent Office (iO), is used by 30% of UK advisers. Australian company Iress is the main competitor, according to Clive Waller, managing director at CWC Research.
Investment Quorum chief executive Lee Robertson is a fan of the software provider. Robertson described its breadth of service and functionality, plus its open architecture, as excellent.
“Recent developments make it now look like more of a hybrid between a back office system and a platform and its strong links to investment providers show this well,” he told Portfolio Adviser.
He said said Intelliflo’s success has come at the expense of some of the other back office systems.
“In terms of significance if purchase by an asset manager, this appears to be part of a trend amongst asset managers purchasing well respected adviser and client investment tech companies,” Robertson said.
International ambitions
Invesco’s digital ambitions are highlighted by the purchase, according to Waller.
It is following in the footsteps of Blackrock, which has invested in FutureAdvisor and Scalable Capital, and Schroders, which has invested in Nutmeg and Benchmark Capital, he said.
In a press release announcing the deal, Martin L Flanagan, president and CEO of Invesco, said digital solutions are increasingly important in the firm’s efforts to improve investment support for advisers.
For Intelliflo, the purchase by a US company helps its internatonal ambitions.
Hamish Purdey, chief executive officer at Intelliflo, said they were looking forward to taking their technology into new markets globally.
Robertson said the backing of the asset management giant and its experience of international makers and distribution should help Intelliflo achieve that goal.
Vertically integrated future?
Waller said acquisition, aggregation and vertical integration will increase in the industry. “The reality today is that everyone is eating everyone else’s lunch.”
He said platforms will increasingly manufacture and distribute, pointing to 7IM as an example on the former and Standard Life and Old Mutual Wealth as examples on the latter.
However, he said unlike the US, the one-stop shop does not appeal in the UK, “unless it incorporates best of breed”.
“In the UK, we like intermediation, such as brokers. Even with vertical integration, there will be multiple providers of funds.”
