One of Europe’s largest asset managers has bought the UK’s largest fixed-fee fund platform in a deal that will have rival asset managers contemplating their own strategies, according to experts.
Abrdn, formerly Aberdeen Standard Life, announced its £1.5bn acquisition of interactive investor (ii) on Thursday morning, with the deal expected to be completed in the second quarter of 2022 pending approval by abrdn’s shareholders.
ii is the largest fund platform to charge investors a fixed fee, rather than using a percentage pricing system. Percentage-based systems cost more for investors with higher sums of money: a firm charging 0.5% per year in platform fees would cost an investor with £50,000 in their account an annual fee of £250.
ii charges £9.99 per month, or £119.88 a year, as a flat fee, making it cheaper for investors with more money saved. The average customer with ii has more than £120,000 invested. In total, the firm has £55bn in assets under administration across more than 400,000 customers.
Regardless of its change in ownership, ii will continue to operate independently, with Richard Wilson staying on as chief executive officer. There will be no changes to its structure or prices, the firm said.
Holly Mackay, chief executive officer at Boring Money, said the move “clearly signals the growing importance of a non-advised customer to UK asset managers, and will cause lots of discussions and strategic reviews at abrdn’s competitors over the coming months”.
The news came as rival fund platform AJ Bell released its end-of-year financial results. The firm announced that profits rose 13% to £55.1m, while revenue was up 15% to £145.8m.
However, shares were down 7% on Thursday as these figures missed expectations of £56.9m and £146.6m, respectively, while profits were 9% lower in the second half of 2021 compared with the previous year.
The firm incurred higher costs this year, in part due to its ongoing investment in infrastructure to avoid trading issues, such as the one that incurred on 9 November 2020, when there was an exceptional spike in activity as investors piled into buoyant markets following the vaccine rollout.
Rob Murphy, managing director of financials at Edison Group, said the firm could be hit in the near future by “headwinds to markets from tightening central bank policy”, although dealing activity is expected to remain at “normalised levels”.
AJ Bell also announced a 5p per share special dividend, alongside a final payment of 4.5p per share, taking its total to 11.96p per share for the year, a 94% increase on the previous year.