Investment in Edinburgh fintech firm among biggest in the world this year

Edinburgh-based fintech firm FNZ has announced a major investment in the company which values the firm at £1.65 billion just 15 years after it was founded.

La Caisse de dépôt et placement du Québec (CDPQ) and Generation Investment Management LLP revealed news of their acquisition, subject to regulatory approval, of General Atlantic and H.I.G. Capital’s investment in FNZ yesterday.

The acquisition, which is one of the world’s largest fintech transactions this year, represents the first investment by CDPQ-Generation, the unique, sustainable equity partnership announced today by CDPQ and Generation.

FNZ is a global FinTech which partners with banks, insurers and asset managers to help consumers better achieve their financial goals using methods that it claims are transforming the way financial institutions serve their wealth management customers.

The business has grown rapidly in recent years, as its institutional customers have used FNZ’s platform to improve transparency, choice and drive down long-term costs for consumers of wealth management products across all segments: from mass-market workplace pensions to mass-affluent and high-net-worth clients.

Today, FNZ is responsible for over £330 billion in assets under administration (AuA) held by around 5 million customers of some of the world’s largest financial institutions, including Standard Life Aberdeen, Santander, Lloyds Bank, Vanguard, Generali, Barclays, Quilter, UOB, Aviva, Zurich, UBS, BNZ, Findex and FNZC. In total, FNZ partners with over 60 financial institutions across the UK, Europe, Australia, New Zealand and South-East Asia.

FNZ was founded in New Zealand in 2003 by Adrian Durham and New Zealand investment bank and wealth manager FNZC.

To accelerate growth, the company partnered in a management buy-out with H.I.G. Capital in 2009. General Atlantic provided additional investment in 2012. Today, the company has over 1,400 employees in the UK, Czech Republic, Shanghai, Singapore, Australia and New Zealand. Around 400 employees are shareholders, who will continue to own about one third of the equity of the company following this transaction.

FNZ expanded from New Zealand to the UK in 2005, initially partnering with Standard Aberdeen and basing its UK operations & technology in Edinburgh. The company was a significant beneficiary of the UK’s global leadership in the consumer regulation of financial advice. The 2013 retail distribution review (RDR) improved fairness, transparency and costs for consumers of financial advice and has been followed around the world, including recently in Europe with the introduction of MiFID2.

Adrian Durham, CEO and founder of FNZ, said: “We started FNZ by asking: how can technology solve the problems faced by consumers of long-term savings products? We saw investors being charged so much that their retirement income was halved by charges alone. They were no better off than a bank deposit, despite taking risk and investing in managed funds for over 30 years. Choice was non-existent and the entire value chain was managed using paper.

“Our approach has entirely digitised the value chain, reducing cost and complexity for financial institutions and consumers alike. Our clients have all moved to Platform-as-a-Service (PaaS) combining cloud-based software with transaction and custody services. This frees them to focus purely on their customer proposition, transferring all the technology, transaction & asset servicing to FNZ.

“This unique PaaS approach, combined with regulatory change, has reduced total consumer costs in long term savings by around 40 per cent over the last decade. It has transformed the accessibility, choice and transparency of a consumer’s long-term savings.

“We see a unique opportunity to create a global-scale platform for wealth management. This requires a willingness to invest for the long-term. The firm’s 400 employee shareholders are firmly committed to this outcome and CDPQ-Generation is the perfect partner, given its unique 8-15 year time horizon and focus on sustainable investments.”

David Blood, senior partner and co-founder at Generation, said: “FNZ represents an outstanding first investment for our new partnership. It is an exceptional company with a management team that has demonstrated its ability to innovate and grow in the fastmoving fintech sector.

“We believe our long-term approach will suit the company and allow it to continue to invest in its technology and service proposition to the benefit of savers and pensioners, as well its employees, customers and investors.”

Carl Harring, managing director at HIG, added: “HIG is proud to have been a longterm partner of FNZ.

“FNZ has delivered an outstanding return for HIG and its investors. We look forward to following the company as it continues on its rapid global growth path.”