The wealth management arm of Old Mutual has terminated its contract with IFDS for an IT platform upgrade worth hundreds of millions of pounds over concerns about cost and time overruns.
Old Mutual Wealth (OMW), which is set for an IPO next year as part of its parent firm's break up plans, has signed a new IT deal with FNZ.
IFDS had a contract with OMW to deliver a back-end investment administration platform, dubbed Bluedoor, and associated business process outsourcing and related work with another IT firm, DST, on a front-end system.
Last October, OMW said that the costs of implementing the platform systems with IFDS/DST could be up to £450 million. But £330 million has already been spent and in March a statement warned of "certain pressures which, potentially, could increase timescales and costs".
At the time, the firm said that it was in negotiations to address these issues but it now says that these talks have been unsuccessful.
"We now believe the costs of implementation with IFDS/DST would have been materially greater than those advised to the market in October 2016. We have, therefore, reached the conclusion that continuing with the current suppliers would not be in the best interests of our customers, their financial advisers, or our shareholders."
As well as terminating the IFDS contract, OMW says it has told DST "that contractual arrangements with it in relation to the use of the associated 'Opendoor' front-end solution in connection with UK Platform transformation which have time expired, will not be renewed nor extended".
OMW says it expects to have a fully functioning platform from FNZ up and running by late 2018 or early 2019, with preliminary cost estimates of the order of between £120 million and £160 million.
Paul Feeney, chief executive, OMW, says: "Given the cost, effort and time already invested in the programme, we have not taken these decisions lightly. This has been a difficult journey for all stakeholders. We have made tough decisions today but we believe they are the right decisions for our customers, their advisers, our business and our shareholders."