According to the firm, the directors consider it prudent to have “headroom” of 25% more than the FCA regulatory requirement. However, over the past few years, while its regulatory capital requirement has risen, “its capital has been eroded by poor trading and uncovered dividend payments”.
The group’s total dividend of 5p per share, down from 12.4p last year represents the new base level, with a medium term dividend cover target of two times, after which it intends to grow it progressively.
The other reason for the increased headroom is the group’s intention to refocus the business solely on wealth management, a decision that has resulted from a strategy review that began at the beginning of the calendar year.
The board has taken the decision to focus Charles Stanley solely on wealth management and is currently in negotiations to sell the principal elements of Charles Stanley Securities and Charles Stanley Financial Solutions.
And, it said, while it intends to remain an investment-led, holistic provider that focuses on bespoke investment advice, it does intend to “be more active along the value chain, especially in relation to the provision of financial planning services” in a bid to increase its vertical integration.
As a result of the shift, financial planning will become more important and the current disaggregated model will shift to a single financial planning capability offering consistent suite of advice.
The move, it said, reflected growing client demand for broader planning advice beyond just investment management expertise.
At a private client level, it said it intends to retain a bespoke approach, led by “empowered investment managers” rather than a model-driven relationship manager structure.
It added, that, despite the sale of Charles Stanley Securities, the firm intends to provide traditional stockbroking services on a “more select basis”
“While the industry trend towards the provision of discretionary management continues, the board believes there remains client demand and a willingness to pay for advisory services,” the firm added
Charles Stanley also plans to explore low-cost, automated advice through its Direct business, which it expects to become an increasingly important segment of the market.
Paul Abberley, Charles Stanley’s CEO, said: “Having recently been appointed as CEO, I have seen first-hand the quality and breadth of our client offering, the expertise of our staff and the scale of our operations, all of which should enable us to take good advantage of the exciting growth opportunities that the wealth management industry provides. We have a strategy to modernise and significantly improve the operating performance of the Group and the Placing will help support the execution of such strategy.”
Financials
In an effort to reach its new 15% operating margin (before the impact of the FSCS levy and amortisation of intangibles) target, by 2018 the group said it will be according a higher priority to distributions than it has in the past.
“In particular, the IFA channel is expected to become more important to Charles Stanley with a more focused sales capability. The Board believes there are significant opportunities, particularly in the bespoke space through local delivery via the Group’s national network.”
For the year, the group reported total funds under management and administration grew 6% to £21.3bn. Of that discretionary managed funds accounted for £9.3bn, up from £8.2bn last year.
The group was also quick to point out the changes in revenue sources.
“Fees within the Investment Management Services division grew 17.8% to £75.5 million. This increase was in part offset by a 13.9% decline in commission earnings, both as a result of lower bargain volumes and more clients being charged fee- only tariffs. Overall revenues for the division increased by 3.4%;
Charles Stanley Direct saw revenues rise 39.1%
