After more than 20 years of advisory dealing providing the bedrock of the business, new discretionary business and the migration of existing clients onto managed accounts rather than pure dealing accounts has led to a positive impact on fee revenues, he explained.
In the year to 31 March discretionary funds under management increased by 28% from £5bn to £6.4bn, the group’s final results revealed.
Over the same period total funds under management and administration increased by a more muted 14.9% from £15.4bn to £17.7bn.
The firm’s results said the long decline in trading volumes and commission income had “more than been made up for” by a continuing increase in investment management fees – up 17.3% compared with 2011/12.
Death of advisory dealing
Howard said changes from EU regulators had more or less eliminated the advisory dealing market where a stock broker had no responsibility for the suitability of a client’s investments.
“It has not quite gone completely but one can see the end in sight, which I regard with regret because that is our traditional line of business, but of course the clients have been moving towards having management either in an advisory capacity or on a discretionary basis.
“Discretionary is the most attractive form of business from our point of view and the business has been moving across to discretionary management in droves, which is really what has been driving our rise in fees,” he added.
Discretionary funds now represent 71% of total managed funds, compared with 64.7% at 31 March 2012 and 64% at 31 March 2011.
FSCS hits profits
Pre-tax profit for the year showed a 7% increase to £9.1m, from £8.5m in 2011/12, but Howard complained this would have been 20% higher if it was not for a £1.9m FSCS levy.
“We have no control over the size or the timing of demands, nor any say in weeding out the rogue firms who give rise to these expensive claims. In 2011/12 our bill was £1.6m and in the latest year the figure is £1.9m.
“Collectively across the industry this is a huge burden for firms and ultimately therefore for the investing public. It cannot be right that failed businesses take a great bite out of the rest of us,” he said.
At the start of the year the FCA announced the intention to give firms more notice on FSCS levies, find out more here…
Meanwhile he praised the launch of Charles Stanley Direct, spearheaded by ex-Hargreaves Lansdown man Rob Hudson, who was joined by another ex-Hargreaves Lansdown employee Ben Yearsley in October last year. The has added over 1,000 new accounts since launch and now has £500m in assets under administration.
The group’s Matterley Fund Management business has also seen strong growth, with the five funds AUM growing 34.7% from £150.9m at 31 March 2012 to £203.2m a year later, showing it has been resilient to the departure of George Godber in September of last year.
