Quilter platform migration could extend into 2020

Delay would add to costs that are already creeping near £160m

Quilter

Quilter will begin the migration of advisers’ assets onto its newly launched UK platform this autumn but has cautioned this process could extend well into 2020.

It is aiming to have transferred an initial 10% of assets under administration from the existing platform, representing the assets from around 100 adviser firms, in early autumn.

If the migration is completed by the end of 2019 Quilter expects costs to be on the upper end of its £120m and £160m guidance range. But it said this process could feasibly extend into the first half of 2020, in which case it would incur “modest additional programme costs”.

So far the wealth manager has spent £79m on revamping its platform since May 2017.

Quilter has stated that transforming its platform business is key a step in realising its ambition of becoming the leading UK wealth manager.

Once operational, the finished UK platform will allow the wealth manager to widen its product set to include Sipp capabilities, Junior Isas and cash accounts. It will also be able to hold assets such as ETFs and investment trust shares.

“This will provide us with the opportunity to target a broader and higher net worth customer segment in the UK market than we are currently reaching,” said the group’s CEO Paul Feeney (pictured). “It will significantly enhance our position in the UK platform market by providing us with a modern, resilient system built on current technology rather than legacy code as is the case with the current platform.”

Quilter completed the first stage of the transformation programme when it soft launched the platform at the beginning of last month.

The final platform is due to be unveiled by early summer, the wealth manager said. The platform, which will incorporate full adviser functionality, is currently in the last stages of development and undergoing “rigorous testing”.

Not the finished article

The updates on the platform transformation were included in the group’s first set of annual results since separating from Old Mutual plc on 25 June 2018 and listing on the London and Johannesburg Stock Exchanges under the Quilter umbrella.

Simultaneously it also sold off the Richard Buxton-led single strategies business, now known as Merian Global Investors, which netted it £583m.

Feeney said on Tuesday that selling the single strategies business was consistent with Quilter’s objective of building the UK’s leading wealth management company.

“As I have said on many occasions, we know that Quilter is not the finished article,” he said. “The task that my team and I are undertaking is nothing less than a multi-year transformation of our business.”

Multi-asset business struggles

Feeney said the group was pleased to deliver “a strong set of maiden full year results” in what was a “landmark year in the history of Quilter”. Profits before tax at the group were £233m for the year, up 11% from £209m in 2017.

However, the group saw a marked decrease in net client cash flows during the year. Excluding the Quilter Life Assurance business net flows were £4.7bn in 2018, weaker than the consensus prediction of £5.2bn and down 38% from the £7.6bn in net client money it brought in the year before.

In particular Feeney said the firm’s multi-asset group Quilter Investors suffered. The largest fund in the range, the £8.3bn Cirilium active portfolio, had a “disappointing first half of 2018” though Feeney said it has started this year strongly.

The impact from negative market movements of -£7.8bn was also worse than the consensus view of -£6.3bn worth of damage.

As a result, total assets under management shrunk, falling 4% from £114bn in 2017 to £109bn in 2018.

Outflows ahead

Feeney cautioned shareholders that “2019 will throw up other challenges for Quilter” which may see the group “undershoot” its growth target.

The impact on investor appetite from Brexit and market uncertainty combined with the teething problems of migrating advisers onto the new platform could contribute to a slowdown in the flow of new money, he said.

“As a result of both of these factors, while we remain confident in a target of 5% growth for NCCF on a medium-term basis, we may undershoot this target during calendar year 2019.”

He said a reduction in the group’s headcount of investment managers would also dent client flows in the short-term. The number of managers at the firm dropped from 168 in mid-2018 to 155 by the end of the year after “a small number of resignations from a particular cohort of investment managers” following the firm’s listing.

“While we have mitigation plans in place to reduce potential client departures, we are expecting this could lead to higher than trend outflows for Quilter Cheviot in the second half of 2019 and early 2020,” said Feeney. “Growing our IM count is a key focus for 2019 and recruitment is ongoing with a number of new starters in the pipeline.”

Shares in Quilter rose steadily during trading on Tuesday morning and were up 5.5% at 139p at the time of writing.

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