IT and redundancy costs weigh on Brewin profits

The national wealth manager says office closures are likely a thing of the past and has vowed to look to the future by focusing on three core areas, in spite of multi-million pound redundancy and computer software costs pulling its pre-tax profit down.

IT and redundancy costs weigh on Brewin profits


For the year ended 29 September, the national wealth manager said its profit before tax was £28.6m, down on the previous year’s £29.9m.
While Brewins said its discretionary funds business had performed well and grown from £16.2bn to £21.3bn, multi-million pound costs linked to redundancies, the FSCS levy and computer software were flagged to investors.

Brewin, which has gone through two restructures resulting in the firm employing roughly 100 fewer staff and a consolidation of its branch network – with hubs being shed in Inverness, Teeside, Hereford and Swansea – said changes in the firm had triggered redundancy costs of £4.8, while its FSCS bill totalled £1.1m.

Elsewhere, Brewins reported that £15m had been spent purchasing software and a further £1m on development.  The firm said that the costs were linked to the creation of a new settlement system, a project which has been underway for 18 months.  £17m was spent on the system back in 2012, bringing total investment in the system so far to roughly £34m.

Going forward, Brewin said it expected to spend a further £20m would over the course of the next 18 months to bring the implementation of the system to a “successful completion”.

Reflecting on the firm’s progress and results, Brewin chief David Nicol said Brewin’s main ambition was to do the best it could for its clients and investors.

“Our priorities are clear. They are to reinforce our high standard of service to clients and ensure an improved return to shareholders. Discretionary investment management is currently the core of our business model and our mission is to provide a compelling and consistent offering, relevant to all our clients. Over the past decade we have evolved from a stockbroker into a private client investment manager.  Our evolution must continue as we strive to become the leading provider of personal discretionary wealth management in the UK," Nicol said.

Closures and redundancies likely over

Adding to these views, Stephen Ford, who heads up Brewin Dolphin’s investment management arm, said that largely the firm’s “simplification” phase was drawing to a close, and while there could be “one or two” additional branch moves, further office closures and redundancies were unlikely.

He told Portfolio Adviser that going forward, Brewin had decided to concentrate on three core areas: creating a focused offering, improving its financial planning and building out its professional services arm.

“We have been surprised by the uptake [of professional services] by high net worth clients – there’s big growth in that area following the issues in the banking sector,” Ford explained.

Elsewhere, he added that leveraging off Brewins’ established brand to create a direct to consumer offering was also a priority, though as yet, he was unsure what such a service could look like, and felt there needed to be more clarity from the regulator on what wealth managers could provide.

“There’s a certain cohort of fund supermarkets which I do not think is a route we want to go down,” Ford added.  “What we need is a shop window and I think having a strong brand is important to that.”