Quilter Reports 38% Drop In Flows; Unveils Plans To Improve Margins And Transform UK Platform

In the firm's maiden results, for the year to 31 December 2018, net client cash flows (excluding Quilter Life Assurance) dropped to £4.7bn - down from £7.6bn the year before - while assets under management/administration (AUMA) declined 4% year-on-year to close 2018 at £109.3bn.

Quilter noted, however, this was impacted by negative market performance, which knocked £7.8bn off the total figure.

Net client cash flows for the advice and wealth management businesses was positive at £3.5bn but lower than the previous year where it was logged at £4.4bn, while the firm also noted the "disappointing" short-term performance within its multi-asset business, Quilter Investors, after most major asset classes declined towards the end of last year.

Time to work harder and smarter as fund outflows soar

However, this was amid a year where the Investment Asscociation reported a market-wide reduction of 85% year-on-year in net retail flows.

However, despite these falls the group recorded adjusted profit before tax climbed to £233m, up 11% from £209m in 2017, while operating margins grew 30%.

Total fee revenue also increased by 8% to £788m and revenue margin was up 1bp to 57bps, while the group also committed to "optimisation" plans, which will boost operating margins and cut costs.

Paul Feeney, Quilter chief executive officer, said: "Quilter performed well in 2018 despite increasingly challenging market conditions as the year progressed. We are delighted to report record profit with adjusted profit up 11% and adjusted diluted earnings per share up 15%.

"Although deteriorating investor sentiment over the course of the year made net client cash flows more challenging, the resilience in our integrated flows demonstrated that our business model is generating real traction with our customers."

Managed separation

Last year saw the group complete its managed separation from Old Mutual and listings on the London and Johannesburg Stock Exchanges on 25 June.

It also successfully completed the sale of the single strategy asset management business, now Merian Global Investors, on 29 June 2018, with separation activity from this business reported as "progressing well".

A special interim dividend of 12p per share was paid on 21 September 2018, returning £221m net surplus proceeds to shareholders.

Feeney said: "Given the limited linkages between the single strategy asset management business and our retail-focused wealth business, the sale of that business was consistent with our objective of building the UK's leading wealth management company.

"The full consideration received from the sale of the business to its management team and funds managed by TA Associates, which completed at the end of June 2018, was £583m."

However, he added the current business is not the "finished article" as he outlined its UK platform transformation plans, which it expects to commence by autumn 2019, and ways to optimise the business and improve profit margins.

Platform migration

Feeney explained: "Our new UK platform, once operational, will allow us immediately to widen the product set we currently offer to include SIPP capabilities, Junior ISAs and cash accounts as well as allowing us to hold a broader spectrum of assets on behalf of clients 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.

"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."