The half-year results are in for the UK's largest wealth managers, and the picture is decidedly mixed. While some firms have posted robust growth in assets and profits, others have struggled with net outflows and margin pressures. The standout performer was St. James's Place, which reported a 12% increase in operating profit, while Quilter saw its assets under management swell by 15% to £118 billion.
St. James's Place Leads on Profit
St. James's Place, the FTSE 100 wealth manager, reported an operating profit of £519 million for the first half of 2023, up from £464 million in the same period last year. The company attributed the growth to strong client inflows and disciplined cost management. According to the firm, gross inflows reached £8.3 billion, a 4% increase year-on-year, while net inflows stood at £4.5 billion.
However, the company's funds under management dipped slightly to £151.1 billion, down from £151.6 billion at the end of 2022, reflecting volatile market conditions. Chief Executive Andrew Croft said in a statement: "Our focus on providing trusted advice and investment solutions continues to resonate with clients, and we remain confident in our ability to deliver long-term growth."
Quilter's Assets Surge
Quilter, the wealth manager spun off from Old Mutual, reported a 15% increase in assets under management to £118 billion, driven by positive market movements and net inflows of £2.5 billion. The company's adjusted profit before tax rose 23% to £112 million, helped by cost savings from its restructuring programme.
Quilter's Chief Executive, Steven Levin, commented: "Our results demonstrate the resilience of our business model and the strength of our client relationships. We are making good progress on our strategic priorities, and we remain on track to deliver our medium-term targets."
Mixed Performance at Other Firms
Other major players in the sector showed a more varied picture. Brewin Dolphin, which was acquired by RBC in March 2022, reported a 6% increase in total funds to £58.1 billion, but its operating profit fell 9% to £32 million due to integration costs. Rathbones Group saw its funds under management rise 8% to £55.4 billion, with net inflows of £1.2 billion, but its pre-tax profit declined 14% to £30 million, impacted by higher regulatory costs.
In contrast, Evelyn Partners (formerly Tilney Smith & Williamson) reported a 4% decline in funds to £51.2 billion, as clients withdrew £1.1 billion in the face of market volatility. Its adjusted EBITDA fell 6% to £85 million. The firm's CEO, Chris Woodhouse, said: "We are navigating a challenging environment, but our diversified business model and focus on client service position us well for the future."
Outlook and Challenges
The wealth management sector faces a number of headwinds, including persistent inflation, rising interest rates, and geopolitical uncertainty. These factors have weighed on client confidence and led to increased caution in investment decisions. According to data from the Investment Association, UK retail funds saw net outflows of £2.4 billion in June, the third consecutive month of outflows.
Despite these challenges, many firms remain optimistic about the long-term growth prospects. The UK wealth management market is expected to grow at a compound annual growth rate of 5.2% between 2023 and 2027, according to a report by McKinsey & Company. This growth is driven by an ageing population, increasing wealth accumulation, and a growing demand for professional financial advice.
Consolidation Continues
The sector has also seen significant consolidation, with larger players acquiring smaller rivals to gain scale and cost efficiencies. Recent deals include RBC's acquisition of Brewin Dolphin and the merger of Tilney and Smith & Williamson to form Evelyn Partners. These moves are likely to continue as firms seek to defend their margins and compete with low-cost digital platforms.
In conclusion, the half-year results reveal a sector that is resilient but not immune to market pressures. Firms with strong brands and distribution networks, like St. James's Place and Quilter, are performing well, while others are feeling the pinch. As the economic environment remains uncertain, the ability to adapt and innovate will be key to success in the second half of the year.
