Brooks Macdonald has partnered with a unnamed wealth management tech firm to ramp up its digital offering as it sets its sights on becoming the dominant player in the intermediary space.
Speaking to our sister publication Portfolio Adviser, chief executive Caroline Connellan said the wealth manager had now achieved its strategy set out in 2017 of reinforcing the foundations of the business, strengthening the senior management team and cost-cutting, and was “ready to progress with our bold and exciting next stage of our strategy to achieve our vision of Brooks MacDonald as the leading investment manager for intermediaries”.
“We are emerging from that period of change as a strong business, a robust organisation and one that is really confident about the future,” she added. “And that future for us is all about pivoting from preserving value as an organisation to creating value”.
A key part of its strategy will be transforming the adviser experience and client service levels through its digital offering.
Outsourcing demand
To do this, Brooks has partnered with a “leading wealth management technology and service company”, which Connellan said would result in a material upgrade to its investment admin and operations.
Connellan said the coronavirus pandemic had accelerated demand for outsourcing investment propositions as advisers focus on making their businesses more efficient so they can retain and grow their client base.
“It’s all about being easy to do business with, and it’s all about market leading digital tools – automated onboarding, a full and intuitive portal functionality, sophisticated reporting – packaged together,” she explained.
“This will give us a distinctive and compelling offering, along with our market leading investment propositions that we have now and that rigour of the potentialised investment process that has delivered strong investment performance over the last year in another very difficult market.”
Record profits
News of its future business plans comes as the DFM reports record profits and revenues for the year ended 30 June. Underlying profit before tax jumped 11.1% to £23m during the period, while turnover rose 2.7% to £108.6m ($140.5m, €118.6m).
As reported in July, the DFM finished out the financial year with £13.7bn in assets under management, up 4% from the year before, though £1.2bn came from its acquisition of Edinburgh DFM Cornelian.
Peel Hunt gave Brooks a ‘buy’ recommendation on Thursday. Analysts noted its results were “slightly better than expected” with yearly profits exceeding its own estimates (£21.8m) though Brooks’ annual dividend of £0.53 fell short (£0.54).
“We continue to see material upside: the opportunity with intermediaries remains significant, tight cost management will deliver operational leverage and the dividend is expected to grow strongly,” analysts Stuart Duncan and Robert Page said in the note.
Outflows not under control
But outflows at the business have not yet stabilised since covid rocked markets in the first quarter.
Brooks was hit by £800m of net redemptions in the year, though part of this was from losing out on a £244m contract with Grosvenor Consultancy.
Overall, its discretionary business shed £359m, while its funds business lost out on £355m. The one bright spot was its MPS business which saw assets climb 17.6% to £1.8bn after taking in net inflows of £91m.
Flows had remained negative in the first quarter due to the longer lead times of converting new business, Connellan admitted, but she said net new business had been picking up.
“What we’re seeing in Q1 is that the pipeline is building so we believe that for this year we are in a good position.”
Additional M&A deals
Though Connellan said Brooks was focusing on organic growth she said the firm would leave the door open for future acquisitions.
Brooks has been highly acquisitive over the last year, snapping up Edinburgh DFM Cornelian for £39m last November and more recently Lloyds’ Channel Islands wealth business.
“Acquisitions will be something that we’ll continue to look at,” Connellan said, but added they would need to be “high quality” businesses like the two just acquired and support the DFM’s strategy going forward.
Meanwhile, she added that Brooks had reopened all of its offices in the last few weeks after months of being locked down.
The move reflects “our desire as a relationship business to start bringing our people together again and also, in time and complying with all the relevant social guidance, to meet face to face with advisers, and clients”.
However, she said the DFM would continue to support the flexible working policy it has had in place for a couple of years.
“What covid has done is shown the benefits of flexible working. A few days in the office and a few days at home seems to be what works well for most people, and something that we will support going forward.”
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