Financial services giant Quilter has put aside £24m ($31.4m, €26.7m) for potential claims made against recently-acquired Lighthouse over legacy defined benefit (DB) pension transfers.
The firm had previously thought £12m would be enough to cover compensation for British Steel Pension Scheme (BSPS) members.
Quilter said in its H1 2020 results: “We continue to work proactively with the Financial Conduct Authority (FCA) to ensure good customer outcomes for the clients involved.”
Prior to its acquisition in June last year, Lighthouse advised around 300 BSPS members to undertake a DB transfer.
Of this sum, approximately 80 were carried out prior to June 2017, after which the transfer values of the pension scheme were fundamentally enhanced.
In June 2020, Quilter confirmed that its advice subsidiary Lighthouse was being investigated by the UK financial watchdog over the legacy DB pension transfer cases.
Acquisitions
During its H1 2020 financial results, Quilter also spoke about how the firm is shifting its business strategy away from acquisitions.
“We have purposefully not undertaken any significant advice business acquisitions in 2020, as we focus on fully integrating those undertaken in 2019,” the firm said in its results statement.
Paul Feeney, chief executive of Quilter, added: “Having built the second-largest advice business in the UK through a number of acquisitions over recent years in Quilter Financial Planning, we are now looking to drive the next phase of our business strategy with an increased focus on organic growth and closer pan-Quilter integration.”
Results
Quilter also reported adjusted profit before tax fell 20% to £71m in H1 2020 from £89m in the six-month period ending 30 June 2019.
As at 30 June 2020, assets under management/administration increased slightly to £107.4bn (H1 2019: £107.3bn).
The firm said that net client cash flow came in at £1.1bn representing a significant rise on the comparative period (H1 2019: £300m), which was “due to lower outflows and stable gross sales”.
Integrated net flows were stable at £1.4bn, which the firm said was due to the “consistency of the group’s multi-channel model”.
Significant pick-up
Feeney added: “”Profitability over the course of the first half of 2020 was impacted by external conditions.
“Given the market decline came in mid-to-late March, we benefited from good performance in the first quarter with a more challenging second quarter, reflecting both lower markets and the impact of the higher 2020 Financial Services Compensation Scheme (FSCS) and regulatory levies of £15m, the majority of which was charged in full in April, with a further £5m expected in the second half.
“We are pleased to see the significant pick-up in net flows across the business in the first half, with gross flows remaining resilient despite the market turmoil and retention rates improving.
“Notwithstanding short-term uncertainties, Quilter remains well positioned in an industry with secular long-term growth prospects. The business is in good shape and we look forward to the future with confidence.”
