An abandoned attempt to sell advice firm Saunderson House saw new client wins drop and £1.5m ($1.9m, €1.66m) in adviser retention incentives set aside during the first half of 2018.
IFG Group, the parent company of Saunderson House and platform James Hay, reported group assets under administration and advice of £31.3bn for the six months to 30 June 2018, an increase of 8% from £29.1bn during the same period last year.
In the group financial results, released 30 August, group chief executive Kathryn Purves described the first four months of 2018 as “a challenging period for IFG Group, with assessments from HMRC in relation to Elysian Fuels and the cancelled Saunderson House sales process”.
Saunderson House performance
According to the results statement: “Operating profit is further reduced due to the previously announced £1.5m of exceptional retention payments paid to staff in H1 2018.
“A further £1.5m is expected to be paid in early 2019, provided certain performance conditions are met.”
In addition, “we expect to shortly commence the remediation process for the small number of clients impacted by the legacy issue identified in 2017 in relation to historical pension transfers”.
No longer for sale
The first half of 2018 was a tumultuous time for IFG following the aborted sale of Saunderson House.
Announced in February, IFG stated that it had received “several unsolicited approaches” and determined that selling Saunderson would create “greater value for shareholders”.
But the advice firm was pulled off the market in April, with the group setting up a £3m loyalty bonus scheme to retain adviser talent.
The U-turn also saw group chief executive John Cotter and chair John Gallagher swiftly exit the business.
In May, IFG confirmed that the firm’s brief spell on the market would hit future client acquisitions.
James Hay results
Assets under advice at James Hay rose 8% to £26.2bn.
It is now “the seventh largest platform in the UK”, according to the financial results.
New self-invested personal pension (Sipp) case wins were 20% lower than the same period last year, reflecting the “softer market conditions and DB flow reducing significantly”.
James Hay’s planned expansion into the Isa and general investment account space is expected to provide opportunities to “drive revenue growth”.
Results for the six months to 30 June 2018 were as follows:
James Hay legacy issues
In February, IFG Group confirmed that it was incurring “material legal and remediation costs” relating to Sipp investments in collapsed Guernsey-listed biofuels scheme Elysian Fuels between 2011 and 2015.
According to the six-month results, discussions with HM Revenue & Customs are ongoing.
“At this stage, the outcome remains highly unpredictable and we are not able to make a provision for any exposure beyond the £1.3m of legal costs already provided for in our 2017 accounts.
“The board remains of the opinion that the total exposure to sanction charges is materially lower than the maximum potential sanction of approximately £20m included in HMRC’s protective assessments.
“The time to resolution remains uncertain.”
In a separate matter, IFG disclosed in its 2017 year-end results that it instigated an extensive review of legacy matters within James Hay to “identify and close off any potential financial exposure or customer detriment”.
In an update, it added: “We have provided a further £0.5m in relation to potential sanction charges and customer detriment during H1 2018.”
Dividend payments remain halted
Following the decision to suspend the final dividend in relation to 2017, the IFG board “remains of the view that it is prudent to retain cash to cover the worst-case outcome in respect of Elysian Fuels and other legacy matters that are yet to be resolved”.
