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Brewin Dolphin loses 5% of income as RDR bites

by David Campbell on Jan 31, 2013 at 07:26

Brewin Dolphin loses 5% of income as RDR bites

Brewin Dolphin lost 5% of its income over the three months to 30 January as trail commission was removed and admitted that the introduction of its new fee structure was ‘slower than anticipated’.

Total income for the period, which coincided with the launch of the retail distribution review, was 13.7% up on the year before however, at £67.8 million versus £59.7 million in 2011/12.

At 9am, the company was trading down 2.42% at 209p, versus a broadly flat market.In a note published in November 2012 broker Peel Hunt said that Brewin Dolphin stood to lose more than its peers from the removal of trail payments.

The company said it was experiencing a ‘period of consolidation’ after several years of strong growth, and alongside internal investment, said it was exploring tighter cost controls.

Overall funds were ‘stable’ at £26 billion, although the business saw outflows from its advisory division, ‘a result of ongoing service reviews as part of the move to new pricing’.

‘The trend towards an increasing proportion of recurring fee income is continuing, albeit at a marginally slower pace than during 2012,’ the company said in a statement.

‘Repricing and moving to new national rate cards remains on track for completion by the end of this financial year although progress was slower than anticipated in the first quarter.

‘The recovery in the commission levels from the sharp falls experienced in the first quarter of the last financial year has stabilised and first quarter total commission income was in line with the average for the final two quarters of the previous financial year.’

New discretionary funds over the quarter remained consistent, but were balanced against the loss of a team of managers.

‘The group is in a period of consolidation after the expansion-led growth of recent years. In particular, the priority remains continued improvement in the quality of service to clients, increasing shareholder returns through improved operational efficiency.

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10 comments so far. Why not have your say?

David Hatton

Jan 31, 2013 at 08:26

Just the first of many to come!

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Rob Stevenson

Jan 31, 2013 at 08:35

David, you beat me to it. Tip of the iceberg this...

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Hugh Jars

Jan 31, 2013 at 10:00

BD saw outflows from its from its advisory division, ‘a result of ongoing service reviews as part of the move to new pricing’.

I picked up a BD client last year who had £70k in ISA's who'd been contaced by them to say his £600 pa fee was insufficient, ( Brewin also received 0.5% trail) as they were increasing his fee to their new £1000 minimum fee...

that would have seen BD's 'income ' at £1,350 pa for supplying no investment advice, or fund reviews in the last 6 yrs... although they did send a convoluted portfolio valuation once a year, and pointless sheets of information on CGT issues, etc...

He was delighted to agree a £400 pa fee, and move the 0.5% trail, onto adviser charging fee basis.... A wonderful client for me,

BD and other Monoliths in the industry really need to look at their structure a lot closer...but heh,. then again hopefully they don't, and more very profitable desirable clients are discarded to us..

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Jan 31, 2013 at 10:10

Some of the bigger (excuse pun) boys didn't realise when they were well off.

Welcome to the real world. One in which many clients do not have the resources to pay ongoing fees for very little EVIDENT or immediate benefit. Who would put money on many of these Br Dolph type operations still being around in 10 years from now? I wouldn't.

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Rob Stevenson

Jan 31, 2013 at 10:13

Is Quilter - Cheviot just the start of a wider consolidation in this space?

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Jan 31, 2013 at 10:28

If the RDR stops consumers getting ripped off as per HJ's example above, then good!

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Mark Richards

Jan 31, 2013 at 15:44

Am I right in reading that it was down from the previous Q, but up (a lot) as compared to last year's correspondiong Q?

If yes, then that suggests that the previous Q was a high point and that this may be a return to mean... and more refelctive of a peak that was unsustainable....

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Super Moses via mobile

Jan 31, 2013 at 21:36

I hope HJ you are going to do more for your 1% per annum than BD did

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Hugh Jars

Feb 01, 2013 at 08:21

@ Super Moses,

When I took the client on last February, it was immediately onto Adviser Charge basis,- telling him (as I have been for all clients for a few years) that if he felt at all disatisfied with the service, he could turn the Adviser Charge off at any time.

The £400 pa fee, he pays quarterly, and likewise, I informed him that he could simply stop that at any time -he felt he wasn't getting value for it.

I was confident in what I do for clients.

He remains delighted with the service. -Dialogue when needed, a quarterly valuation report, and bespoke comment on his funds, which considers the near future, not simply a review of what has happended.

Not a Big glossy Brochure from London, with benign commentary, and for him a refreshing change to get updates and valuations based on his situation, not a one size fits all for thousands of clients.

I wish the thousands of clients who use BD, the Banks' 'Private Wealth Management' etc etc, would just try some smaller IFA firms, and see what they get ......

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Edinburgh Investor

Feb 01, 2013 at 16:35

A point that has not been picked up on is their investment in new systems. they have a strong record in monstrous overspends on systems' upgrades over the last few years (5-10x estimates) and are on track to maintain this woeful record.

Why don't analysts look at the overspends (and delivery delays) for the last two major projects alone?

...not all is well in the management of the infrastructure at the heart of this company. The sacrificial firing of one of the old guard every once in a while should not really be enough to convince analysts that this is under control.

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