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Close Bros AM ups wallet share on disintermediation fears
by Danielle Levy on Oct 04, 2013 at 07:27
Close Brothers Asset Management has significantly grown its share of wallet among its clients, driving an annual 32% increase in assets run for individuals across its investment management and planning divisions.
Chief executive Martin Andrew (pictured) says the rise in clients using both arms of the business fitted with his strategy to diversify revenue sources and increase the firm’s control of the distribution chain. This allows Close to protect itself against fee pressure across the business and the threat of disintermediation later down the line, he says.
‘We do not want to be reliant on one revenue source because that could be the one that gets squeezed, and increasingly you can see a proportion of the business has multiple revenue sources that are growing, which is encouraging,’ he said. ‘We want to be in control of our own distribution and not vulnerable to being disintermediated.’
The firm manages around £2.2 billion in assets for clients who use both services, with assets moving in both directions. Andrew says this has been the fastest growing element of assets under management, which broadly grew by 9% over the 12 months, to £9.1 billion. The firm moved back into the black with an adjusted operating profit of £4 million, versus 2012's loss of £4.3 million.
Andrew is unsurprised by the Financial Conduct Authority’s recent finding that since the onset of the retail distribution review, consumers have found the new independent and restricted labels confusing. Although the regulation has introduced a focus on transparency, Close has not experienced pressure on its fees. At an industry level, he expects margin compression to continue, pushing profitability levels down further.
As the cost of doing business continues to rise, he expects more strategic alliances, joint ventures and acquisitions in the industry. All options are aimed at solving ‘the same fundamental problem’: namely, to gain greater scale.
Though Close has been acquisitive over the past few years, Andrew says there were no deals in the pipeline. However, he expects to see growth across all parts of the business and hopes to capitalise on the opportunity created by auto-enrolment rules through the firm’s dedicated proposition, which includes its own investment management master trust which can be populated with Close’s multi-asset investment offering.
With new platform rules set to come in next April, the management team is still deciding a charging structure for the firm’s fledgling direct-to-consumer platform.
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