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Brewin Dolphin loses 5% of income as RDR bites

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.

‘To fulfil these aims, whilst still growing through organic fund inflows, the Group has committed itself to a significant programme of organisational change with material capital investment in new systems.

‘The ‘group retains this commitment and will continually examine opportunities to improve business efficiency.

‘In particular, future efforts will not be limited to further investment in systems and people but will also encompass a programme of organisational efficiency, underpinned by rigorous and disciplined cost control.’

While noting that the company was vulnerable to a short term removal of commission Peel Hunt analyst Stuart Duncan said the business' overall resilience would be a long-term winner under RDR.

‘In effect the new fee charge will be implemented this year although they will still collect the trail,’ said Duncan. ‘In effect, in the short term, there will be an element of double counting until the trail reduces.’

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