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Brewins says RDR offers 'competitive advantage' as profits leap

Brewins says RDR offers 'competitive advantage' as profits leap

Brewin Dolphin took a £553,000 Financial Services Compensation Scheme (FSCS) hit, according to its results, but chair Jamie Matheson said predicting future levies would be like 'banging your head' against a wall.

At market open Brewins reported a sharp increase in assets under management from £24 billion to £25.9 billion as it said the retail distribution review would deliver 'significant competitive advantages'.

In preliminary results for the 12 months to end of September the company reported profit before tax of £29.9 million, 36.5% up on the £21.9 million reported in the previous year.

While that was driven by the ongoing move to recurring revenue, with discretionary funds under management rising 16.7% from £15.6 billion to £18.2 billion, the FSCS led to a £553,000 expense.

Although the private client stockbroker drew up its balance sheet before the announcement last week that wealth firms could face an additional FSCS cost, Matheson (pictured) said there was little point trying to project the scheme's future cost.

He told Wealth Manager: 'I can only speculate on what the FSCS will be from one year to another.  Clearly, the more accidents that can be stopped the less the FSCS will be.  But speculating what you will have to pay is banging your head off a wall.' 

Elsewhere in Brewins' results, advisory assets fell 8.3% over the period, with an increase in recurring income from 61% of the total to 68%, while the operating margin continued to expand from 15% to 16%. Overall income rose from £264 million to £269 million.

Shares in the company jumped an immediate 1.86% at the market open, to 185.9p. Royal Bank of Canada last month upped its price target against the company from 170p to 210p.

‘To make progress in this environment continues to reassure us that the services we provide remain relevant and valuable to our clients,’ said executive chair Jamie Matheson.

‘We have made good progress in implementing our strategic review and the FSA's Retail Distribution Review (RDR), which we believe gives significant competitive advantages to larger businesses such as ours.

‘We have led the industry by being more transparent about charges. We believe strongly that transparency and competitive single pricing are important for the confidence of all private investors.’

The company has proposed a final dividend of 3.6p bringing the total for the year to 7.15p, up from 7.1p previously.

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