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Rathbones ‘alert’ to buy opportunities as profits jump

Rathbones ‘alert’ to buy opportunities as profits jump

Rathbone Brothers is eyeing further buys after the Jupiter and Deutsche wealth acquisitions in 2014 helped fuel strong profit growth last year.  

The wealth and asset manager saw assets under management rise by 7.4% to £29.2 billion in the 12 months to the end of December. This was a decent return given the FTSE 100 lost 4.9% over the year and the FTSE WMA Balanced Index decreased by 0.2%.

Pretax profit jumped 28.2% to £58.6 billion on the back of a 12.7% increase in underlying operating income to £209 million. Rathbones attributed part of this return to receiving the full benefits of the Jupiter and Deutsche deals.

The dividend was increased by 5.8% to 55p.  

Rathbones private client business saw a fall in net inflows from £4 billion in 2014 to £1.4 billion. However, the 2014 figure was distorted by acquired inflows of £3.2 billion, which included £2.6 billion from the purchase of the Deutsche and Jupiter businesses.

Meanwhile its unit trust business, which controls £3.1 billion, saw inflows fall by 33% to £371 million.

Net organic growth in the private client arm fell from 4% in 2014 to 3%, the lower end of the firm’s planned range.

The firm said strategic initiatives to boost business development remain on track, notably through a new distribution team collaborating with independent financial advisers, legal and accountancy firms.

In 2015 Rathbones formed 10 strategic alliances and said it established many more professional relationships over the year.

Buy opportunities

The acquisition of the outstanding 80.1% stake in Vision Independent Financial Planning and Castle Investment Solutions was a key event for Rathbones in 2015.

Vision will retain its independent status and Rathbones anticipates it to contribute ‘meaningfully’ to its net organic growth objectives.

At the year end, Vision had £845 million funds under advice with the discretionary fund manager panel, along with 81 independent financial advisers and seven mortgage advisers operating nationally.

Optimism for this purchase and the success of the Jupiter and Deutsche buys - which added 2,800 clients and £3.2 billion worth of inflows - has encouraged Rathbones to look out for more 'accretive' opportunities, which fit with its 'culture and investment philosophy'.

Chief executive Philip Howell (pictured) told the market: ‘We continue to be alert to acquisition opportunities. Acquired growth from our new joiners in the year was very much in line with our expectations and importantly, client retention from our two major acquisitions in 2014 has been very strong.’  

Another a key growth initiative for Rathbones is its new Private Office, which serves clients with investable assets of £10 million and above.

‘We are currently finalising arrangements with the third party platform identified to serve clients in this segment of the wealth spectrum and in 2016 we expect to add new private banking professionals to launch the initiative,’ Howell said.

The group is also scheduled to move to new London base at the start of 2017.

With lots of investment going into the business against an uncertain market backdrop, Rathbones said it will aim to protect its 30% margin.  

Howell said: 'Notwithstanding an uncertain market outlook, we have decided to continue to progress our strategic initiatives. Whilst this may impact our operating margin in the near term, we continue to strive for a margin of 30% in most market conditions, and will carefully balance our longer term investment against the near term impact of lower revenues during market downturns.

He added: 'We enter 2016 with even more intense geopolitical tensions and economic risks than last year, and nearer home, the uncertainty of Britain's future place in Europe adds to the mix. This will require us to more frequently review the timing and priority of projects.'

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