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S&W IM takes £736k FSCS hit as assets rise but profit falls
by Danielle Levy on Oct 18, 2013 at 07:58
Smith & Williamson Investment Management saw its pre-tax operating profit fall by £3 million to £20.8 million over the year to April, as the firm invested in the business and suffered declining returns from its banking and broking activities.
Smith & Williamson’s investment management and banking division, which was split into a separate LLP in May this year, was hit with a £736,000 Financial Services Compensation Scheme (FSCS) levy, up some £450,000 on the year. However,it was buoyed by a £3 million increase in operating income over the period to £93 million.
In April the firm had £14.2 billion under management, up £2.1 billion on the year. As a result of higher expenses the division’s operating margin fell 4% to 24%.
The rise in the FSCS levy was down to a provision for the 2008/09 banking failures, which hit its banking division, alongside additional levies for 2010-11 after asset managers successfully resubmitted their tariff data.
Incoming group joint chief executive David Cobb said the drop in operating profit was down to increased investment in the business, and a reduction in banking and broking activities.
He said the firm had invested in its business development team to raise its profile, particularly in the adviser community, with the launch of a guided architecture proposition.
Although he recognised that the company is late to this market, he expects the service and performance the firm can offer will differentiate it from its rivals.
Smith & Williamson also expanded its investment management team in the core discretionary business over the year, an area where Cobb sees particularly strong growth potential.
‘We have only got a tiny market share of what is a fragmented market. We would like to grow our [share of] the intermediated space with third party advisers or direct to the existing market place, which is now maturing as it has been fragmented. It is terribly important to have scale,’ he said.
While consolidation in the wealth management sector has picked up over the last few years, Cobb said that organic growth remains the firm’s top priority. He is positive about the decision to spin out the investment management and banking arm from the broader group.
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