Quilter International has “sizeable” business in Q4 to thank for its rise in net client cash flow (NCCF) in 2019.
In its results for the year to 31 December, NCCF increased by 67% to £500m (2018: £300m).
Gross flows hit £2bn ($2.58bn, €2.28bn), which was 11% up on 2018 at £1.8bn.
Assets under administration were up 12% to £20.5bn in 2019 from £18.3bn. The firm said this was predominantly due to favourable markets over the year and modest client inflows.
But Quilter’s international arm suffered a £10m fall in net fee revenue to £125m, from £135 a year before.
Big business
Peter Kenny, Quilter International chief executive, told International Adviser: “We had some fairly sizable cases come in, most notably from Hong Kong and from Latin America and they lifted our figures by some degree in Q4.
“These are cases these are predominantly ultra-high net worth cases, linked to estate planning. We will have been working with those clients for pretty much most of the year and they then culminated completion in Q4.
“Our NCCF in 2019 did have a uplift primarily because of those large cases. Had they not come in, you probably would have expected an NCCF figure similar to 2018.”
Total fee revenue fall
Kenny also attributed the 7% decrease in total fee revenue to the transition “from its old-style heritage business to the new style front book business”.
“Our heritage business is more of the contractual regular premium savings type of products, which typically attracted higher margin. We discontinued the sale of those products a number of years ago.
“We now, as a business, focus on the single premium portfolio bond product, which is a more transparent product and it attracts lower margin.
“That difference you’re seeing in net revenue is the effect of us selling more of our portfolio bond and much less, if any, higher margin contractual regular premium business.”
Coronavirus
This year has been marred by disruption from covid-19, also known as coronavirus, which has included a big hit to the financial markets.
Kenny said that it is difficult to anticipate how much of an impact it may have.
“We started the year pretty positively and sentiment was pretty good not only amongst our own people, but also amongst advisers and customer, and the flows we’ve seen in 2020 are positive indications.
“My early sense of 2020 was that it was going to be a good year. Coronavirus, clearly has come and taken everybody out at the knees, and it’s difficult to assess the impact this might have.
“I’ve not witnessed anything quite like coronavirus before, but my sense is when there have been significant shocks to stock markets, the best thing to do is to sit and wait for it to blow over.
“As markets typically do, they bounce back. Personally, I’m viewing it as a bit of an opportunity. There’s a lot of cheap stocks out there at the moment.
“But it’s difficult to know how long this is going to prevail.”
Hong Kong business
The Quilter International chief added that the coronavirus outbreak has also “presented some challenges” for the business.
“The staff in our Hong Kong office have been following Hong Kong government advice and have been working from home for the past five weeks.
“It doesn’t mean they can’t continue to operate because we’re all capable of operating remotely these days.
“But what they have witnessed is less meetings with advisers and clients, and that will ultimately mean difficulty around executing business. We may begin to see the impact of that flow in the coming weeks and months.”
France plans
But Quilter International still has plans for 2020.
Kenny said that the firm has “a number of things in the pipeline”. This includes being “in the final stages of launching a product in the French market”.
“There appears to be widespread demand from advisers in Europe for French compliant product and that’s where our early efforts in the first couple of months of this year have been.
“The product is principally targeted at British expatriates in France and it’s a large market with a clear need.
“We think where the demand is coming from has been the withdrawal from some existing providers in that space. Advisers have been left without product choice, so that’s where we see the opportunity.”
Group results
Overall, the Quilter group had a 1% increase in adjusted profit before tax (including Quilter Life Assurance (QLA)) to £235m in 2019 from £233m.
However, on a like-for-like basis, Quilter made a loss of £53m, compared to £41m profit in 2018.
The company said this was due to the costs of its platform transformation programme and the restructuring costs associated with its optimisation plans, which it will continue to incur in 2020 and 2021.
Gross client cash flows into the business (excluding QLA) were lower in 2019 at £12.3bn (2018: £14.2bn), while NCCF (excluding QLA) fell dramatically to £300m from £4.7bn in 2018.
The firm said this was due to general market uncertainty as well as the departure of a group of investment managers and a lower level of new gross flows onto its UK platform.
Assets under management (excluding QLA) swelled 13% to £110.4bn, from £97.7bn at 31 December 2018.
Legacy matters
The firm also said that it has put £12m aside to cover potential costs from defined benefit legacy cases of Lighthouse.
Prior to its acquisition in June last year, Lighthouse advised around 300 British Steel pension scheme members to undertake a DB transfer.
Of this sum, approximately 80 were carried out prior to June 2017, after which the transfer values of the pension scheme were fundamentally enhanced.
Since the year-end, the firm has been notified of around 30 complaints relating to advice provided by Lighthouse, all of which related to the pre-June 2017 period.
Quilter is in the process of reviewing these complaints “to assess the standard of advice given to British Steel pension scheme members” and is actively engaged with the regulator.
The firm has also written directly to the customers involved.
Looking ahead
Paul Feeney, Quilter chief executive, said: “Quilter’s performance during the early part of 2020 was broadly in line with our expectations.
“The sharp coronavirus induced market correction beginning in late February has created a level of uncertainty as to the outlook for the remainder of 2020.
“As we all try to understand the potential impact of this on people, economies and markets; my focus is two-fold, firstly, making sure our people are safe and, secondly, a customer focus.
“We remain committed to our targets but recognise that attainability will be subject to market levels, investor activity and management actions over the remainder of the year.
“Irrespective of short-term market sentiment, we remain optimistic on the long-term secular opportunity across our markets and we are strategically well positioned to benefit from this.”
