News - Platforms / wraps
Categories: Platforms / Wraps
Old Mutual Wealth is planning to turn around its Skandia platform by halving costs as a proportion of FUM after the business made a £5m loss in the first half of 2012.
Old Mutual Wealth (OMW) chief financial officer Mark Satchel has revealed to investors the platform business sustained a pre-tax loss equivalent to five basis points of FUM (£10.2m) on an annualised basis.
As of 30 June FUM stood at £20.4bn, meaning a loss of £5.1m in H1 (excluding protection business).
Skandia UK chief executive Peter Mann said this week that OMW is "in a dominant position in the UK retail market" and has the platform, relationships and propositions that are "fit for the future".
But the group is cautious over the prospects of future revenue growth for its platform business as RDR comes into force at the start of 2013.
Old Mutual Wealth is forecasting revenues as a proportion of platform FUM - currently 52 basis points - will fall to around 40-45bps in the coming years as FUM rises. Revenue totalled around £53m in H1 2012.
Its push for profitability instead focuses on a sharp reduction in costs. Expenses for the platform business totalled 57 basis points' worth of FUM, or around £58m, in H1 2012.
Old Mutual Wealth envisages platform expenses will fall to 25-30 basis points' worth of FUM within a timeframe of around three years.
The group is targeting a 15% compound annual growth rate (CAGR) for platform FUM in the coming years - pushing FUM to £31bn in three years' time with annual expenses of around £78m-£93m according to the above estimates.
The platform business is seen as producing a pre-tax profit equivalent to 15 basis points of FUM in future - a figure which would amount to around £46m in three years' time if the CAGR target is hit.
The H1 2012 loss for the Skandia platform follows a £11.4m loss for 2011 and a £15m loss in 2010.
Its 2011 figure incorporated a pre-tax loss of £6.5m for the ISA and unit trust arm and a £4.85m pre-tax hit in the platform's life and pensions business.
The latest figures have emerged after Investment Week revealed in September the group was seeking to target the restricted advice market by offering a select number of funds as part of a core solutions range.
Old Mutual announced in October it will axe 200 jobs as Skandia is merged into the Old Mutual Wealth business.
Costs associated with those cuts, along with the group's closure to new business in Germany and Austria, will see the wider Old Mutual business take a £15m net operating charge in 2012, it told shareholders.
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