Wealth manager Charles Stanley has seen a 30% rise in pre-tax profits to £11.4m but admits core business remains below its pre-tax profits target as it faces headwinds going into 2019.
In its final results for the year to 31 March 2018, the firm said pre-tax profits increased from £8.8m in 2017 to £11.4m.
This included pre-tax profits of £10.9bn in the core business but Charles Stanley said this was still a "long way" from its medium-term target.
The firm wants to increase its core business operating margin to 15% in the medium term, it is currently 7.2%.
This was hindered by share-based options in remuneration agreements agreed with the investment management teams.
In order to achieve its 15% target, the firm said it would need to continue to increase discretionary assets in its investment management services division, the model portfolios in the asset management division, online execution-only funds in Charles Stanley Direct and financial planning revenues in that division.
Chief executive Paul Abberley said: "As a business we are capable of meeting that target, it is now about how quickly it can be achieved."
Meanwhile, revenues increased from £141m to £150m over the same period, while discretionary funds rose from £11.4bn to £12.3bn.
In the asset management division specifically, revenues rose from £5.5m to £7m and pre-tax profit was £100,000, compared to losses of £300,000 in 2017.
New asset inflows were £1.5bn with over half placed in discretionary mandates and a further £1bn of advisory mandates moving into discretionary instead.
Abberley said: "The growth in discretionary fund management is encouraging, we see a natural trend for clients to delegate to a discretionary and there is natural momentum. We think it is the right thing for clients and a more efficient process for the firm."
He highlighted many investors "did not have the time" to be making all the decisions themselves and preferred someone else to make the decisions for them.
However, inflows were partly offset by client losses as the firm consolidated its investment management teams.
Execution-only platform Charles Stanley Direct grew its assets under administration by 21% to £2.3bn in the year and moved into a profit in the second half. Revenue on the service increased from £4.3m to £5.9m.
It described the move into profit as a "landmark move" for the execution-only service and that there was a "polarisation" between those clients seeking discretionary services and those using the online platform.
The firm said it had completed its disposal of non-core activities at the start of the year and was fully focused on holistic wealth management.
There are no plans for any further disposals or any acquisitions with the focus now on organic growth, although it would consider "bolt-on" acquisitions if they were complementary to the existing business.
Abberley said: "The focus for the 2019 financial year will be on driving top line revenue growth whilst improving operational efficiency and in turn harnessing operational gearing.
"As the balance of revenues shifts from commission to fees the group is more exposed to stockmarket volatility, which can be expected to be more frequent given the stage of the global economic cycle. Regulatory change will continue to absorb key resources.
"So as ever, headwinds are likely. That said, I approach the current financial year with quiet optimism. Continuing the commercial transformation of the firm while sustaining high and stable levels of customer service will not be easy, but our staff are focused and determined to deliver our vision of becoming the leading UK wealth manager."
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