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Charles Stanley's battle to be UK's 'top wealth manager'

After posting a solid set of interim numbers, Charles Stanley outlined to analysts how it plans to become a top UK wealth manager.

Solid numbers

Yesterday's results from Charles Stanley showed a 5% increase in profit in its core business from £5.4 million to £5.7 million during the six months to 30 September. Revenue was also up 5% to £77.7 million.   

Chief executive Paul Abberley described the numbers as solid. He is likely to be a little disappointed though that they were not more spectacular as he tries to grow the firm's profit margin to 15% over the medium term.  

The margin rose from 8.4% to 9.3% year-on-year. Abberley admitted growing the margin is taking longer than planned. 

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Solid numbers

Yesterday's results from Charles Stanley showed a 5% increase in profit in its core business from £5.4 million to £5.7 million during the six months to 30 September. Revenue was also up 5% to £77.7 million.   

Chief executive Paul Abberley described the numbers as solid. He is likely to be a little disappointed though that they were not more spectacular as he tries to grow the firm's profit margin to 15% over the medium term.  

The margin rose from 8.4% to 9.3% year-on-year. Abberley admitted growing the margin is taking longer than planned. 

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Restructure 

Abberley, who took charge of the 226-year-old wealth firm in December 2014, has restructured the business over the last few years in a bid to make it more competitive. 

There was more evidence of this during the last six months, with a new charging structure implemented on its online platform Charles Stanley Direct. 

The firm has also introduced a 'central initiative' for remuneration and has expanded its intermediary sales team. 

However, it still has some way to go to hit its ambitious target.

In a presentation to analysts, the firm provided insight into how it aims to make big strides over the next 12 months to help meet its goals of becoming the 'UK's leading wealth manager'. 

 

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Investment Management Services  

By the first half of 2019 Charles Stanley intends to have: 

* An improved business mix; upgrading clients to a discretionary service where appropriate

* Continued progress in repricing its  managed asset book

* It has already released a significantly improved website portal and new mobile app for private clients to increase digital interaction with clients

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Asset Management 

On the asset management side, Charles Stanely's model portfolio service will play a key role. 

To deliver on this front it is:  

* Looking to recruit dedicated sales staff to drive its model portfolio offering externally

* Provide portfolio templates to the firm’s investment managers

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Financial Planning 

Financial planning is another area the firm has high hopes for:

The initiatives here include:   

* Looking to continued expansion in capacity with the hire of new planners and support staff

* Embed a new operating system; improving our internal processes and delivering efficiency gains 

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Charles Stanley Direct 

For its online platform, technological enhancements and charging structures will be critical. 

The crucial cogs to success here are:  

* The successful re-pricing of its platform in September

* Delivered app improvements, including the launch of a fund trading function

* Committed to reinvesting around half of incremental revenue gains from repricing into further development

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Support functions 

Charles Stanley intends to ramp up its marketing spend here to boost its competitiveness. 

This includes: 

* Continued investment in its technology to enhance standardisation

* Increase the number of targeted marketing campaigns and events

 

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Growth in funds under management  

Charles Stanley is targeting growth in funds of 13-15% in the medium term.

Funds grew on average by 18% between 2015 and 2018, 10 percentage points of which was down to market movements and 8 percentage points organic

The firm has appointed a group head of distribution and plans to expand the intermediary sales team in a bid to meet this target

 

 

 

 

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Increase in revenue margin

Here Charles Stanley is aiming to achieve a 66-68bps blended revenue margin across the group in the medium term. In the first half of its financial year the margin was 63bps. 

The firm sees three ways in which it can deliver on this: 

* The trend toward its higher margin discretionary service

* Completion of managed book repricing by 31 March 2019

* Growth in its financial planning offering

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Improve in operating efficiency 

Charles Stanley's medium target here is to reduce non-variable costs as a percentage of revenue to below 55%. This target has been set before any one-off restructuring charges that may arise. 

It achieved a ratio of 57.7% in the first half. 

Charles believes it can hit this goal through the implementation of two key measures: 

* Standardising operating practices to improve efficiency across the group

* A central remuneration initiative for leads

 

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Discretionary assets 

In its presenation, Charles Stanley gave a breakdown of how its asset base has evolved over the last six months by service type. 

This chart showed a £900 million increase in discretionary AuM over the last six months. 

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Advisory Managed 

Meanwhile Charles Stanley saw a marginal decline in assets in its advisory managed business. 

 

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Execution only 

Its execution-only business experienced a £400 million rise in assets. 

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Advisory dealing 

While there was little movement in its advisory dealing unit over the last six months. 

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