Wealth manager Brooks Macdonald expects profits to be in line with expectations even as it prepares to deal with “legacy matters” expected to cost £6.5m.
In a statement to the stock exchange today (27 July) Brooks Macdonald said it is taking a “proactive” approach to dealing with issues arising from the Spearpoint business which it acquired in 2012.
The company stated: “These matters relate to a number of discretionary portfolios formerly managed by Spearpoint, now managed by our Jersey office, and a Dublin-based fund, for which Spearpoint acted as investment manager.
"We intend to contact relevant clients shortly to explain how we propose to resolve these matters. While we accept no legal liability in these matters, we have a deep commitment to treating customers fairly and seeking to protect our clients’ best interests.
"We expect this exercise will cost £6.5m, including associated expenses, and this amount will be provided for as an exceptional item in the financial results for the year to 30 June 2017.”
Despite the legacy issue, Brooks Macdonald reported that group underlying profits are likely to be “in line with expectations.”
Brooks Macdonald reported that funds under management were £10.5bn as at 30 June.
| Analysis of discretionary fund flows over the quarter and year | | | | | |
| Periods ended 30 June £m | Quarter | Quarterly | 2017 | Annual | 2016 |
| % change | % change |
| Opening FUM | 9,932 | - | 8,301 | - | 7,413 |
| Net new business | 314 | 3.17 | 951 | 11.45 | 863 |
| Investment performance | 209 | 2.1 | 1,203 | 14.49 | 25 |
| Total FUM growth | 523 | 5.27 | 2,154 | 25.94 | 888 |
| Closing FUM | 10,456 | | 10,456 | | 8,301 |
| | | | | | |
That represented an increase of 25.9 per cent over the year and 5.3 per cent over the quarter.
All segments of the business reported increased assets under management, with the Brooks Macdonald Investments business unit passing £1.5bn of assets.
Caroline Connellan, chief executive of Brooks Macdonald, said: “To position the business for future growth, we will be stepping up investment in our regulatory and risk management capabilities.
"While the associated costs will have an impact on profitability in the near term, this will result in a much stronger platform both now and for delivering sustainable growth in the future.
“Today we have also announced that we are dealing decisively with certain legacy matters. This decision upholds our commitment to protect our clients’ best interests and supports our relationships with key intermediaries.
“As the incoming chief executive of Brooks Macdonald, I am excited by the opportunities we have to deliver value for our clients, partners and shareholders in the years to come.
"We enter our new financial year with strong momentum across the group while remaining cautious around markets and client sentiment.”
david.thorpe@ft.com
