Despite seeing a rise in profits wealth management firm Mattioli Woods has warned increasing regulatory and compliance costs would drive down margins this year.
In its interim results for the six months ended November 30, 2019, published this morning (January 4), Mattioli Woods reported profits before tax of £6m, up 7.1 per cent on the £5.6m in the first half of 2019.
This was driven by increased revenues as well as cost savings from the restructuring of the firm's client facing business.
However, the wealth manager has warned that profit margins are expected to be lower in the second half of the year due to rising costs in regulation and compliance as well as its recruitment activity and marketing.
Despite this, the firm expects its core pension business to continue to perform well in the coming years on the back of any changes made to pension taxation, such as a possible tweak to the annual allowance or its taper.
Chief executive of Mattioli Woods, Ian Mattioli, also said he expected more individuals to be driven to advice as the pension market continues to change and the negativity surrounding the self-invested personal pension and small self-administered scheme markets continues.
Mr Woods said: “There has been some negative publicity for the pension market over the last few years, with restrictions on annual contributions and annual allowances, and certain Sipp and Ssas operators in the spotlight due to issues with esoteric and non-standard investments, while the general economic environment has reduced some consumers' focus on pension savings.
“The government is reported to be considering raising the point at which the tapered annual allowance for tax-free pension savings kicks in, which would benefit higher-earning private and public sector workers.
“While continual change, and talk of change, to the UK pensions system may work against the government's aim to ensure all individuals save for their retirement, we expect any changes to drive demand for advice, benefiting our core pensions business.”
Mr Mattioli also said events such as the recent suspension of the Woodford Equity Income fund and the M&G Property Portfolio were driving individuals to Mattioli Woods for advice.
In response, the wealth management firm will look to develop new products and services and continue to be on the lookout for appropriate acquisitions.
Mr Mattioli said: "We plan to build on the progress achieved in the first half of this financial year, advancing our strategic initiatives, such as the development of new products and services and our own IT solutions where possible.
“Our profit outlook for the year remains in line with management's expectations and we believe the group is well-positioned to grow, both organically and by acquisition, to continue delivering sustainable shareholder returns."
The firm's revenue increased 3.8 per cent to £30.3m in the six months ended November 30, 2019, up from £29.2m in the first half of 2019.
Pension consultancy and administration revenues increased 3.8 per cent to £10.9m with the number of Sipp and Ssas schemes administered increasing 5.4 per cent to 11,060, including 355 schemes administered by Ssas Solutions.
A total of 277 new Sipp and Ssas clients with assets totalling £88m chose to join Mattioli Woods from May to November 2019.
Total client assets under management, administration and advice were £9.4bn for the six months ended November 30, 2019 with clients drawing pension payments of £67m during the period.
At the end of last year Mattioli Woods acquired Glasgow-based financial planning firm the Turris Partnership in a deal worth up to £1.6m.
This followed previous acquisitions of Ssas Solutions (UK) Limited and Broughtons Financial Planning.
Mr Mattioli said he anticipates that more potential acquisitions will come to light this year as scrutiny of the Sipp market continues.
He said: “We anticipate continued regulatory scrutiny of the pension market, with certain other Sipp and Ssas operators in the spotlight due to issues arising with esoteric and non-standard investments.
“However, the market opportunity remains strong, with Sipp and Ssas arrangements still benefitting from the introduction of the pension freedoms and being favoured as a way of allowing individuals to have greater access, control, flexibility and responsibility over their pension savings.
“Sipps are increasingly the pension vehicle of choice for the mass affluent and having been appointed to administer Sipps previously operated by a number of failed operators in recent years we anticipate there may be similar opportunities over the next few years.”
amy.austin@ft.com
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