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Charles Stanley warns regulation could hit profits

Charles Stanley warns regulation could hit profits

Charles Stanley has seen its profits before tax increase by more than 50 per cent but warned it may struggle to meet market expectations for the rest of the year.

The company saw its profits before tax rise to £6.9m in the six months to September while its funds under management and administration increased by 1.3 per cent to £24.3bn.

It also saw its revenue increase by 9.8 per cent to £74m.

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Paul Abberley, chief executive of Charles Stanley, said the business made "good progress" on a number of initiatives to drive revenue growth, including greater external marketing activity, greater focus on discretionary services, more resources devoted to developing its financial planning proposition and the launch of new mobile app for Charles Stanley Direct.

Earlier this year Charles Stanley told FTAdviser it has set itself a target of more than doubling its number of advisers to around 50 by the end of the decade.

But despite the increase in profits, revenue and assets, Mr Abberley said the company faces obstacles to achieving the results the market expects over the next six months.

He said: "The group continues to benefit from favourable markets which we think are likely to persist on a six to 12 month view.

"We do, however, face headwinds in the form of major regulatory change, which is driving additional IT and process change costs and, in recent months, from lower than expected commission income.

"We will therefore need either a higher level of trading activity or other revenue increases to be generated in the second half in order to meet current market expectations.

"Notwithstanding this note of caution, we remain confident about the long-term prospects for Charles Stanley as the benefits from the detailed execution of the third leg of our strategy begin to bear fruit."

Mr Abberley added that the first step towards Charles Stanley's goal of becoming the UK's leading wealth manager by 2020 has been achieved with the business returning to profitability.

Earlier this year Charles Stanley announced it had swung back into profitability in the year ending in March 2017, after two years of being loss-making.

Charles Stanley’s return to profit follows a strategic review which has delivered governance changes as well as better cost control and a new remuneration policy, which Mr Abberley said was the second step in the company's plans

He said: "We are now focused on the third but hardest step, that of invigorating our new business channels and more generally improving our productivity across both front and back office."

damian.fantato@ft.com