Chief executive Paul Feeney acknowledged the “revenue headwinds” in half-year results published today (August 10), which were compounded by a £300mn rise in outflows.
But the company's profit before tax jumped to £182mn, up from the £21mn loss it made this time last year.
Quilter put the turnaround down to a policyholder tax credit of £145mn, compared to a £48mn tax charge in 2021. The business also managed to reduce base running costs by around £8mn.
The FTSE 250 company has been engaged in a drive to push up adviser productivity in recent years - a move which has seen advisers leave the business.
Feeney said that while this drive led to an expected reduction in the number of advisers, this fall had been "more modest" in 2022 so far and that attrition rates had now normalised.
He said: "We have stepped up our new adviser recruitment and resourcing. Our core focus has delivered a sustained improvement in our adviser productivity, with the Quilter channel gross flows per adviser being stable at £2.4mn despite a more challenging market environment.
"While our work to reshape our advice business is ongoing, we currently expect adviser numbers to stabilise and to resume growth by the end of the year."
The number of restricted financial planners employed by Quilter’s affluent segment has fallen by 127 over the past year, from 1,639 to 1,512.
Meanwhile, the business’ high-net-worth advice arm Quilter Private Client has cut seven restricted financial planners, and its discretionary investment managers have gone up by eight.
Between January and June 2022, Quilter’s assets under management and administration fell by 12 per cent to £98.7bn, down from £111.8bn in December.
Feeney said the environment for new inflows “has become more challenging” over the course of the first half of the year.
The repositioning of our advice business since the beginning of 2021 contributed to lower other revenues reflecting the decline in advisers.Paul Feeney, Quilter“While we experienced improved persistency in client assets across each of our businesses, the lower level of new sales volumes translated into lower net inflows which were 30 per cent lower at £1.4bn versus £2bn in the comparable period of 2021.”
The main decline in net flows, he said, was recorded in outflows on external third party platforms. Outflows rose to £600mn over the period compared to £300mn this time last year.
Quilter's Investment Platform inflows also fell £200mn, with net inflows reaching £1.6bn compared to £1.8bn last year.
Feeney said clients were stepping back from discretionary investment.
As a result, gross inflows in the first half were 12 per cent lower at £5.9bn, compared to £6.7bn last year.
Advice fee revenues also took a hit with total net fee revenue having fell by £1mn, to £303mn over the six-month period.
This included a 15 per cent dip in Quilter Financial Planning’s net fee revenue, from £47mn to £40mn, and an 8 per cent dip in the firm’s high-net-worth advice arm Quilter Private Client Advisers, from £12mn to £11mn.
“The repositioning of our advice business since the beginning of 2021 contributed to lower other revenues reflecting the decline in advisers over the course of 2021, coupled with a reduced contribution from mortgage and protection fees,” said Feeney.
“Despite revenue headwinds, our cost discipline delivered positive operating leverage and a solid P&L [profit and loss] outturn in an environment where costs were naturally higher than 2021 as we emerged from the pandemic,” said Feeney.
The group's operating margin increased to 20 per cent, compared to 18 per cent in the first half of last year, which it said was driven by a reduction in operating expenses.
Operating expenses decreased to £242 million, a reduction of £6mn from £248mn last year.
Despite a focus on cost discipline, Quilter also managed to set aside £2.16mn in one-off payments to over half of its employees to help them during the living cost crisis. Those earning less than £50,000 - around 1,800 of its 3,000 employees - have received a £1,500 payment.
The firm said negotiations have concluded with the insurers who provided professional indemnity cover for Lighthouse, the business Quilter bought in June 2019.
A year after the deal, the Financial Conduct Authority began an enforcement investigation against Lighthouse a year later for defined benefit transfer advice linked to British Steel members.
In March, Quilter had paid out £15mn on claims made against Lighthouse and the provisions sat at £29mn.
The business has now said the provisions decreased by £5mn during 2022, due to redress calculations performed under the skilled person review.
ruby.hinchliffe@ft.com
