"I am pleased to report continued excellent progress on old mutual wealth’s strategic ambition to become a leading, integrated, advice-led wealth management business. Net inflows were 11% of opening funds under management (h1 2016: 8%), excluding our heritage closed book, demonstrating robust growth in a difficult environment, and well ahead of our 5% annualised target."
- Net Client Cash Flow (‘NCCF’) increased by 53% to £4.9 billion (H1 2016: £3.2 billion)
- Gross sales increased by 34% to £14.1 billion (H1 2016: £10.5 billion)
- Funds under management (‘FUM’) increased by 10% to £127.3 billion (£115.3 billion)¹
- Pre-tax Adjusted Operating Profit (‘AOP’) increased by 29% to £134 million (H1 2016: £104 million) 2 3
- Pre-tax operating margin 30% (H1 2016: 28%)4
- Post-tax IFRS profit/(loss) £42 million (H1 2016: (£23 million))
1 FUM as at 31 December 2016, excludes Old Mutual Wealth Italy (£6.2 billion), divested in January 2017 and South African branches (£2.0 billion) which are being transferred to Old Mutual Emerging Markets.
2 H1 2016 AOP includes profit from Old Mutual Wealth Italy, the sale of which completed in January 2017 (H1 2017: £nil million).
3 For the six months to 30 June 2017, one-off managed separation and standalone costs are excluded from AOP. Recurring managed separation and standalone and Old Mutual Wealth head office function costs are included in OSIE.OSIE for H1 2017 includes the costs incurred to prepare the business for separation from Old Mutual plc (£3 million) and Head Office function costs, which were previously allocated to the businesses. H1 2016 only included costs incurred to prepare the business for separation from Old Mutual plc (£2 million).
4 Operating margin is calculated using reported AOP pre-tax divided by net revenue, where net revenue includes gross performance fees.
Paul Feeney, CEO of Old Mutual Wealth, comments:
“I am pleased to report continued excellent progress on Old Mutual Wealth’s strategic ambition to become a leading, integrated, advice-led wealth management business. Net inflows were 11% of opening funds under management (H1 2016: 8%), excluding our Heritage closed book, demonstrating robust growth in a difficult environment, and well ahead of our 5% annualised target.
“The period has seen strong performance across each of our Invest and Grow business areas. Despite continued questions over the strength and resilience of the UK economy, including rising inflationary pressures, we saw continued growth in net client cash flows which were up 53% to £4.9 billion (H1 2016: £3.2 billion) with a particularly noteworthy performance in the UK Platform and by both the multi-asset and single-strategy businesses in Old Mutual Global Investors.
“For the six months ended 30 June 2017 we reported an adjusted operating profit of £134 million, up 29% (H1 2016: £104 million) and an IFRS post-tax profit of £42 million (H1 2016: loss of £23 million). Strong investment performance led to performance fees in the period of £17 million, compared to £nil million in the comparative period of 2016.
“Pleasingly, we have seen continued recognition of the strength and, we believe, the value of our integrated business model. Integrated flows rose substantially from £0.7 billion to £2.2 billion for the six months to 30 June 2017. One of our strongest performance areas was our multi-asset solutions business, which is part of Old Mutual Global Investors, which saw impressive growth in net flows to £1.6 billion.
“Recognising the importance of sound financial advice in securing good customer outcomes, we have continued to invest in distribution with the completion of our acquisition of Caerus and a number of small acquisitions into Old Mutual Wealth Private Client Advisers.
“I am especially pleased with the performance of our UK Platform business which achieved net client cash flows of £2.1 billion, up 50%. Pension related flows were particularly strong in the period. Following our announcement on 2 May 2017, we have successfully transitioned to FNZ as our UK Platform implementation partner.
“2017 continues to be a year of transition for Old Mutual Wealth as we move towards our separation from Old Mutual plc, and we are excited about the opportunities ahead.”
Intra-Old Mutual Wealth FUM were £16.5 billion, the majority of which is managed within the multi-asset solutions teams in OMGI, up from £13.8 billion as at 31 December 2016. Funds managed by OMGI and Quilter Cheviot represent 46% of the total Old Mutual Wealth FUM. OMGI manages 18% of UK Platform assets, increasing from 14% at H1 2016, of which the multi-asset solutions teams manage 80%.
Building awareness of Old Mutual Wealth continued in 2017. Old Mutual Wealth continued as a Principal Partner of England Rugby. The partnership, which began in 2016, includes sponsorship of the Men's Autumn Internationals at Twickenham, the Women's Autumn Internationals and Kids First. Quilter Cheviot also expanded its brand building activities by announcing its sponsorship of BBC CountryFile Live for a second year.
Old Mutual Wealth continues to be recognised for performance and service. In H1 2017 the business won 46 awards, including winning the Best Platform Award at the Professional Paraplanner Awards, the UK Platform winning five categories and Quilter Cheviot receiving a 5* Investment Provider rating at the FT Adviser Online Innovation and Service Awards. In addition, OMGI won five awards in July between the 2017 What Investment Unit Trust Awards and the 2017 Investment Week Fund Manager of the Year Awards.
Old Mutual Wealth’s commitment to boosting young people’s financial awareness continued through its partnership with MyBnk, which has enabled a financial education programme to be undertaken in secondary schools in the Southampton region and the Isle of Man. Old Mutual Wealth was also one of the founders of KickStartMoney, a ground-breaking collaborative project launched by eighteen leading savings and investment firms. The movement to build a national savings culture for the future aims to invest over £1 million to take financial education to nearly 18,000 primary school children. As part of its focus on increasing personal finance education in schools, Old Mutual Wealth sponsored the Moneywise 2017 Personal Finance Teacher of the Year Awards.
In addition, OMGI continued to work closely with LEAP, Quilter Cheviot supported Aspire and Motiv8 and Intrinsic supported Dallaglio RugbyWorks.
Delivering good customer outcomes
Old Mutual Wealth achieved strong investment performance in Old Mutual Global Investors (‘OMGI’), with 79% of all funds above target over three years on a FUM-weighted basis at 30 June 2017, compared to 74% at 31 December 2016. 71% of the multi-asset fund ranges were above their target over three years, 72% of single manager funds were ahead of their target over three years, and 100% of absolute return funds were above target over three years driven by very strong performance from Old Mutual Global Equity Absolute Return Fund (‘GEAR’).
Old Mutual Wealth believes that a broad range of structured multi-asset propositions is right at the heart of delivering modern wealth management solutions for customers. The business has therefore expanded Cirilium by launching the Old Mutual Cirilium Adventurous Portfolio and the Old Mutual Cirilium Adventurous Passive Portfolio. In addition, it has restructured the Old Mutual Spectrum Fund range in July 2017 as the Old Mutual Creation Portfolios range, as part of a wider review of its multi-asset capabilities. On 1 June 2017, the business introduced a fixed ongoing charge pricing structure to eight risk-profiled Old Mutual Cirilium active and passive multi-asset portfolios to improve transparency and clarity around fund charges for customers.
UK Platform transformation
The contracts related to the UK Platform transformation with IFDS and DST have come to an end by mutual agreement effective as of 2 May 2017. At the same time, Old Mutual Wealth announced that it had contracted with FNZ to deliver its UK Platform transformation programme. Following these changes, the initiation phase of the work with FNZ is now underway, and Old Mutual Wealth has started detailed requirements workshops which will continue over a three to five month period.
To date, nothing has arisen to alter the time and cost estimates announced in May 2017. Old Mutual Wealth anticipates increasing levels of confidence in its estimates as it progresses through the requirements and planning stages.
Old Mutual Wealth continues to plan for an enhanced customer and adviser proposition supplied by FNZ to be operational for new business by late 2018/early 2019, with migration to follow swiftly thereafter.
All aspects of the previous programme, including the financial and operational aspects of ending of the contracts with IFDS and DST, have now been concluded. As a result, final costs associated with this phase of the project amounted to £332 million, marginally ahead of actual costs to 30 April 2017 of £330 million.
Managed separation and governance
Old Mutual Wealth is progressing well with the programme of activity as it works towards operating as a standalone business as part of the managed separation from Old Mutual plc. A number of functions have delivered the changes necessary to be standalone with the remaining functions expected to complete preparations by the end of 2017.
To ensure the business is fit for purpose as a listed standalone entity, Old Mutual Wealth has continued to reshape and strengthen its executive management team and the Old Mutual Wealth Board of Directors. Tim Tookey has been appointed as Chief Financial Officer and Mark Satchel has assumed the role of Corporate Finance Director. Tim joined the Old Mutual Wealth Board of Directors in February as Chair of the Board’s Audit Committee. George Reid, Independent Non-Executive Director, has become interim Chair of the Audit Committee. Rosie Harris and Jon Little have joined the Board as Independent non-executive directors during Q2 2017. Rosie has been appointed Chair of the Board Risk Committee and Jon has additionally joined the Board of OMGI as a Non-Executive Director. Old Mutual Wealth has also established a new IT Committee of the Board, chaired by Moira Kilcoyne, an Independent Non-Executive Director, to provide oversight of IT strategy, risk profile, resilience and strategic change programmes.
There are a number of studies and thematic reviews currently being initiated or undertaken by the UK regulators. These include the FCA’s Asset Management Review, the findings of which were published on 28 June 2017, and the Investment Platforms Market Study, the terms of reference for which were announced on 17 July 2017. Old Mutual Wealth fully supports these studies which it believes will increase the confidence and credibility of the wealth management industry in the UK and ensure that it provides fair outcomes for customers.
Managing conflicts of interests
Old Mutual Wealth’s model combines the knowledge and capabilities across the businesses to gain a deep understanding of customers and their needs. This business model allows Old Mutual Wealth to interact directly with advisers to deliver new products and solutions that are suitable for customers. Suitable investment solutions are central to ensuring good customer outcomes. Old Mutual Wealth aims to blend peer-leading capabilities across its business, but the decision about which investment solutions are right for each individual customer remains with the financial adviser, where client suitability decisions will always remain sacrosanct.
Old Mutual Wealth takes its responsibilities for managing actual or perceived conflicts of interest very seriously. Each part of the business has strong governance in place, with each business being a separate regulated entity that seeks to deliver good outcomes and value for its customers in its own right.
UK Platform NCCF was up 50% to £2.1 billion (H1 2016: £1.4 billion) primarily due to strong flows into the pension proposition, which accounted for 86% of total NCCF. Gross sales, of which 16% were generated via Intrinsic advisers, were up 38% to £4.4 billion (H1 2016: £3.2 billion). FUM was up 11% from the end of 2016 to £45.9 billion (31 December 2016: £41.4 billion). Profit was up 43% to £20 million driven by increased FUM (H1 2016: £14 million).
Pension sales in the UK Platform performed well, up 48% compared to the same period in 2016 as Old Mutual Wealth’s flexible drawdown pension continues to meet investors’ needs following the 2015 pension reforms.
Following a poor ISA season for the industry in H1 2016, sales were up 29% to £0.8 billion (H1 2016 £0.6 billion) as clients increasingly saw ISAs as a tax efficient and accessible complement to their existing savings plans.
WealthSelect, the managed portfolio service launched in February 2014, had nearly £4.0 billion of FUM and continues to receive good net flows.
Old Mutual International
Old Mutual International NCCF was double those of the prior year at £0.4 billion (H1 2016: £0.2 billion). There was strong growth in the Middle East as NCCF increased by 111% from H1 2016 to £203 million (H1 2016: £96 million). The UK continued the strong momentum experienced through the whole of 2016 and NCCF grew by 36% in H1 2017 to £103 million as the sales integration with the UK domestic business gained traction.
FUM was up 5% to £17.8 billion (31 December 2016: £16.9 billion) on a like-for-like basis after removing £2.0 billion FUM for the South Africa branches.
Profit remained broadly flat at £25 million, on a reported basis, though on a like-for-like basis, ie excluding the South African branches in H1 2016, profit was up 14%.
Old Mutual International has launched two pioneering products in 2017. The Select Bond, which is a new breed of offshore bond, and Wealth Portfolio, a new solution where Old Mutual International and Quilter Cheviot collaborated to help deliver enhanced investment outcomes for UK expats in the region through a bond which is fully portable in the event the expat returns to the UK.
Old Mutual Wealth highlighted in the 2016 Preliminary Results in March 2017 that it expected outflows of circa £0.5 billion across 2017 from a large institutional scheme reported within UK Other following £0.2 billion which had transferred out in 2016. In July 2017, £0.4 billion transferred out and Old Mutual Wealth expects the balance of remaining members’ assets to transfer out by the end of the year. These are very low margin assets within our Heritage business.
Old Mutual Wealth’s strategy of recognising the importance of sound financial advice in securing good customer outcomes is unchanged, and accordingly, the business has continued to invest in advised distribution. The acquisition of Caerus, which was announced in March, completed on 1 June 2017. Caerus is one of the UK’s leading financial planning firms with 289 advisers, including 130 restricted financial planners and more than £4 billion of assets under advice.
Old Mutual Wealth’s advisory capabilities and coverage were enhanced during H1 2017 through a number of small-scale acquisitions through Old Mutual Wealth Private Client Advisers (‘OMWPCA’), with several acquisitions combining to form a new Birmingham hub. OMWPCA now has £1.7 billion of assets under advice. Together, Intrinsic and OMWPCA contributed over £0.1 billion of NCCF to Quilter Cheviot, making it one of Quilter Cheviot’s largest suppliers of new business.
Old Mutual Wealth remains committed to improving the strength and sustainability of the financial advice industry and improving customer access to advice. The number of Intrinsic restricted financial planners rose 11% to 1,582 as at 30 June 2017 (31 December 2016: 1,423), including the benefits of the Caerus acquisition.
The restricted channel accounted for £0.6 billion (29%) of the UK Platform’s NCCF in H1 2017 (H1 2016: £0.4 billion, 29%) and £1.1 billion of NCCF into OMGI’s multi-asset solutions business in H1 2017 through the Cirilium and Generation portfolio ranges.
Intrinsic is currently loss-making, with its loss increasing from £9 million for H1 2016 to £13 million for H1 2017. Half of this increase in the loss is due to increased contributions to the Financial Services Compensation Scheme and the remainder is due to costs associated with the growth of the business. Intrinsic is currently reported within UK Other along with the small, but profitable, Protection and Institutional business lines. Net flows from Intrinsic’s advisers generate substantial business for Old Mutual Wealth and thereby contribute to the business’ overall profitability.
The commitment to quality advice is supported by Old Mutual Wealth’s investment in its Financial Adviser School (‘FAS’), where the first cohort of candidates graduated in April 2017.
In February 2017, FAS was one of the first businesses to secure recognition as a Trusted Partner with The London Institute of Banking and Finance (formerly ifs University College). Achieving recognition sees FAS formally acknowledged as a leading provider of financial adviser training in the UK.
Old Mutual Global Investors
OMGI NCCF was up 106% to £3.3 billion (H1 2016: £1.6 billion), exceeding net flows for the 2016 full year of £2.4 billion. Gross sales were up 31% to £8.2 billion (H1 2016: £6.3 billion) with good sales into GEAR of £2.9 billion, Cirilium of £1.4 billion and the Old Mutual North American Equity Fund of £0.9 billion. FUM was up 17% to £36.6 billion (31 December 2016: £31.4 billion). In the multi-asset ranges, Cirilium has nearly £6 billion of FUM and the WealthSelect fund range has nearly £4 billion of FUM. In the single-strategy ranges, GEAR exceeds £7 billion and each of the Old Mutual UK Mid Capand the Old Mutual UK Alphafunds are above £2 billion of FUM.
The multi-asset solutions business, which is at the core of Old Mutual Wealth’s proposition and wealth management strategy, contributed NCCF of £1.6 billion (H1 2016: £0.3 billion), of which £1.5 billion is invested in the multi-manager funds, driven by strong sales into Cirilium and WealthSelect.
Single strategy funds added £2.2 billion of NCCF (of which £0.4 billion was generated by the multi-asset solutions business).
OMGI’s profit increased 136% to £59 million (H1 2016: £25 million) due to strong revenue growth and performance fees of £17 million (H1 2016: £nil) following strong investment performance.
Quilter Cheviot NCCF was up 50% to £0.6 billion (H1 2016: £0.4 billion) with a strong second quarter of 2017. The comparative six month period was impacted by low investor confidence prior to the June 2016 Brexit referendum. FUM was up 9% from the start of the year to £22.5 billion (31 December 2016: £20.7 billion), benefitting from £0.3 billion added through the acquisition of Attivo Investment Management, which completed on 29 March 2017.
Quilter Cheviot profit remained consistent with prior year at £24 million, with lower commission income limiting the revenue growth.
UK Heritage net outflows of £0.5 billion were in line with prior year (H1 2016: £0.5 billion of net outflows).
Profit of £22 million was significantly higher than prior year (H1 2016: £3 million) as the previously announced restructuring of the Heritage fees reduced profit by £21 million in H1 2016, all of which was accounted for as an offset to revenues.
1 Invest and Grow includes Old Mutual Global Investors, Quilter Cheviot, UK Platform, Old Mutual International and UK Other (which consists of Intrinsic, series 6 pensions, institutional platform assets, protection products and service companies).
2 Manage for Value includes Heritage and Old Mutual Wealth Italy, the sale of which completed in January 2017 (H1 2016: £11 million).
3 For the six months to 30 June 2017, one-off managed separation and standalone costs are excluded from AOP. Recurring managed separation and standalone and Old Mutual Wealth head office function costs are included in OSIE. OSIE for H1 2017 includes the costs incurred to prepare the business for separation from Old Mutual plc (£3 million) and Head Office function costs, which were previously allocated to the businesses. H1 2016 only included costs incurred to prepare the business for separation from Old Mutual plc (£2 million).
4 Operating margin is calculated using reported AOP pre-tax divided by net revenue, where net revenue includes gross performance fees.
5 Annualised NCCF is used in the calculation of NCCF as % of opening FUM, excluding Italy, South African branches and Heritage.
6 FUM as at 31 December 2016, excludes Old Mutual Wealth Italy (£6.2 billion), divested in January 2017 and South African branches (£2.0 billion) which are to be transferred to Old Mutual Emerging Markets.
For more information contact
Old Mutual Wealth
020 7778 9550
020 3757 4985
07733 124 226
Notes to editors
Intrinsic is part of Old Mutual Wealth.
Old Mutual Wealth is a leading wealth management business in the UK and internationally, helping to create prosperity for the generations of today and tomorrow.
It has an adviser and customer offering spanning:
- Financial advice delivered by the Intrinsic network in the UK and AAM Advisory in Singapore
- Platform based wealth management and protection products delivered by Old Mutual Wealth in the UK and Old Mutual International globally
- Asset management solutions delivered by Old Mutual Global Investors
- Discretionary investment management delivered by Quilter Cheviot
Old Mutual Wealth oversees £127.3 billion in customer investments (as at 30 June 2017).
Old Mutual Wealth is part of Old Mutual plc, a FTSE 100 group that provides life assurance, asset management, banking and general insurance. Old Mutual is trusted by more than 19.4 million (as at 31 December 2016) customers across the world and has a total of £212.3 billion of assets under management (as at 30 June 2017).
This press release is for journalists only and should not be relied upon by financial advisers or customers.
Please remember that past performance is not a guide to future performance. The value of investments and the income from them can go down as well as up and investors may not get back any of the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.
This communication is issued by Old Mutual Wealth Management Limited, a Private Limited Company (Company Number 0604270), Old Mutual House Portland Terrace Southampton Hampshire SO14 7EJ.