Specialist
Former divisional leader at Quilter plc
Agenda
- FUM (funds under management) growth outlook and mix trends across Quilter's (LON: QLT) Cheviot, Investors and Investment Platform segments
- Impact of Quilter’s replatforming efforts and comparisons vs peers’ platforms
- Conversion process of IFAs (independent platform advisors) to RFPs (restricted financial planners) as method to increase AUM (assets under management)
- Competition for IFAs, highlighting multiples and market size
- Scope for further industry consolidation
Questions
1.
What are the differences in the business models of Quilter vs St James’s Place?
2.
Quilter has been given guidance around growth for AUM [assets under management] and AUA [assets under administration]. Could you estimate how the company’s AUM might grow?
3.
What are the main reasons for gross outflow? Is it just redemptions? Is it people crystallising their benefits or actively moving assets to platforms and products that Quilter doesn’t control?
4.
To what extent could the replatforming improve Quilter? NCCF [net client cash flow] as a percentage of opening assets was 2.5% in FY20 vs a mid-term guidance of 5% according to the company’s capital markets day. How much of that gap might be addressed by the replatforming? Could it be effective in bringing the platform in line with those of peers?
5.
Whose platform do you think is the best in class?
6.
Is the distinction between Quilter’s AUM and AUA that AUA would be with products that the company doesn’t manage directly?
7.
What’s the general growth trend for AUM?
8.
How many more basis points do you typically get on AUM vs AUA?
9.
What’s the typical advisor margin?
10.
Do you think platforms fees can reasonably go lower or have we hit a floor?
11.
How do you think Quilter can or will try to grow AUM? Many RFPs [restricted financial planners] recently left the business for various reasons. How is that trend consistent with growing AUM?
12.
What is the conversion dynamic for IFAs [independent financial advisors] into RFPs? What is that process like for an IFA?
13.
How good are the incentives around IFAs migrating their back books when transitioning to being an RFP? I imagine the process would be a real pain, depending on your customer base and who your clients are. It could be really difficult to get in contact with them.
14.
What do you think of Quilter’s product range and whether or not it meets IFA market needs? Does the company need to develop a broader suite of products, or do you think it can cater to the IFA market already?
15.
How might the AUM mix evolve across Quilter’s different products? You mentioned some will have higher fees than others. You also mentioned people perhaps churning internally to cheaper products.
16.
The shift from active to passive across the whole wealth management industry has been discussed for a long time. What portion of Quilter’s AUM mix could be actively managed vs using passive products in the long term?
17.
What Quilter products are active? You obviously have Cirilium Active. Do you consider Blend to be broadly an active product as well?
18.
I think Quilter reports Cirilium Active was about 40% of AUM in H1 2021. WealthSelect had another significant chunk. Is that an actively managed product?
19.
Do you think there will be more meaningful fee compression across products such as Cirilium Active and WealthSelect? I think those are probably the highest fees. I think you’ve got 115bps to 105bps on Cirilium Active and 80bps on WealthSelect on the active side.
20.
You mentioned around 30bps blended for SJP. Is Quilter at a scale where it can outsource a lot of that asset management and benefit from lower asset management costs as well or is the company managing a lot of that internally still?
21.
We discussed converting IFAs as the primary means of attracting AUM. How competitive is that? Presumably, everybody is courting IFAs who wants to acquire those portfolios. How does Quilter differentiate itself?
22.
What are the prevailing multiples for IFAs?
23.
How large is the market of AUM still being managed by IFAs?
24.
Do you think a player such as True Potential is increasing the multiples that more established players will have to spend to acquire? You mentioned IFAs who were maybe thinking about their own retirement and financial planning. It might be quite attractive to sell to True Potential if it offers you more for your business.
25.
Do you think Quilter’s replatforming improves the conversion process of AUA into AUM? Is that comparable now to one of the more technologically advanced peers such as True Potential, or is there still a way to go?
26.
I think Quilter’s QFP [Quilter Financial Planning] is relatively large at around 2,000 advisors. Do you think that’s an attractive acquisition target to a larger wealth manager or maybe a platform that wants to grow its own financial planning business?
27.
How expensive is it typically to incentivise RFPs to migrate their back book to Quilter products?
28.
Have advisors generally been able to maintain or grow the basis point remuneration they’re getting out of their books, to the detriment of wealth managers?
29.
Is improving the share for the advisor the most effective lever to incentivise the move from AUA to AUM, or is that generally not accepted as best practice? It seems to be a potential conflict of interest.
30.
There are still a number of smaller wealth managers in the UK such as Brooks Macdonald, Charles Stanley and Rathbones. Do you think those could be attractive assets for acquisition if Quilter were considered too large? What’s the future for those smaller managers?
31.
Do you have any concluding thoughts on the UK wealth management sector?
32.
Have you noticed any interesting players in robo advice? How might those product types serve the lower end of the market? Who do you think could potentially be the one to crack robo advice?
33.
Quilter issued NCCF guidance of 5% of opening AUM and AUA over the medium term. Do you think there’s enough there to meet that 5% target, given the 2.5% in 2020? It’s obviously a meaningful step up.
34.
Do you think the replatforming will lead to broader margin expansion over time or will that be offset by fee compression?
35.
Could margin expansion be driven by a more favourable AUM vs AUA mix?
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