Charles Stanley, the London-listed wealth management and brokerage firm, said that for the six months ending 30 September, it made a pre-tax loss of £3.9 million ($6.14 million), compared to a first half profit of £4.9 million for the same period last year.
Charles Stanley, the London-listed wealth management and brokerage firm, said that for the six months ending 30 September, it made a pre-tax loss of £3.9 million ($6.14 million), compared to a first half profit of £4.9 million for the same period last year. The firm said investments to upgrade systems had increased costs and hence hit the bottom line.
The firm said in a preliminary statement that total funds under management were £20.2 billion, up 0.5 per cent to £20.1 billion from 31 March, while underlying profit before tax was £1.5 million compared to £8.0 million last year.
"It is disappointing to have to report a loss before tax of £3.9 million and a reduced underlying profit before tax of £1.5 million, not least because this does not reflect the good progress achieved in many areas of the group. We are investing heavily in a major upgrade of our systems and processes to enhance the proposition to our clients, and in several developments for the future including our award-winning service Charles Stanley Direct. This has impacted on our costs in a period of static markets and revenue,” said chairman Sir David Howard.
Funds under discretionary management increased by 6.1 per cent over the same period, from £8.2 billion to £8.7 billion, while other fund categories, advisory managed, advisory dealing and execution-only, declined.
Group revenues increased 4.1 per cent to £72.9 million, up from £70 million in the first half of 2013, a result of “notable growth” achieved in its financial services division and Charles Stanley Direct.
Charles Stanley said in its investment management division, which represents 80.4 per cent of group revenues, performance was mixed, with strong growth of fee income from managed services offset by lower commission income and a decline in income from administered clients.
Howard said the change in revenues was caused by a combination of factors.
“The re-pricing programme to which I drew attention in our interim statement last year reflects enhancements in our service to our clients following the Retail Distribution Review, and a re-balancing of our charging structure with a greater emphasis on investment management fees and less on commission charged on transactions. This in turn has brought about a re-balancing between our different services,” said Howard.
“The improvement in fee income has been achieved despite the fact that we have suffered, as expected, a small percentage of attrition amongst clients with lower levels of investment assets," he added.
Charles Stanley said this was reflected in the 8.3 per cent reduction in client funds in its advisory dealing service since the March year-end.
“So the increase in fee income has been driven by a combination of re-pricing, increasing substitution of fees for commission income, and of re-balancing our mix of services,” said Howard.