Old Mutual Wealth’s strategy is to offer trusted financial advice, flexible products, discretionary investment management and high performing asset management, all underpinned by first class support for advisers and their clients. All components are managed to be market leading in their own right and financial advisers can choose how much of the integrated service they want to use.
The company’s financial results for the first half of 2015 are a strong endorsement of this strategy. IFRS Adjusted Operating Profit (AOP), pre-tax, was £151 million for the first half of 2015, up by 26% compared to the prior year (H1 2014: £120 million). Funds under management (FUM) stood at £101 billion at 30 June 2015.
Paul Feeney, chief executive of Old Mutual Wealth, comments:
“Our focus has been to build a business that offers financial advisers all the components they might need to service their customers, whether that’s network support, flexible and innovative products, discretionary investment management or top performing asset management. Advisers will decide how much of the integrated proposition to use for each client but by offering it all in one place we can do so at very good value for advisers and their clients and underpin it with first class service. These results are starting to show that strategy gaining significant traction in the market.
“At the same time, we are seeing huge demand for our flexible income drawdown product. Retirement income has been redefined beyond recognition and income drawdown has come of age following the pension freedoms. Annuities, for so long the default option for turning savings into an income, have fallen from grace with just 16% of those not yet retired looking to use an annuity. In contrast, around 65% of current retirees are receiving their income through an annuity.
“With further complexities introduced in the summer budget around the taxation of death benefits, we expect to see even greater demand for financial advice as people consolidate their retirement funds with providers offering full access to the freedoms alongside packaged investment solutions that meet the changing investment needs in later life.”
Financial advice – Intrinsic
In April, Intrinsic agreed with Sesame Bankhall Group to become its preferred adviser network partner. This has progressed well and the first restricted advisers will join the Intrinsic network during Q3 2015. This is a significant opportunity to recruit high quality financial planners into the network and drive growth across Old Mutual Wealth. Intrinsic’s restricted proposition accounted for 11% of gross sales via the UK platform during the first half of the year. Demand for retirement planning advice is particularly strong following the pension freedoms with income drawdown business almost five times the levels seen during the first half of 2014.
Cirilium, the investment proposition managed by Old Mutual Global Investors (OMGI) that sits at the heart of the Intrinsic restricted advice proposition, is continuing to see strong net flows, with £0.4 billion over the first half of 2015 taking funds under management above £2.5 billion.
Products – UK platform
The Old Mutual Wealth platform delivered NCCF of £1.2 billion, 33% higher than prior year (H1 2014: £0.9 billion). The new flexible pension rules fuelled this growth with particularly strong transfers from providers that do not offer the flexibility for nominated beneficiaries to be able to access flexi access drawdown through multiple generations. Pension sales via the platform are up 43% compared to H1 2014 and pension transfers in progress were up 133% in June compared to January 2015.
WealthSelect has attracted more than £1.2 billion worth of net new investments via the platform following its launch in February 2014, with £0.5 billion in the first half of 2015. OMGI continues to review the funds available to enhance the proposition and offer financial advisers and customers access to the very best fund managers at a highly competitive price.
The platform recorded a profit of £13 million in the first half of the year, up from £10 million during the same period last year, with FUM standing at £32.9 billion, an increase of 7% since the start of the year.
Old Mutual Wealth’s protection offering has also made good progress with new business sales rising by 79% over the period, demonstrating demand for high quality Critical Illness and Life cover.
Products – Old Mutual International
NCCF for Old Mutual International, the cross-border business of Old Mutual Wealth, of £0.3 billion was significantly higher than prior year (H1 2014: £0.1 billion). The volume of business from high net worth customers was higher across all regions, increasing the average case size received and boosting sales figures.
More specifically, a new licence in Miami is driving an increase in sales in Latin America and sales of the Wealth Management Plan, which launched in Hong Kong in March, are beginning to gain traction. In addition, the first sales of the new high death benefit, Silk Life Plan, came in Asia during the period.
Overall, Old Mutual International’s FUM increased by 2% to £15.9 billion (2014: £15.6 billion) and adjusted operating profit was £26 million, 13% up on 2014 (H1 2014: £23 million).
Products – Old Mutual Wealth Italy & Europe
NCCF of £0.4 billion in Old Mutual Wealth Italy was significantly higher than prior year (2014: £0.1 billion) following an expansion of a distribution agreement with a major bank. Adjusted operating profit was £11m for the period and funds under management increased 2% to £4.9 billion.
Old Mutual Wealth completed the sale of its businesses in France and Luxembourg to APICIL on 2nd February 2015. In May 2015 it also agreed the sale of Skandia Switzerland to Life Invest Holding, a company owned by the Mutschler Group and Hannover Re. The transaction is subject to regulatory approval and is expected to complete in H2 2015.
Discretionary investment management – Quilter Cheviot
The acquisition of Quilter Cheviot formally completed in February 2015 and is contributing in line with expectations. It generated £0.4 billion NCCF for the full half year and contributed NCCF of £0.3 billion to Old Mutual Wealth since the acquisition completed. Adjusted operating profit for the period Quilter Cheviot has been owned by Old Mutual Wealth was £17 million and funds under management stood at £17.3 billion at 30 June 2015. Quilter Cheviot has now been added to the Intrinsic panel for discretionary investment managers further enhancing its distribution options.
Asset management – Old Mutual Global Investors (OMGI)
OMGI had a strong first half of 2015. OMGI’s FUM reached £22.4 billion at 30 June 2015, up 7% on the start of the year (2014: £21.0 billion). NCCF of £1.0 billion continued at a similar level to prior year (H1 2014: £1.1 billion) despite the uncertainty in the market for much of H1. The Global Equity Absolute Return fund continues to attract strong net flows with NCCF of £0.8 billion. The North American Equity and UK Alpha funds are also attracting good net inflows, along with the WealthSelect and Cirilium ranges managed for the UK platform and Intrinsic respectively.
OMGI investment performance remains very good, with 50% of core funds in the first quartile over a three-year period and a total of 81% of funds above the median. Adjusted operating profit for OMGI was 88% higher on the previous year at £30 million (H1 2014: £16 million).
Old Mutual Wealth data tables for the six months ended 30 June 2015