The ever increasing frequency with which firms report their financial results can often obscure fundamental shifts in business models. The volume of financial data generated by quarterly, or even bi-annual, reports can quickly become the equivalent of statistical noise, something that can be ignored all too easily.
Take Brewin Dolphin for example which has just reported its financial results for the year to 30 September 2017.
With total income of £304.5million, pre-tax profits of £57.6 million and total clients assets under management of £40.1 billion of which £33.8 billion were discretionary Brewin Dolphin consolidated its position as one of the UK’s leading independent wealth management firms.
But what the accounting data obscures is the extent to which Brewin Dolphin has restructured its business during the current decade.
Back in 2010 Brewin Dolphin still functioned primarily as a full-service stockbroker. Now its sole focus is on wealth management and its income profile has changed accordingly as a slide buried in the appendices of its full-year results presentation shows.
In 2010 the firm generated income from a more diverse range of sources than was the case in 2017.
At 41 percent commissions accounted for the biggest source of income reflecting Brewin’s stockbroking bias followed by fees (38 percent), trail commission (10 percent), interest (seven percent) and financial planning (four percent).
By 2017, however, the firm received income from just three sources. Of these fees accounted for 71 percent, commissions 22 percent and financial planning income seven percent. Interest and trail commission, which to all intents and purposes became obsolete in the wake of the FCA’s retail distribution review are conspicuous by their absence.
The extent of Brewin’s business restructuring is also reflected in the asset mix of its business.
In 2010 discretionary business accounted for 51 percent of client assets followed by advisory (33 percent) and execution only (16 percent).
By 2017 discretionary assets had grown to 84 percent of total assets while advisory and execution only had fallen to seven percent and nine percent respectively.
This meant that discretionary funds accounted for £33.8 billion of client funds, execution only £3.6 billion and advisory £2.7 billion.
With restructuring to all intents and purposes complete Brewin is now intent on expanding with the onus very much on organic growth. According to its full-year results presentation it intends to make around 100 net new hires over the next twelve months.
The presentation did not specify where these will be made. But there is a good chance that these will spread throughout the entirety of the firm’s national network.
For Brewin is one of a relatively small number of firms that has a genuine national presence. Indeed the firm probably generates the bulk of its income from outside London if the geographical breakdown of discretionary assets is anything to go by.
London and the southeast accounted for just £10.8 billion of the £33.8 billion of discretionary assets followed by Scotland northern England (£9.2 million), northwest England and the midlands (£5.2 billion), the southern England, western England and Wales (£4.2 billion), “other” £2.1 billion and “models” 2.3 billion.