Brewin Dolphin First Half Pre-Tax Profit Drops as Year-End Market Volatility Hits Investment Performance

British wealth manager Brewin Dolphin (BRW.L) reported early Friday a drop in pre-tax profit as slower-than-expected growth in discretionary fund flows compounded woes from the company’s investment underperformance in the first half. 

While total funds under management rose to 42.4 billion pounds ($55.16 billion) during the six months that ended March 31, from 39.7 billion pounds a year ago, the value of discretionary assets under management slipped as “continued organic growth [was]offset by investment performance,” the firm said in its earnings statement. 

The fourth quarter of 2018 was particularly difficult for money managers as risk assets were punished because investors feared a normalization of US monetary policy would bring about a slowdown that would then affect the rest of the world. In the first quarter of 2019, markets, however, saw a recovery from double-digit declines. 

Nevertheless, Brewin Dolphin’s annualized growth rate for net discretionary funds flows, including transfers, was 4.3% in the period under review against its 5% target. Net inflows, excluding transfers, in the intermediary channel were also lower due to “continued economic uncertainty, leading to subdued client activity.” 

Additionally, market trends showed that defined benefit pension scheme transfers were lower this period, reducing intermediaries’ client flows further, the company, which has sought to grow by acquiring two businesses in the quarter, noted in the statement. 

For the period under review, profit before tax and adjusted for items dropped by 8.2% to 35.6 million pounds, from 38.8 million pounds a year ago. 

“This reflects broadly flat income as a result of volatile markets in the first quarter, followed by a rebound in the second quarter impacting the value of funds, and higher costs as the group continues to invest in growth initiatives and its infrastructure,” the company added in the statement.

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