Brooks Macdonald offers quality growth

There were concerns following last year's referendum that political uncertainty and market volatility would dampen retail investor sentiment. However, during the first half of its financial year to the end of December Brooks Macdonald gained discretionary net inflows of £332m. This momentum has continued into 2017. During the three months to March management reported net new discretionary business of £291m. The business generated an additional £311m in the quarter, too, from investment gains, taking total funds under management to £9.9bn. This represents total third-quarter growth of 6.5 per cent, compared with a rise in the WMA Balanced Index of 2.8 per cent.

Brooks Macdonald has long recognised the benefits of the discretionary wealth management model, where clients hand over the day-to-day running of their portfolio rather than signing off individual investment decisions. Income attached to these services tends to be more recurring in nature than commission earned via advisory services, which is more dependent on transaction volume.

One of the primary ways Brooks' core investment management division gains new business is via referrals from professionals, such as independent financial advisers (IFAs), accountants and solicitors. At the end of December its network of advisory firms had grown to more than 1,000, after it established two further strategic alliances during the latter half of the year. This included its first international tie-up with UAE-based financial adviser Abacus. Management's plan is to partner with IFAs in countries where regulators are following a similar path to the UK's Financial Conduct Authority.

Brooks also operates several funds. It had a particularly strong period of growth last year, after a strong performance by its multi-asset funds. It launched two of these funds for specific third-party mandates during the latter half of the year. However, its Levitas risk-rates funds have been slower to grow in scale than anticipated at the time of acquisition. After investing in its IT infrastructure, which is scheduled for completion in July, management is seeking to more closely align its funds and management businesses. Part of this will mean working more closely to distribute services.

The international business has been slower to shift towards discretionary fund management. Much of the focus for the Channel Islands-based business during the prior two years was migrating clients from advisory to discretionary fund management. This resulted in a 12 per cent reduction in revenue during the 12 months to the end of June. However, operating profit was much improved during the following six months, and in the long term the transition will result in better-quality revenue for the business.