Brooks Macdonald Group plc (BRK) Earnings Call Transcript & Summary

Good morning, and welcome to Brooks Macdonald's 2025 Full Year Results Q&A session, hosted by Andrea Montague, CEO of Brooks Macdonald; and Katherine Jones, CFO. Before I hand over to Andrea, let me remind you that you can raise questions via the conference call with details available on this morning's announcement as well as via webcast by clicking on the arrow at the bottom of your screen. With that, let me hand over to Andrea.

Thanks, Eva, and good morning, everyone, and welcome. Before I take your questions, let me give you a few highlights. It's been a busy year, and I'm really pleased to say that we are executing our strategy to Reignite Growth. Over the year, we've reshaped the group to become a U.K.-focused wealth manager and created a scalable financial planning business. We've also launched a suite of Retirement Strategies, which meets our really growing client needs. And we have reported a record FUMA of GBP 19.2 billion. We've delivered 4.6% growth in revenue while maintaining BAU costs flat. Our investment performance remains strong, and we've announced the Board has proposed a final dividend of 51p (sic) [ 81p ], up 4.1% year-on-year. We've built momentum and are creating the conditions for success. So let's go to questions.

We will start with the conference line, then move on to questions submitted via the webcast. When raising your question, please state your name and the company.

[Operator Instructions] First questions today come from the line of Rahim Karim from Investec.

Two or 3 depending on how you want to count them, if I may. The first was just to ask a little bit more around the investments that you're making in AI implementation and how we should think about that impacting the business in terms of user experience and front office experience? And kind of associated with that, you obviously talked about investing in the product suite and the offering. If you could perhaps just elaborate a little bit more on that, that would be super helpful. And then the second question was just to ask a little bit about how the M&A that you did last year is bedding in? How you think about M&A going forward? Obviously, there's strong balance sheet, some excess capital. How we should be thinking about that in the context of the next 12 to 18 months?

Sure, Rahim, and thanks for your questions. I'll take the piece on M&A and then pass to Katherine for the particular questions on the framework around M&A and how we see it. So we've already, Rahim, as you know, spent a lot of time this year thinking about our digital capabilities and how to -- we've got 3 objectives. And the first one is delivering better client service, and that's what we've used AI already to do. So this is continuing to invest in that. So we've got a broad range of examples across the group, which I'm really excited about. But we've got one key delivery partner working with us. We've already embedded a tool within the financial planning business, which has created capacity already with the financial planners across the group. We are now using AI in our research teams to optimize the outputs from investment data and being able to drive even stronger investment returns. You know they're already strong. And we are looking, for example, at AI in the sales and distribution teams. So it's much talked about AI, and I see a huge potential, and those that use AI will win. In terms of M&A, I'll pass to Katherine in a second around the framework, but really there are many opportunities in the U.K. I see there are opportunities in financial planning. For example, there's still 5,000 firms in the U.K. despite the continued discussion around consolidation. So lots of opportunities, and we're well placed because we've got very strong relationships with financial planning firms across the U.K. I think your question is regarding the framework and Katherine will pick that up.

Yes. Thanks, Andrea. Rahim, thanks for the question. So just in terms of how the existing M&A is bedding in, we're really pleased with that. So the 3 acquisitions that we made earlier in the year, the integration is going well. We're confident in the delivery of the synergies of GBP 1 million that we announced previously, and really pleased to have launched the Brooks Financial brand and brought those businesses together. So that's going really well so far and bedding in well. In terms of how we think about it going forward, so as we've talked about before, we're focused on growing this business, both organically and inorganically, and we will continue to look at inorganic opportunities. That won't surprise you. That's something we continue to do. But the approach remains disciplined. So we look at things all the time, but we're very focused on making sure that whatever we progress is the right fit for the company. As you point out, we have a strong balance sheet. We've got no debt on the balance sheet, which is great and a great position to be in. But in terms of any acquisitions that we were to look at going forward, we would be focused on EPS accretion and making sure that there are attractive returns on investment from anything that we did.

Thanks, Katherine. And Rahim, the third -- I think there were really 3. So the third part of the question around products. I'm really pleased that we launched Global MPS. I'm very excited about the product launch and retirement strategy that we've discussed in the results today. So essentially, we are first in the sector to launch the suite of Retirement Strategies, bringing clarity, choice and confidence to clients. With the uncertainty in the macroeconomic conditions, my belief is that product suite is more relevant than ever to our clients. It's already a big market in the U.K. and growing fast. Retirement planning is one of the biggest opportunities for us and for the wealth sector. Over the next 15 years, we expect that nearly 1/4 of the U.K. population will be over 65, and this product is unique. We can serve clients from 50,000 up to over 1 million. So we've got 3 different products within the range, and I'm really excited, and it's been described as game changing by IFA clients. So you'll hear more of that throughout this year.

[Operator Instructions] The next question comes from the line of Ben Bathurst from RBC CM.

I have questions in a couple of areas, if I may. Firstly, on the financials, you've guided that you expect investments to be at the same level in FY '26 as it was for FY '25. I just wanted to confirm, does that apply to the investment that you've shown as above and below the underlying PBT line, as I think the term investment is applied in both areas. And as a sort of follow-up to that, what do you consider to have been the total level of investment spend in FY '25, because I don't think that has been separately stated in the release. And then secondly, just on the flow outlook, I wondered, are you beginning to see any traction in the advised-only AUA that you spoke about at half year as having the potential to transition to advised and managed over time? And should we expect that to begin to be of help in the FY '26 flow outturn?

Thanks for the questions, Ben. I think I'll probably take both of those. So in terms of the investment, you're absolutely right. So I think there are some charts in the RNS, which hopefully are helpful in explaining the level of spend that we had in full year '25. So in total, across both CapEx and kind of more below-the-line spend, it's around GBP 15 million, and we would expect the same level of spend in full year '26. Our focus is making sure that the investment is allocated to the areas that really will drive the growth and make us more efficient in line with our Reignite Growth strategy. So it's things like AI, enhancing our digital capabilities, transforming the front office processes and admin systems, and then reviewing the product set that Andrea has already talked about. So I'm really excited about how that's going to transform the business and the growth that we're going to see from that and the more efficiency that will come. And then just in terms of the advice-only assets, so as you know, our financial planners are all independent. We think that's an important choice that we have made and our clients are seeing the benefits of that independent advice. In terms of how much transitioned during the year, it was a relatively small number. So I think GBP 26 million is the number that we've disclosed in the report and accounts in respect of the period to 30 June. We're being very thoughtful. Our financial planners are having their ongoing suitability discussions with their clients. And so over time, those discussions will take place. And we think that at Brooks Macdonald, we have the breadth of proposition, the investment performance and the client service, which makes us a really good choice for their end clients. And so we hope to see some of that transition over time, but that will obviously depend entirely on client suitability. Thanks for your question, Ben. Hopefully, that was helpful.

That means my one follow-up would be on the investment side. It looks to me as though you're also classifying some of your underlying cost as investment too. Sort of GBP 4 million...

I think that's right. So where we are integrating the businesses, we would view that as investment spend, yes.

So that would be added to the GBP 15 million effectively?

It's included within it.

Conceptually?

It would be included within it. Yes, the GBP 15 million is the overall number.

Ben, to add to that, the integration, we've delivered a pace. We did the last acquisition at the end of January. And Katherine helpfully outlined the numbers around the advised assets. I see Brooks Financial is really a growth area for us going forward. So essentially now we've got a scalable and quality financial planning business. So there are many things that I'm excited about across the group, and this is one of them. It's quality independent financial advice. Those advised assets, we're very careful that our clients come first. What we are doing is delivering strong investment performance across 1, 3, 5, 10 years across all risk portfolios. So we believe we've got great products for these clients. And the interesting thing or one of the many interesting things about the financial planning business then is that our average client, we've got an average portfolio size 50% higher than the rest of the U.K. So these are high net worth clients. We focus on those affluent and high net worth clients, and this is strategically aligned. It's really early days then. I know you want the numbers, but it's really early days. We finished the integration and launched the brand on the 1st of July, and I'm really excited about the potential for the business.

The next question comes from the line of Andrew Watson from Singer Capital Markets.

Obviously, kind of a lot already done and well done for that. Just after a little bit of additional color on a number of areas of kind of strategic opportunity. So I think, first of all, could you just give us an idea of any particular initiatives that you've got planned for H2 on adviser engagement and interaction? I expect there's an autumn roadshow, but just anything else. Then just on the technology investment that you're planning. We know that you're going to make some enhancements in terms of things like AI tools. But could you just give us a little bit more color around the transformation of front office process and what that entails in the most basic sense? And then just one greedy final third question was on Brooks Financial. We know that much of the integration has been done in the simplest sense. But just can you talk a little bit more about how you want the business to work more closely with the existing core BM franchise and opportunity that you see in the next 6 to 12 months there, please? Sorry about all of those.

As always, great questions, Andrew. So thank you for them. So take a step back, adviser engagement, part of our strategy is, first, client service; second is increased product reach, and that's all about adviser engagement. This is a contact support, Andrew, and we're out there. The autumn roadshow is kicking off next week. Katherine and I will be on it. It's as exciting as answering all these questions, and we get to meet real clients. And indeed, the retirement income strategy proposition was formed from conversations that we've had with those clients. So you'll see we've raised our game in terms of marketing, comms and branding, and our clients have daily, weekly and monthly interaction with us. The thing is that the budget going out to the 26th of November gives us the absolute opportunity to engage with these clients more. That's what we're here to do, to help them work out their financial needs for the future, give them support through what is difficult macroeconomic time. In terms of front office processes, Andrew, I could probably spend the next half an hour speaking about that. But if we summarize what we're doing, essentially, what I want to be able to create is opportunities for the IM to be in front of our clients more and release that capacity. We're doing that in many ways. For example, InvestBM is our core portal that's now used and has taken up great feedback on that from our clients, but 72% of our clients can log online. I'm sure you've noticed on Monday, we launched the app. Again, has been received well. We've gone paperless or in process to go paperless with great uptake on that. And there's much, much more to do in AI to help both the financial planning teams and the IM team to release capacity to be in front of the clients. Your third question, again, we spend half an hour on, but the financial planning business, as we've said, we've built something really quite special. And it is now under one brand, a very strong leadership team in place. It's a whole of market scalable financial planning business. And how it interacts? Well, we have a very broad proposition range. We believe we know we've got the right products to serve those clients, financial planning clients, and we've increased the client base by 15%. So across the offices, the IMs and the financial planners are working well together, and that's really great to see. So again, as I said earlier, this is really early days. We've integrated the business from the 1st of July, and I really look forward to talking to you more at the half year about the progress with that. So Andrew, we need more time, but hopefully, those were a helpful high-level view of your 3 questions.

We currently have no questions coming through. [Operator Instructions].

We do have some questions submitted via the webcast. It's coming from Robin Savage at Zeus Capital. Do you expect the FCA to look at the contractual relationships between discretionary fund management MPS providers, independent financial advisers and the retail investors in the FCA multi-firm review? Should DFM MPS providers have contractual obligation to retail investors?

It's a great question. I'm not going to try and second guess that review. It's ongoing. In fact, we got an update yesterday from our audit team on progress. But essentially, there is a wide market of MPS. The scope is published. The contractual liabilities for us are really clear. So I'm not expecting a material change in those for us. But again, the FCA has done a lot in our industry already to increase trust and confidence in the sector. And I'm also confident that they will continue to do that. So we will keep close to the review. We're not specifically part of the review. But as you would expect, we take all of the component parts into account when it's completed, and we'll update you when it is.

Thank you. There are no more questions on the webcast or the conference line. So I will hand over to Andrea for closing comments.

Well, thank you all. It's great to speak this morning. As you will have seen, it's been a busy year, and we're already delivering our full year '26 priorities. I'm really excited about the opportunities ahead of us and look forward to the next call at the half year, and enjoy the rest of your day.

Thank you for joining today's call. You may now disconnect.