Quilter plc (QLT) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to our 2024 full year results. This morning, I will take you through the business highlights and discuss our improved flow momentum. Then I'll cover our strategic priorities and update on our transformation programs. Finally, I'll say a few words about how we're thinking about the evolution of our business over the next few years. Mark will talk through the financials, and then I'll summarize and we'll take questions. We had an excellent year in 2024. 2 years ago, at my first results presentation as CEO, I said that Quilter was less efficient than it could be, and it wasn't delivering the growth it was capable of. The strategy was good, but it needed a tight execution. And that's exactly what we've been focusing on. And therefore, I'm really pleased to report strong profit growth and higher operating margins. Quilter is now in much better shape. Let me start with the key highlights. Adjusted profit increased 17% to GBP 196 million. That reflects robust cost management as well as higher revenues. Our operating margin at 29% is above our 25% by 2025 target and is broadly in line with our 30% medium-term goal. Core net flows were sharply higher, up to over GBP 5 billion. Earnings per share increased 13% to 10.6p, and the Board is proposing a dividend for the year of 5.9p, an increase of 13%. So a year of excellent progress and very strong flow momentum. Before we get into the detail, let me turn to the ongoing advice review, which we're confident we can resolve without a major impact to our business. As the regulatory process is not yet complete, there is a limit to how much I can say. I'm sure you'll have many questions, but I won't be able to provide further detail beyond the comments that I'm about to make. I believe that a well-delivered ongoing advice service should be the foundation of an enduring trusted relationship between a client and an adviser. As such, we welcome the announcement made by the FCA on the 24th of February, recognizing the importance of financial advice in helping people make the most of their money. As you know, a skilled person was appointed to undertake the advice review in June last year. That review is well advanced and is expected to complete in the second quarter of this year. The work we've undertaken has supported our view that apart from a limited number of cases where clients have paid for ongoing service that this has been provided. The level of customer complaints we've experienced in this area remains relatively low. We have concluded that in those instances where clients may not have been provided with the expected level of service from their adviser, following the completion of the skilled person review and subsequent discussions with the FCA that some form of client remediation is likely to be appropriate. Our current best estimate of the cost of undertaking this additional work, together with the potential cost of client remediation amounts to GBP 76 million, including interest. So we've recognized a provision for this amount. We will do the right thing for our customers. Let me now take a step back and look at what we've achieved over the last 2 years. Our adjusted profit before tax has increased by 46%. Our operating margin has improved by 7 percentage points. Our core net inflows are up nearly 150%. We're running in line with our 5% of opening balances targets. That's great progress. We are now clearly starting to deliver to our potential. I'm particularly pleased with the improvement in flow performance last year. You can see a summary of our quarterly performance in 2024 in green and how that compares to 2023 in gray. The key points that I'd like to draw out, we increased new business flows in each quarter of 2024, and we capped the year off with a very strong final quarter. As a result, we've delivered improving trends in net flows through the year with the second half considerably stronger than the first. And I'd add that the first quarter of this year is currently tracking close to the second half run rate. So assuming the current trends continue, we expect to announce a meaningful year-on-year uplift in the first quarter flows when we update in April. Delivering in line with our 5% net inflows target is key, but I also want us to be performing well against other leading players across the market. So let's turn to that. I'll start with affluent. This slide shows the performance of our platform and leading peers, gross flows on the left and net flows on the right, both expressed as a percentage of opening assets shown vertically and with the total assets on the horizontal axis. The key takeaway is that we are both the largest advice platform in terms of scale and the fastest growing, and that is a very attractive competitive position. The improvement in net flows can clearly be seen on this slide. On the left, you can see the cumulative net monthly flows onto the platform in 2023. And on the right, you can see the improvement delivered this year. In 2023, the Quilter platform generated good net flows, but the IFA net flows were frankly disappointing. The actions we've taken, coupled with a better market have driven a significant and consistent improvement in IFA net flows. I think our performance in 2024 demonstrates the tangible benefits of our dual distribution model. We've got 2 strong distribution channels contributing to platform flows, which obviously in turn drives flows into our solutions. In 2024, those 2 channels delivered gross flows of over GBP 12 billion. That's an increase of over 50% on the prior year. And because our platform is highly scalable, incremental assets generate a very attractive operating margin. So we are happy adding assets from IFAs who just want to use our platform. But of course, we prefer it where assets are both in our solutions and on our platform. In 2024, GBP 4.5 billion or around 40% of the gross platform inflows went into our solutions. By channel, that's about 80% of the flows from our advisers and about 20% of those from IFAs. So while growing our adviser base is important, growing our relationships with IFA firms is equally important, and I'll say more on that in a moment. But first, let me turn to the platform-based solutions we offer to the Quilter investors. We offered 2 approaches: Fund of funds under Cirilium Blend and our WealthSelect managed portfolio service. Regulation has encouraged more independent advisers to outsource investment solutions and our WealthSelect MPS is one of the largest ranges in the market and meets this need incredibly well. Its strong performance and competitive price make it attractive to both our own and independent advisers, and you can see the resulting growth on the right. On the left, the performance in Cirilium has been a bit more mixed. Cirilium active has been an outflow, but our blend and passive ranges have delivered very good growth. From what we've seen on our platform, we've retained around 3/4 of the assets we've lost from Cirilium Active and other Quilter Solutions, but the mix effect has reduced our revenue margin on managed assets. Mark is going to comment more on revenue margin guidance later. Let me now talk to our high net worth flows. On the left, you can see we're generating new business inflows pretty much in line with our peer group. When you look at the performance on the right, the net performance, we delivered solid net inflows last year. That said, 2% level of net inflows is not where I want us to be. So we've got a number of initiatives to help get us up towards the mid-single-digit level. I'll discuss those a bit more shortly. In terms of driving the growth, we do intend to drive a clearer demarcation between our discretionary portfolio service or DPS and our managed portfolio service, MPS for the remainder. Essentially, we're going to move some of our existing lower-value DPS clients into MPS. That will lead to some easing of the revenue margin as NPS margins are lower, but it will also free up investment manager capacity to add relationships with new and larger clients. So it's good for growth and operating margin. This will, of course, be a gradual transition. Now let me turn to the 3 strategic priorities we've previously set out to improve our business, building distribution, enhancing propositions and driving efficiency. I'll start with distribution in the Quilter channel. There are 3 strands to helping get our Quilter channel to where it should be. First, we're building the network of tomorrow. We want to improve the productivity of our advisers by giving them the tools to do their jobs better. That's all part of our advice transformation program. Over the last 3 years, the work we've done on improving alignment has significantly improved the flows of our advisers coming onto our platform and into our solutions. And productivity, which we measure as gross flows per adviser has also improved. That's running at GBP 3.2 million on an annualized basis, up from GBP 2.8 million in 2023. That has been helped by the continued progress on back book transfers, which were around GBP 800 million in 2024, up from GBP 750 million in 2023. The 1,400 or so advisers across the business wrote about GBP 5 billion of net new business last year, equivalent to -- sorry, that was gross equivalent to 26% of opening balances and better retention led to net flows as a percentage of opening assets increasing by around 1.5 percentage points, so very good progress. Next, we want to recruit the advisers of tomorrow. The waterfall at the top provides a breakdown of the change in our adviser numbers this year. The net decline of 23% in the first half was mainly due to natural attrition and retirements exceeding recruitment. The modest increase in the second half reflected the initiatives we've been working on. We added more firms to the network in 2024 than in the previous year, and we saw the reward from our investment in our Academy payoff through a higher number of graduates joining our network firms. We're looking to do more of both of these in 2025. Finally, we want to support the growth firms of tomorrow. That's why we've continued to invest in our Quilter partner hubs. By the end of last month, we had 9 firms that joined Quilter Partners. We're going to see how those firms progress before we're making any significant investments, but we're very pleased with how Quilter Partners is doing. Next, let's look at the IFA channel. Our focus here is twofold: first, to improve our market share of IFA new business; and second, to become the platform of choice for an even greater number of IFAs. The chart at the top demonstrates the strength of our competitive position. It summarizes IFA transfers between our platform and peers in 2023 and in 2024. We haven't shown a scale because it's commercially sensitive. But the bars above the line represents net transfers to us, and the bars below the line show transfers from us to others. As you can see, right across the market, we gained more from competitor platforms than we lose. And pretty much across the board, the level of business transferred to us has increased year-on-year. So we're becoming the platform of choice for more IFAs. In 2023, the main drag was from consolidators, which are on the right. And pleasingly, the outflows from them fell sharply in 2024. And finally, on this slide, in the bottom right, we've updated a chart that you've seen before. The green line is our market share of gross new business flows across the market and the black line is our share of stock. You can see that we are clearly taking market share of new business flows and our share of total advised platform assets is now also increasing. That's an excellent outcome for the largest player in the market. And I think there's still more that we can do. Next, propositions. We've continued to enhance our proposition. We introduced our cash hub in early 2024. We launched WealthSelect on a number of third-party platforms as well. In high net worth, we've added specific tailored propositions for partners at leading accounting firms as well as for IFAs who work with family solutions and entrepreneurs. We're also enhancing our investment offering for clients with more complex financial needs. And we're investing to extend our digital capabilities with a new Quilter Cheviot app and with the acquisition of NuWealth. NuWealth is an exciting long-term project that supports our strategic objective of broadening our client base. It's a small digital operation that we acquired last summer, and it will help us solve a problem that the advice industry faces. Many advisers within our ecosystem are having to turn away business because it's uneconomic. That 35-year-old who knocks on the door with GBP 50,000 in savings presents a dilemma. Advisers want to help them, but the revenue an adviser would generate doesn't justify the cost of full face-to-face advice. With NuWealth, we can give advisers a digital proposition that they can use to support their clients earlier in their wealth journey, incubating them, if you like. We are really excited about the opportunity because it's going to build a pipeline of new relationships at a lower client acquisition cost. And it also helps support outcomes from the advice guidance boundary review by delivering advice-based solutions to underserved segments. The contribution to flows from NuWealth is likely to be modest for the next few years, but it has a powerful potential over the longer term. Our proposition enjoys considerable market recognition. Notably Platform of the Year and leading platform for MPS at the Schroders UK Platform Awards, our 5-star service awards from FT Adviser, the Defaqto expert rated award for Quilter Cheviot. And as you know, we have extremely strong Trustpilot scores. So we're getting a lot right, but we can never be complacent. Let's now review the 3 broader transformation programs highlighted on this slide. The most significant remaining work is on the advice transformation program, which I touched on earlier. It will deliver results over the next 2 to 3 years, including better customer experience and higher adviser productivity. Next, in high net worth, we've obtained regulatory approval to offer advice from the Quilter Cheviot legal entity, giving clients a seamless integrated service. And on simplification, we're on track to complete our plans by the end of 2025. We've delivered GBP 35 million of our GBP 50 million cost saving target and we'll deliver the remainder by the end of this year. We've made great progress in transforming Quilter and improving the pace of execution. The prospects for this sector remains strong, not least because too many U.K. consumers over save and underinvest. They also need to take an increased responsibility for their own financial health as the government provides less support and as new pension accumulation is almost exclusively in defined contribution arrangements. As the nation's second largest advice business, I want Quilter to play its role in building brighter financial futures for as many households as we can. With such a strong growth opportunity, we're going to invest further in our brand and in our propositions and in our front office distribution. As a result, our focus is shifting to the core goals you can see on the right. First, distribution. Growing our adviser base and active IFA firms remains important, but we want to increase our market share, improve productivity, broaden our client range and maintain net flows at 5%. Next, we'll continue to innovate and invest in our propositions like NuWealth and ensure we remain highly customer-centric. Finally, now that we are close to our 30% operating margin, we're deliberately moving our focus to being future fit. What does that mean? It means completing our simplification program, and then improving our operating margin beyond our target 30% base over time at the same time as accelerating investment in data, AI and growth initiatives and continuing to instill a high-performance culture in this company. You should expect the operating margin improvement. You shouldn't expect it to be linear, of course, it's going to reflect the investment phasing and natural market volatility. With that, let me hand over to Mark.

Thank you, Steven, and good morning, everyone. Let me start by echoing Steven's comments that our business is in great shape. Last year, we experienced a strong financial performance, and it's really encouraging to see that driven by revenues and flows and not just cost control. There are 4 key points I'd like to make about our 2024 results. One, we've delivered pleasing revenue growth of 7%. Two, the revenue margin of 44 basis points was in line with our guidance. Three, we've maintained cost discipline, which has led to a 17% profit increase and a 2 percentage point improvement in operating margin. And four, our balance sheet, even after the customer remediation exercise provision remains in good shape, supporting the dividend increase of 13%, in line with EPS growth. What you can see here is that operating leverage drove strong growth in profits and EPS. Let me walk you through the details. Starting top left, as you already heard from Steven, net flows of GBP 5.2 billion in the core business were substantially ahead of 2023. Our average AUMA was up 11% on last year due to those inflows and supportive market conditions. On top right, you can see all income categories grew, giving revenues of GBP 670 million in total. Costs bottom left, were up 3% to GBP 474 million, so good operating leverage. As a result, we increased adjusted profit by 17% to GBP 196 million. That gave an operating margin of 29%. And we reported adjusted diluted earnings per share of 10.6p, an increase of 13%. Now getting into the detail. Let's start with revenue margins, which landed in line with our guidance. On this slide, each chart shows the second half 2023 run rate, the level in the first half of this year and the second half run rate as we exited 2024. In high net worth on the left, the overall margin was broadly stable. In affluent, the lower managed margin largely reflected mix shift with Cirilium Active outflows moving into our other solutions. You can see that most of that decline was in the first half with the second half broadly stable. Looking ahead, I expect the managed margin to fluctuate around the low to mid-30 basis points level with mix being the main driver of movements. Next, our platform or administered margin was resilient in the second half. The step down in the first half was largely due to removing the platform charge on cash balances in February 2024. Going forward, some of the interest rate benefit we generate on client cash will diminish as interest rates begin to ease. My expectation continues to be for a decline in the platform margin of around 1 basis point a year. Let's now turn to revenues by segment. Our high net worth business delivered a good performance. The increase in income largely reflected the benefit of higher assets with total revenue increasing by 7%. In the affluent segment, revenues grew 8%, another good performance, supported by growth across all income categories. Let's now turn to the detail on costs at both the group and segment level. The efficiencies we've achieved in the last few years are now giving us the capacity to invest in growth. Last year, cost growth was less than half the increase in revenues, despite inflationary headwinds, higher variable staff compensation and growth investment. And as you'll note, the cost of revenue generating staff and variable compensation has remained broadly stable as a percentage of revenues. The increase in absolute pound terms was linked to better business performance. The waterfall on the right summarizes the main cost changes year-on-year. Increases came from inflation as well as the investments we've made. Reductions came from our simplification program. In the bar far right, you can see how the overall cost base breaks down by segment. High net worth segment costs were up 5% year-on-year, reflecting front office investment. The affluent segment increased costs by 3%, primarily reflecting higher staff compensation, partially offset by simplification benefits. As I look forward, I'd expect 2025 costs of around GBP 500 million, reflecting higher FSCS, and national insurance charges, as well as the investments that Steven spoke about earlier, which I'm confident will drive growth in revenue and profits. Simplification plans will reduce run rate costs by around GBP 15 million this year, although I expect that benefit to be back-end loaded. So the main contribution from simplification in 2025 would be the difference between the run rate an in-year level of cost savings in 2024. And of course, overall cost could be potentially a little higher if the revenue environment is stronger, and vice versa if markets are more challenging. So putting the segment revenues and group costs together, this slide shows the strong segmental contribution to group profitability. High net worth delivered profit of GBP 48 million, up 17%. And affluent profits rose 19% to GBP 148 million. Operating margin increased by 2 percentage points in high net worth to 21% and 3 percentage points in affluent to 35%. Now let me turn to the balance sheet. As you'd expect, we've maintained a strong solvency ratio and cash position. I've set out the usual graphical walk showing the major movements in the Solvency II ratio and cash positions. The year-end solvency ratio reduced over the year with the decline largely due to the ongoing advice remediation provision markets and acquisitions, which we have already talked about. In terms of cash, as you can see, we've got around GBP 400 million of cash available in the center after payment of the final dividend. You'll note that remittances were particularly high last year. That includes upstreaming of the GBP 80 million capital benefit from the change in Solvency II rules that we called out this time last year. The full year dividend and the remaining simplification costs will absorb around GBP 100 million. That leaves us with a good buffer to cover the remediation provision, capital requirements, contingencies, liquidity management and business investments while retaining balance sheet optionality. With our balance sheet in good shape, once the ongoing advice review has progressed further, the Board will undertake a full review of our capital requirements and capital allocation priorities. The Board has declared a final dividend of 4.2p per share, which together with the interim dividend of 1.7p takes the total dividend for the year to 5.9p. This is a year-on-year increase of 13%, broadly in line with the increase in EPS. The payout ratio was 59%, roughly in the middle of our 50% to 70% target range. Let me now say a few words about how we are thinking about the P&L in 2025. In terms of revenues, there's the compounding of AUMA from flows and markets, which at current market levels would lift AUMA by around GBP 10 billion year-on-year. And there will obviously be headwinds from lower interest rates. Each 25 basis point cut reduces income by around GBP 4 million on an annualized basis. I've already discussed the items that will push costs up. So when you put all of that together and assuming current market and interest rate expectations are broadly maintained, I'd expect mid- to high single-digit profit growth this year before an acceleration in 2026. Let me take a step back to conclude. While there's no such thing as a normal year or normal markets, our results in 2024 demonstrate the shape of what we are building and what our medium-term financial model looks like at Quilter. Around 5% growth in AUMA from flows each year with a similar contribution from markets, giving around 10% growth in the asset base. Then allowing for normal margin attrition, partly from targeted action should lead to a mid- to high single-digit percent growth in revenues. And you could expect our traditional cost discipline to manage expenses to deliver positive jaws. That should lead to a steady compounding of earnings at a strong growth rate over time. That's what we delivered in 2024 with 17% profit growth. Although from what I said earlier, you can conclude that 2025 is unlikely to be quite as strong. The right-hand side of this slide fine tunes our existing guidance assuming no significant geopolitical shocks, we expect a constructive operating environment this year. As I see it, we're starting to see the potential power of the Quilter engine though there's a bit more to be done to get us firing perfectly on all cylinders. And with that, let me hand back to Steven.

Thank you, Mark. So let me summarize. We are really pleased with our performance in 2024. Flows, revenue and profit all moved sharply in the right direction. Strategically, we're in great shape. The 4 key messages I'd like to leave you with are: we offer structural growth as a large scale player in an attractive and fragmented U.K. wealth management markets. We've got great differentiated dual channel distribution that delivered significant improvement in flows in 2024. And we can still do better. We believe the whole group will deliver net flows around the 5% figure on average over time. And our medium-term aim is to sustainably operate above our 30% operating margin target while continuing to invest in our business. We're building a business that's fit to deliver on the significant opportunities that we see ahead, and I'm hugely excited by that. Let's open up for questions.

Andy?

Thank you very much. Three for me as usual, please. First, just on that GBP 80 million upstream, should I just think about that as broadly being -- will be used to some extent to pay for the advice provision. Should we think of them as broadly as a wash? Second, adviser headcount, well done with the growth in H2, possibly even better on the Academy actually. The 160 in the Academy now, should we think about around 2/3 of those becoming RFPs in 2025? It looked like that was about the run rate 2023 into 2024. Is that the right way to think about it? And I guess, should that lead to some faster adviser headcount growth overall in '25? And then third was just you mentioned thinking about uses of excess capital as clarity emerges on the provision. How do you think about debt reduction in that discussion as well? I know you've got some slightly more expensive debt on the balance sheet. Does that come into the thinking for uses of excess capital?

I'll take the second question, and I'll let Mark answer all the capital and numbers ones. So just on the adviser headcount, yes, I think you're right that it's probably around 2/3 of the advisers who are in the Academy should drop through into RFPs. I mean not everyone completes the program, so there is a dropout rate for that. And then not all the advisers become RFP, some of them become mortgage advisers and stuff. So that explains that sort of 1/3-ish difference. So that is what. And we're investing in our academy. We're investing in recruitment. Adviser numbers are important. As I've said as well, adviser productivity is very important and it is the combination of those 2 that we look to manage.

Andy, you can think about the GBP 80 million upstreaming is offset in the provision, if you like. Would rather be retaining the GBP 80 million upstreaming rather than having to have a provision, but it's up to you. But that is one way of looking at it, and I think some people have mentioned that previously. On capital and debt reduction, the debt that we have in place is a tenure with a 5 core option. So it's kind of term defined. We'd actually pay quite a high premium to actually exit that because it effectively, we need to reimburse the interest that people would have earned over the period anyway and stuff like that. So it'll probably feature in my discussions with the Board. But given that, I think we've still got 3 years or so to run on that. It's more probably of a medium-term consideration rather than a short-term consideration. Thank you very much.

Go ahead, James.

James from Panmure Liberum. Three, if I can. In terms of the ongoing advice provision, what percentage of clients reviewed during that were assessed to potentially be able to redress? Second question, growth in adviser numbers in H2 despite the ongoing advice review. And despite taking longer to onboard new advisers, presumably, what's the pipeline looking like ex the Academy? And then finally, just in terms of the adviser productivity, what do you see as a steady-state adviser productivity number, where you strike the balance between productivity in terms of flows, but also providing a good service to those clients.

Yes, thanks, James. So in terms of the ongoing advice, as I said, we've -- I'm not going to go into any more detail on any of the numbers today. We've set aside what we believe is the appropriate amount as a provision. There is still some work to complete, but we are confident that the number we set aside is the appropriate amount. In terms of the question on growth in adviser numbers, and the pipeline, we have got a good pipeline of recruitment, and we are working on that. I think -- we also see advisers retiring. We've got a very strong retirement program now, which is better than we had in the past where advisers can retire and transfer their clients onto other advisers who've got capacity. So adviser numbers is quite complicated thing and you need to look at it in a nuanced way because if an adviser retires and hands their client bank on to someone else in the network, the adviser numbers will actually go down, but productivity will go up as an example and things and we wouldn't be averse to that. And that may often hand the client base over to a younger advisers, who has got more energy and can drive it to service the clients and find more opportunities. So there is that. And it is obviously a market still with a whole lot of consolidation going on. So we're cautious as to managing the adviser numbers. But obviously, we are investing in both the Academy and in our recruitment. So yes, I would agree with most of your comments. In terms of adviser productivity, I think that -- so one part of your question, I don't agree with. I mean our adviser productivity is not about -- I'm not concerned that advisers are going to be giving less service to their clients. Advisers have an obligation to provide ongoing service and that is sacrosanct. There is no there is no option to not do that. And certainly, we don't think that advisers are at the stage where they're taking on too many clients and therefore, not doing it. I think the issue with adviser productivity is -- some of the systems that advisers use make the advice process more time consuming than it needs to be. That's why we've got our advice transformation program, which we say will take a few more years yet. But we see a lot of upside in that in improving the productivity of advisers and allowing them to serve more clients, but to serve more clients appropriately, of course. The other thing about the adviser productivity in the way we disclose it is there is a bit of a market level in that so because a large part of the business that advisers writes transfers of existing pension assets. So if markets are 10% higher, you can get a 10% or probably a 5% improvement because about half, 60% of the business probably transfers. You could probably get an improvement in productivity from market effects and that can go vice versa as well. So just to understand that there can be sort of ups and downs in adviser productivity in the measure there because of market levels. But we still think there's potential to drive adviser productivity app in terms of advisers serving more clients with better technology and better efficiency. Yes, at the back, Rahim, yes.

It's Rahim Karim from Investec. Three questions from me as well, if I may. The first was just with respect to your comments on net flows. You reiterated a number of times 4% to 5%, but then talked about how you're running well ahead of that. So just I was hoping if you could help us square that circle and whether that's just a level of prudence that you want us to take away that you would hope to outperform that or if I've necessarily missed something? The second question was just regarding the strong improvements in market share that the platform has seen over the last 12 months or so, it's something to be congratulated. I was wondering if you had a view on where that might max out or whether consolidation in that space might mean that there's still a lot of room for you to run in terms of your market share, both the stock and flows? And then the third question was just around capital allocation framework. You talked about bolt-on acquisitions. I was wondering if you can might allude a little bit to the areas that you were thinking about with respect to the various parts of the business.

Thank you. So the 4% to 5% is a number that we've talked about is through the cycle. So if you look at the fourth quarter of last year, we actually delivered net flows of 7%. So we are not trying to say that 5% is the cap. In fact, I would -- in very strong markets and good flow environments, we would expect it to be above that, we're talking about through the cycle. It is obviously also difficult to forecast what sort of market we're going to see. Long term, we are very bullish on the demographics in this market. There's too much savings. There is a huge amount of excess cash sitting in savings in the U.K. environment. And we believe that customers can and will invest that, and there's a lot of initiatives focused around that. So actually, there is a very strong sort of tailwinds on some of the growth metrics. So that's all we're talking about. It is a through-the-cycle number. In terms of the market share improvements, yes, we've had very strong market share improvements in the IFA space. That has been hard work over the last 3 years, and we're very proud about that. I think we do believe that there is still more road to go. I think the pace at which we have sort of captured market share is likely to slow because I don't think that, that pace can sort of be necessarily sustained forever. And you're right, the consolidation may actually help and support that, but we think there is still more room to go. But actually, what we -- the other way we think about it sort of linking back to what I said a moment ago, because we have a view that the size of the pie is going to increase quite significantly as well over the years. We think that the platform market is going to continue to grow. We think there's going to be more investments coming out of savings and going into longer-term investments. Interest rates are coming down. There is a lot of excess cash in the system. We think that our market share that we have gained places us in a very strong position to deliver strong net flows as we start seeing even stronger platform years that we believe we will see in the years ahead. And on the final question on capital allocation, I'll let Mark.

Yes, Rahim, our view on that hasn't changed a whole lot. It's primarily probably in 3 areas, 2 of which are in distribution, both in DFM and advice space. Small acquisitions, some of the capital is also set aside to help fund practice buyout loans, management buyout loans, those sort of things. But that's where we see a lot of the activity that we've historically done in that area. And the third area is sort of complementary digital and other capabilities. And we've seen the acquisition of NuWealth last year is an example of that. None of these are really sort of massive investment amounts for each investment we make, but the small ones all add up, and we've been doing quite a few of those over the course of the last year.

It's Andy Lowe from Citi. Your guidance talks about sort of long-term further increases in the operating profit margin. So I was just curious if we were to allocate your cost across each of your divisions where you see the biggest opportunity across those 3 divisions. And then the second question was just on the new wealth proposition. I'm just curious, it's obviously a new thing for you. How developed do you think competing offerings are across your peer group? And is this the case that everyone's been holding back a bit until we get more clarity on the regulation and therefore, you're sort of competing in a sort of similar development stage to others on that product.

Should I talk about operating margin first. Look, I see it coming across both segments. We put out some slides over there talking about the affluent and the high net worth operating margin. Our net worth is at 21% at the moment. I think a DFM sort of structured business should be in the mid-20s, and that's what we target in there. And in the affluent space, I think 35% is kind of a decent starting point. I think it can improve from there. The affluent part of the business is where we have the most operating leverage. So the platform as well as the fund management business within Quilter investors is where the incremental pound cost to manage more assets is at its lowest and that is where you should expect the most sort of expansion to take place. So personally, I see the margin improvement coming in both segments, but with the affluent segment, having greater capacity for expansion. There was the second question on that.

Sorry, yes, apologies Yes. Sorry, Andy. So yes, on NuWealth, I think in terms of the proposition, I think it's a good proposition. There's not a lot of other players who are looking to do -- to use digital offerings to support advisers like we are to help them incubate younger clients, which I think is something we're very excited about, but I'm sure others may try. I think a lot of companies will be looking to how they can make use of the advice guidance, boundary opportunities that come. I mean, we are involved in sandbox work with the FCA on that and things like that. So there's a lot of firms are working on what the opportunities are. It's something we are excited about. But we do think that we've got some good ideas, and we are investing accordingly. Should we go to the lines? No questions online?

Andy has got another one.

Andy Sinclair from Bank of America again. Just when you're looking at the excess capital in time, how do you feel about the dividend payout ratio? Is that something that could be reviewed as well? Or does that -- do you think that is the right number for the longer term? Second was just after the inheritance tax changes for pensions in the budget, there's been a bit of chatter that maybe life insurance protection products could become more prevalent. Would you consider using your balance sheet to write any of those sorts of products? Or is that something that's just of no interest? Yes, those 2 are fine for me.

All right. I'll take the second question, and then I'll let Mark talk about the dividend. In terms of the IHT changes, I think that has increased certainly the need for advice. We're seeing our advisers getting a lot more engagement from clients about how to manage inheritance tax. There are a range of options. I mean our bond product, for example, is doing very well, and that is -- that has some users trust. We have a very sophisticated trust range as well. In terms of pure protection, it is not currently our focus to write protection business. We do advise on protection business, and we have a panel of protection advisers -- protection providers that our advisers use.

And on the second, I think that probably will feature. It's really not a highlight feature, but I think it will feature. I'm expecting that when I go through this with the Board that we'll be looking at the different uses of capital, what we see the opportunities are down the line, how we might deploy it for reinvestment in the business, et cetera, et cetera. And clearly, the dividend payout policy or payout ratio will feature within that, but I'm not expecting to be at this stage, at any rate to be headlining with it.

Okay. There's 2 questions on the web. The first is from Greg Simpson at BNP Paribas. Firstly, asking 3 questions. Firstly, do you think there is room to improve adviser productivity from the GBP 3.2 million, given how this has improved over time. Secondly, asking about the quantum of back book transfers still remaining to go for. And thirdly, asking about platform flows noting that one of our platform peers yesterday talked about an ambition to turn their outflows into inflows and made a decent fee cut recently. What is your confidence on keeping the current good market share trends can be sustained?

All right. Thank you very much. In terms of the adviser productivity, I think I probably already commented on that question, we had it from similar question from the room. We do believe there is still scope to increase adviser productivity, but we're not going to give a forecast for a number or anything like that. In terms of the back book transfers, we believe that there is still north of GBP 5 billion of back book that our advisers advise on that we -- that is addressable. So we are confident that we can deliver similar numbers to what we delivered this year and last year for the next few years. And actually, obviously, as you recruit new advisers into the business, especially new experienced advisers, they obviously will bring their own sort of back books with them type thing. So the opportunity can be continuously refreshed as you bring in new advisers. And then on the final question about platform flows and pricing and other behavior stuff like that. Our platform is very competitively priced. We obviously look at what changes and what pricing is out there in the market, and we're very comfortable that our platform is incredibly -- is very well priced and delivers exceptional value. In terms of the market share, I think one of the points that the slide that we showed which shows where we get our flows from, you can see that we get our flows -- we get net inflows from a large number of platforms. It's not concentrated to any one particular source. So that is what I think is helpful to know. It is also -- it takes -- it's hard work to win over IFAs and to get them to be new supporters or to move them from a tertiary to secondary or to primary platform. And they're not looking to sort of change that every month. So actually, once you've gained a strong position of share, actually, it is -- it's a good position to be in. We can't rest on our laurels at all, and we certainly don't and won't, but we're very pleased with the position that we have.

One more question from Alex Bowers at Berenberg on MPS solutions. Firstly, he notes that the market has grown as adviser have adopted. He's asking once that's got to a saturated position, how well is Quilter placed to pick up market share from other MPS competitors. And secondly, he asked -- the FDA has announced that we'll start a multi-firm review of MPS looking at firms or how firms apply consumer duty. Are Quilter involved in this review? And what are your thoughts on this review?

So thank you for those questions. I think that our MPS offering, we are sort of the biggest -- second biggest that's sort of GBP 9-odd billion. It has got phenomenal performance and a very long-term consistent track record. We have only recently added MPS to our MPS WealthSelect, in particular, to other platforms. Our QCMPS has been on other platforms for some time. Between our 2 MPS offerings, we think there is still significant opportunity because there are obviously assets of advisers who already use WealthSelect on our platform, but have assets on other platforms. I'd love them to move all their assets to us, but IFAs don't always do that. So the fact that our WealthSelect is now available on some third-party platforms as well that -- and there are assets there that are from advisers who already use WealthSelect, know it well, like it, et cetera. So that gives us opportunity for growth that we haven't historically had. And then in terms of the questions on sort of consumer duty and the FCA review, we welcome the FCA review. I think that is an important thing to do. MPS has grown very significantly. There's a large number of people providing MPS services of different sizes and scale. We have got a very significant team, front office team, risk management functions, capabilities, all sorts of things. research, investment due diligence, operational due diligence of the managers we have. I'm not sure that everyone else then in the industry is at that level, but it is such an important solution, I think, what the FCA is doing makes absolute sense. And we -- that has only just been announced in the last few days that it is on the FCA's road map. So that I don't think has formally kicked off yet. Okay, we're going to wait. Everyone wait patiently. If you're on the phone, you have a question, speak now. All right. If there's nothing, we will end the day. Thank you all very much for coming.