Rathbones Group Plc (RAT) Earnings Call Transcript & Summary

All right, well, good morning, everybody. Nice to see you all. Thank you very much for attending the 2024 preliminary results announcement of Rathbones Group Plc, in case you missed the signs coming in this morning. The presentation today is being recorded, so again the usual rules. I'd be grateful if you could keep all your mobile phones on silent for the duration. Now of course, there'll be plenty of time for questions at the end of the presentation, so very much we look forward to responding to those. We have a couple of members of the Rathbone (sic) [ Rathbones ] GEC here today to help in case Iain and I get into trouble. I'm joined this morning by Iain Hooley, our group CFO, who will take you through in a moment our financial results and indeed our medium-term guidance for the market. I'll then have an opportunity to update you on how the integration is going with IW&I; and as we begin to see more and more beyond that, talk a little bit more about how we're positioning the business to take advantage of what is a significant growth opportunity. Now of course, this is the time in the year where we tend to look back a little bit. And I think, if we started to do that as we looked into 2024: It was a pretty ambitious agenda that we set ourselves on, a balanced integration with technology delivery, certainly a focus on marketing and distribution, of course, while facing some quite material regulatory change. It was also a year that required a very strong focus on financial disciplines to set us well on our way to achieving the synergy targets we set out following the combination. So we were very grateful to see 2024 as a better year for investors, with a strong year for certainly the key U.S. stocks that have dominated benchmark-led performance in the year. And general asset prices improved as interest rates fell. Market movements have benefited our 2024 results by adding around GBP 4.2 billion to our reported funds under management and advice. The U.K. budget, of course, was a more notable event last year, generating many meaningful advice conversations with clients that were most welcome. So as we look back on the year, we can say that we have achieved a significant amount of what we set out to do. With GBP 30 million in synergy delivery, we're ahead of target, driven by a successful property consolidation and organizational changes. Client migration on to Rathbones' systems is progressing well. Saunderson House has been fully integrated into our operations, enhancing our financial planning capability alongside our investment teams. Our CLM solution is now live, and we're making continuous improvements as part of our ongoing business-as-usual activity. CLM forms a broad suite of enhanced applications that we've now implemented following the combination. So let me hand over to Iain now to talk you through the numbers. And I'll return in a moment. Iain?

Thank you, Paul. Good morning, everyone. What I'm going to cover falls into 3 main sections. First, I'll run through the overview of the results for 2024. I'll then cover the figures relevant to the IW&I integration and our capital position. And I'll conclude with our expectations for our margin progression and future growth, which Paul will expand on further. So to begin with, let's look at the financial highlights for 2024. Funds under management and administration or FUMA increased 3.7% to GBP 109.2 billion at 31st of December, reflecting market-driven growth in asset values during the year. Operating income grew 57% to GBP 895.9 million. That reflects the full year contribution from Investec Wealth & Investment or IW&I, in contrast to 2023, for which IW&I was a part of the group for the financial course of the financial year only. The 57% increase in income also reflects underlying growth across all principal income streams. Underlying profit before tax grew 79% to GBP 227.6 million, similarly reflecting IW&I's contribution for the full financial year in 2024 relative to the 3 months contribution in 2023. The increase in profit for the year also reflects the underlying growth in profitability of the business driven by revenue growth and the delivery of synergies relating to the integration of IW&I. The increase in profitability is reflected in our underlying operating margin, which showed significant progress increasing to 25.4% for the year, an increase of 3.1 percentage points relative to the prior year as we continue to make progress towards our 30% margin target. On a statutory basis, profit before tax grew 73% to GBP 99.6 million. This growth also reflects revenue growth and synergy delivery and is net of an increase in nonunderlying costs as we progressed through the process of integrating IW&I and incurred the first full year of higher charges in relation to amortization of intangible assets that result from the combination. Underlying basic earnings per share increased by 19% to 161.6p per share. The 19% growth in EPS reflects the benefit of the IW&I combination and the delivery of synergies. As a result of the growth in profitability, including that driven by the combination, we have announced today a proposed final dividend of 63p per share, which brings the total dividend for the year to 93p. That represents a 7% increase on 2023. This reinforces our progressive dividend policy which remains in place despite the short-term investment we are making to deliver the integration of IW&I. We'll look now at FUMA and flows for the year by segment. You will have seen this information before in our trading update, so I'll recap briefly on the key messages. Overall FUMA increased by 3.7% during the year. Gross outflows remained elevated due to interest rates and the costs of living remaining relatively high, resulting in a continuation of higher levels of partial withdrawals from existing portfolios. We also saw a short-term increase in outflows for the month of October ahead of the expected tax changes in the U.K. government's autumn budget. However, gross inflows remained strong as we continued to drive strong levels of new business, with the final quarter of the year reporting the highest-ever level of gross inflows for the group. Looking now at FUMA and flows for each of the 2 segments, starting with the Wealth Management segment. For Rathbones Investment Management or RIM, core discretionary money services continued to report net inflows, which more than doubled relative to the prior year to GBP 834 million. IW&I gross inflows were affected by the time investment managers need to commit to the integration and client consent processes. We expect the impact of the integration process will ease during the second half of 2025. Expected outflows relating to investment managers who left the IW&I business prior to the announcement of the combination showed a declining trend throughout the year, reducing to their lowest level in the final quarter of the financial year. Investment manager turnover within IW&I has remained low since the combination was announced. The migration of Saunderson House assets into Rathbones investment propositions was completed in July, resulting in a one-off outflow of GBP 245 million relating to clients who we were no longer able to serve. With the Saunderson House migration process completed, these outflows will not recur going forward. Moving on to the Asset Management segment, which continued to perform strongly, continuing to deliver net inflows overall which amounted to GBP 606 million for the year despite the continuing challenging environment for the asset management industry. Total funds under management for the segment grew by GBP 2 billion in 2024, an increase of 14.5%. This included the effect of strong net inflows into multi-asset funds. Single-strategy funds continued to be affected by the challenging backdrop for the U.K. asset management industry. However, strong investment performance and market movements resulted in an overall increase in the value of single-strategy funds. The Asset Management business continues to rank highly, relative to its peers in the industry, in terms of net retail sales and investment performance. The success of the business reflects the experience and stability of the full management team, which includes 7 fund managers who have over 18 years tenure each. We see significant growth opportunities for the Asset Management business both in supporting the propositions of the Wealth Management segment and in opportunities to gain greater traction through its external distribution channels. So whilst the group overall experienced net outflows for 2024, we see the outlook for net flows improving as we move through 2025. This reflects a number of factors: the improved net inflows in 2024 for the core RIM business; Rathbones Asset Management continuing to deliver net inflows despite the challenging environment for the asset management sector; gross inflows remaining strong across the group despite the short-term impact of the IW&I integration process, the effect of which is expected to diminish in the second half of 2025; IW&I outflows relating to historic departures showing a reducing trend; the Saunderson House migration now fully completed; and the benefits we expect from our growth agenda to drive rates, increased rates, of new business and increase the delivery of advice, which Paul will talk about more later; and of course, the central bank interest rates having also started to decline. So we'll now look at income for the group, which grew 56.9%, relative to the prior year, to GBP 895.9 million. This reflected the full year of IW&I's contribution but was also driven by underlying growth across all of our principal income streams. Fee income was driven higher by the growth in FUMA. Commission income benefited from higher transaction volumes, including the peak in activity in October as capital gains were realized ahead of the autumn budget. Interest income benefited as the run rate which this income reached at the end of 2023, following the rise in interest rates, carried through into 2024. Advice revenue saw some growth, as we benefit from the increase in our capacity to deliver advice, a trend which we expect will improve further in 2025 following the completion of the Saunderson House migration. The other income line on the slide which amounts to GBP 31.2 million includes net -- the net interest margin relating to IW&I's client money balances. This revenue will transfer on to the interest line once IW&I clients migrate onto the Rathbones platform, from which point, cash held within clients' portfolios becomes banking deposits under the Rathbones banking commissions. We'll now look at our income margins. The margins shown on the slide are calculated based on the -- based on gross FUMA for the relevant segment, i.e., prior to group eliminations. So that is a change from the basis presented last year which reflected net FUMA of the relevant segments. All revenue margins have shown resilience, both fee and commission income margins for the Wealth Management segment increasing year-on-year. The Asset Management fee income margin has shown a small decrease, as the mix of funds shifted towards multi-asset funds which have a lower annual management charge than single-strategy funds. And our treasury income yield, which is based on the total value of the group's liquidity, increased in line with the higher interest rates experienced in 2024. Looking now at the group's cost base. The overall increase in costs does, of course, reflect the full year of the IW&I cost base relative to the 3 months that were in 2023. In addition, fixed staff costs in 2024 reflect a full year of the cost of the head count recruited during 2023, the effect of which had been mitigated by both the delivery of synergies and ongoing cost discipline which has resulted in a reduction in head count of 2.2% during 2024, excluding the short-term resource which is directly related to the IW&I integration project. Fixed staff costs also reflect the effects of salary inflation, which equated to 4.5% in 2023 and 3.6% in 2024. Variable remuneration increased as a result of revenue growth. Within other operating costs, certain technology services were outsourced as planned to the Investec group during the year, which was agreed as part of the IW&I transaction. The move to an outsourced arrangement has resulted in a short-term increase in technology costs as we transition fully to the outsourced arrangement. In addition, technology spend has shown some increase generally as we continue to develop and enhance our systems across all areas of the business as we look to maintain continuous improvement in our client service delivery and operational efficiency as well as enhancing specific areas such as our data infrastructure capability. Other operating costs also reflect increase in FSCS levies which were 1.8 million higher in 2024 for the legacy Rathbones business. Certain integration costs, namely depreciation of property fit-out costs, are recognized within underlying costs due to the longer-term benefit they bring beyond the integration period. And 2024 costs also, of course, include the -- or reflect the impact of general inflation. Turning now to synergy delivery in relation to the integration of the IW&I business. Synergies delivered at the 31st of December 2024 amount to GBP 30.1 million on an annualized run rate basis. This equates to 50% of our overall synergy target of GBP 60 million which we communicated when we -- when the IW&I transaction was first announced. This is significantly ahead of our target for the end of the first full year following completion of the transaction of GBP 15 million. The early delivery reflects the pace at which we have been able to implement organizational changes and integrate our property footprint. The synergies delivered during 2024 arose over the course of the year, and hence, the benefit to underlying operating profit for the year as a result of the synergies delivered to date amounted to GBP 24.6 million. We remain fully confident in the delivery of our overall synergy target and, of course, remain focused on maximizing the total value of the synergies ultimately delivered. The realization of the remaining synergies is very much linked to the migration of clients' assets and records onto the Rathbones operating platform, following which the IW&I platform will begin to be decommissioned, so the delivery of further synergies in 2025 is therefore expected to arise mostly from the second half of the financial year. We'll now look at those costs which are recognized as nonunderlying costs. So the categories of costs which are recognized as nonunderlying remains consistent with the prior year. Amortization of intangible assets increased to GBP 44.6 million for 2024, reflecting the first full year of the amortization of the intangibles arising from the IW&I combination. IW&I integration costs amounted to GBP 75.5 million for the year. This cost forms part of the total cost of integration which we have set out previously. Saunderson House or SHL acquisition costs in the year represent deferred consideration that is contingent upon the recipients remaining employed with the business and therefore must be spread over that period. The 2024 cost is the final portion of these deferred consideration costs. And only small -- any small residual costs, including those to wind-down the Saunderson House legal entity, are expected to be incurred in 2025. The effective tax rate for the year was 34.2%. This reflected an increase in the average statutory rate for the year to 25%, with 2024 being the first full year following the increased statutory rate, along with the effect of certain disallowable integration costs relating to the disposal of property leases as our offices were integrated. Turning now to capital. The group has maintained a robust capital position. The group's regulatory capital surplus shown on the slide reflects the retained profit for 2024 -- for the 2024 financial year, which has just been verified; and the announcement of the final proposed dividend, which equates to a total payment of GBP 65 million. During the year, we completed the process to optimize the capital allocated to the group's defined benefit pension schemes, finalizing the buy-in process such that the future liabilities of the schemes are now fully covered by insurance. The risk of future volatility affecting the group is therefore fully mitigated. And the benefit of this is now reflected in the capital which the group is required to hold and is a major contributor to the increase in the capital surplus relative to the prior year. The group remains highly cash generative, with profit converting to cash over a short cycle. We expect to see a further increase in cash generation once the integration process has been completed. Managing the group's capital in a disciplined and efficient manner is, of course, of the highest importance. We recognize that the current surplus of capital is substantial and represents a prudent approach appropriate to underpin the integration process. Our capital allocation priorities and the capacity for surplus capital to be returned to shareholders will be assessed later this year following the migration of IW&I onto a single operating platform. So what does everything I have covered, so far, mean for the future? Looking ahead, we continue to work towards a 30% underlying operating margin to be achieved 3 years from the completion of the IW&I transaction, i.e., from September 2026. As noted earlier, we have made significant progress during 2024, with the underlying margin increasing to 25.4% from 22.3% in 2023. Since we first set out our 30% margin guidance, the backdrop has become more challenging with the prolonged period of higher inflation; and the increase in the rate of employers' NIC announced in the October budget, which will increase costs by around GBP 7 million per annum from April, onwards. The slide sets out the path from the 2024 margin to the 30% margin from September 2026. As you'll see, the path -- so well, the path, first of all, just to point out, places only a small degree of reliance on market growth, assuming that positive market movements arise only to the extent that they offset inflation. The delivery of the remaining synergies, combined with our continuing cost discipline, net of the NIC and FSCS levy headwinds, will see further progression of the margin to around 28%. We therefore need to see relatively modest delivery across our growth agenda in order to reach our target of 30% from September 2026. So looking forward and to recap on some of the matters that I've covered. With regards to income, we expect to see an improvement in net flows driven by our growth agenda and a reduction in the factors which have led to elevated outflows. This improvement is expected in the second half of 2025 as we move through the IW&I migration and our growth initiatives increasingly gain traction. Income in 2025 will therefore reflect only a part year of the full annual benefit this growth will bring. Advice fees are expected to grow at faster rates as we utilize the increased capacity we now have to meet the growing need for advice in our current and future client base. Transaction-based commissioning may see a lower seasonal uptick ahead of the tax year-end in April as a result of the higher activity that arose ahead of the October budget. We will see some movement in fee, commission and other revenue lines following the migration of IW&I clients onto the Rathbones platform as we align our client charging structures, but we expect the overall effect of that to be neutral. Net interest income will be influenced by 3 factors. First, existing net interest income, which we saw on the income slide earlier amounted to GBP 63.9 million for 2024, will show some decline if central bank interest rates reduce further, albeit we expect the majority of the early reductions in rates to be reflected in the rates of interest we pay, mitigating the impact on our margin. Secondly, the remaining net interest income synergy will arise from the point of the IW&I client migration. This will increase income by GBP 9 million, as we saw on the synergy slide earlier. And thirdly, there will be a reclassification of IW&I's net interest margin on to -- on client money balances from other income, into the net interest income line, which I've covered earlier. This will be a -- just a reclassification only with no overall effect on total income. With regards to costs, we expect 2025 salary inflation to be around 2% per annum, with salary reviews taking effect from the 1st of April 2025 for the legacy Rathbones business and 1st of June 2025 for the IW&I business, prior to the alignment of reward cycles in 2026. We expect to see the increase in NIC costs and FSCS levies, which I explained earlier. Also with -- I also referenced earlier we expect the remaining cost synergies, which will be GBP 21 million, to arise from the second half of 2025 as we begin the process of decommissioning the IW&I platform following the completion of the client migration during the first half of 2025. As these synergies will arise over the course of the second half of 2025, they will have only a partial effect on 2025 performance. With regards to our margin progression. The previous slide showed our path to 30% from September 2026. Progress in the margin relative to 2024 will be weighted towards the 2026 financial year, with progression in 2025 relatively modest. This reflects the timing of both synergy delivery and the realization of growth from our growth agenda, in addition to the effects of the headwinds of increased NIC and FSCS costs. And finally, our progressive dividend policy remains in place. As -- and as I explained earlier, we'll reassess our capital allocation priorities later this year following the completion of the IW&I migration. And with that, Paul, I'll hand back to you.

All right, Iain. I hope you got all that. Well done, Iain. As I mentioned earlier, the project to bring Rathbones and IW&I together has progressed really well in 2024, yes. And we're -- as Iain mentioned, we're well on track to deliver the synergies that we've committed to, but just to give you some idea of the sort of things that are driving that: The first thing is certainly optimizing our combined property footprint; obviously, working to migrate both businesses onto one platform; redesigning leadership teams and team structures to best service the combined organization; and of course, combining technology and applications to provide a strong platform for our future growth. So let me touch on these in a little bit more detail. On the property front. Of course, putting 2 property footprints together was never going to be risk free, but we have entered the year by completing all of our planned property moves and managing legacy lease risks to a minimum such that we're ahead of expectations. The look and feel of combined offices, and for those of you who are here, I hope you're getting a sort of flavor of that, represent a significant upgrade for us and has been welcomed by employees. In terms of the client migration. The completion of that, of course, depends on 2 key things: the first, a client consent process that facilitates the transfer of the client contracts to Rathbones Investment Management Limited; and then of course, data and interface preparation work that will ensure a seamless transfer of client and asset data into -- on the date planned and into our systems. The conclusion of this work is well progressed. And we remain very well positioned to complete the migration of some 55,000 clients onto the Rathbone platform in the first half of this year, as planned, with minimum fallout. Now of course, integrations, mergers, combinations impact people. And the scale of the transaction, of course, involves a degree of complexity. And in a people business, we're very pleased to say that we've completed most of the organizational changes and design changes that are required. These provide a clear leadership structure and, of course, a road map for every department for the combined company going forward. In other factors, well, our synergy delivery, of course, depends on working effectively with our other partners like Investec Bank. We -- you may understand that, that partnership is obviously very important to us, but also, as well as restructuring the service team that supports the -- our growth, we've completed a planned outsourcing of technology to Investec Bank, again seamlessly. So overall, with a number of these factors in 2024, the project is very well on track. And we're well placed to deliver into 2025. Now often the migration timetable doesn't allow for the best of both businesses to be delivered immediately before migration, but for the rest of 2025, we have a great opportunity to streamline processes and practices further, particularly across client-facing and operational teams. So there's clearly more work to be done to complete the integration in the coming months, but as we see beyond this post-combination period, it's probably sensible to lift our heads a little bit and talk more about how the business is positioned against what is a significant market opportunity ahead. Now many of you may know this, but the landscape of the wealth industry is changing rapidly. And we've certainly seen our fair share of that in 2024 and into 2025, but the industry is governed by the same fundamentals. The size of wealthy populations and their life expectancies both are continued to be expected to grow. That increases the need to save. That increases the need to plan for a longer retirement. Government policy, of course, in parallel, is expected to continue to place more personal financial responsibility on individuals rather than relying on the state. And all of this adds up to the creation of considerable planning and saving opportunities that help people achieve their goals, supporting both accumulation, decumulation and intergenerational wealth transfer. Now the self-help market, of course, will be an important part of the marketplace going forward, but as complexity increases, the size of wealth grows and the available time of clients to manage that wealth shrinks, a high-quality service-led offering will remain a prominent feature in the U.K. landscape. And of course, Rathbones is extremely well positioned to take advantage of this. So as we sit here, Rathbones now has the scale to invest not only in attracting top talent but also in the technology that will enhance the client experience, offer greater choice and unlock efficiencies to help offset what is a rising cost to serve. We continue to position Rathbones as a service-led business. This approach is underpinned by flexible planning and investment propositions but also by some key strengths. We have a well-respected brand with a potential to expand further across a wider range of wealth sectors. And whilst a relationship-led model may not be the most scalable, it generates very strong cash flows and builds long-term annuity value. Our services are delivered by experienced, high-integrity people supported by a reliable infrastructure. And following the combination, we now operate in all major U.K. centers in the U.K. and Channel Islands. This slide demonstrates the range of services we now offer as a combined group. And of course, each can be tailored to meet client needs. Our crossover from a proposition perspective with IW&I was extensive, but we've welcomed the addition of IW&I's MPS offering to our stable, alongside a highly regarded SIPP administration team. This is in addition, of course, to the wider opportunity to offer credit solutions to clients from Investec Bank. Our funds range continues to provide valuable product to the group, alongside the ability of our multi-asset funds, as Iain mentioned earlier, to be part of delivering wealth solutions to clients more generally. So over recent years, Rathbones' strategy has delivered on its key aspirations, namely to achieve scale, and established a more material financial planning capability, so although we are now a considerably bigger business than we were when we set that out, the key pillars of our strategy remain exactly the same and very relevant. In the future, therefore, we will keep propositions relevant to clients and advisers as behaviors change; and they are. And technology increasingly complements the service that we deliver to our clients. We will respond to changes in the rates and sources of new growth. And we'll inspire our people as a critical success factor to the business whilst continuing our drive for efficiency to protect margins, foster productivity and enable growth. Let me talk about these in a little bit more detail. Iain mentioned our approach to securing what were effectively very strong gross flows last year; and that approach is multifaceted, as you can see from the slide. With the combination of Saunderson House and Investec wealth alongside Rathbone financial planning, the group now has a meaningfully sized financial planning capability which complements our investment management teams really well. And both are working well together. This is naturally creating opportunities for us to be able to train more client-facing colleagues in a different way to promote the number of wealth planning and advice-based conversations that are held with clients. This is an important growth factor. This does not mean, however, that we're deprioritizing in any way our desire or ability to offer investment-led solutions to clients and third-party advisers. Our model is predicated on what is the best approach for clients and advisers and will always play to the strengths and ambitions of them and our people. Now our clients, of course, rightly demand strong investment performance from us. And the combination has provided a unique opportunity to enhance this, taking the best approaches from both firms. Not only do we have a stronger team today, but we also have launched improved risk management systems and can now dedicate more resources to portfolio construction. And as we emerge from the integration, we're seeking to meaningfully explore the technology opportunities that are now available to support investment decision-making and also consider how passive and private equity solutions can be blended into our offerings. Proposition-wise in 2025, though, our priorities are to refresh our MPS in the adviser space; develop a better approach to decumulation, leveraging our high-quality fixed income capability; launch funds solutions for charities; and begin to access EU markets through an established presence in Dublin, subject, of course, to regulatory approval. Lastly, enhancements to improve client service and journeys will always remain a key priority for us. And we've got some exciting opportunities to utilize some new technologies ahead. A recent Alpha FMC service -- survey placed us at the top of a client satisfaction league table for digital interaction. It's a great and strong platform to build from. Now Iain mentioned earlier how gross flows performed strongly in 2024. And of course, that's driven by continued engagement with our extensive client and adviser network despite the many competing priorities that our client-facing teams had throughout the year. This growth was well supported by marketing and distribution teams, but alongside our current activity, the combination has allowed us to take a fresh look into these areas, bringing in new leadership, upskilling resources, adding more discipline to lead generation and prospecting and supporting sales and business development activity. This growth is also supported by improved sales management systems that are now in use in the group. As I said earlier, Investec Bank remain an important strategic partner for us. And we look forward to leveraging this relationship further with our growth -- our combined growth agenda as fully -- as the business combines fully. We continue to have a strong relationship with Vision, which is now a network of some 142 advisers. Rathbone Asset Management is also part of our growth story. Its highly experienced team will be looking to broaden the fund range this year and extend our institutional reach over the medium term. All of these initiatives support the growth assumptions inherent in advancement to our 30% operating margin target that Iain presented earlier. So the last 2 pillars of our strategy. Of course, Rathbones has the ambition to be the employer of choice in the industry; and our culture is really well positioned and very strong. We are not underplaying the people impact of any combination like this which affects the whole of the business, but the response by our colleagues to overcome the challenges of the combination has been exceptional. That hard work has put us in a very strong position for 2025 and beyond. And let me take this opportunity to express my thanks to every team for their industry and professionalism throughout this period. Employee consultation processes are well advanced. And as new organizational designs are implemented, we very much look forward to embedding a fresh purpose and values framework into the group, aligning contracts and benefits; and getting back, frankly, to a little bit more business usual -- as usual, which would be welcomed, I'm sure, by all our employees, where we're able to focus a little bit more on the training, promote our DE&I agenda and obviously drive career development and growth in the business. Now our efficiency agenda obviously remains critical too. And our first priority is to manage a successful client migration that I was referring to, but we're also streamlining our application suite and our infrastructure and as well as launching -- we'll be launching some tactical enhancements to CLM, as I mentioned earlier. What's really important as well is the things that are under the radar, us reaping the benefits of moving core applications to the cloud and, of course, piloting AI and robotic processing solutions into the business to improve workflow. The scope, of course, of deploying these tools as we go forward is very far reaching, so we will continue to pursue these opportunities, of course, balancing the operational capacity and financial considerations as well. So I hope that's given you a little bit of flavor of what we're up to. It's an extremely busy agenda. We've got lots to go for, and I've summarized on this slide some of the key initiatives that we will be working into 2025 and beyond. These, of course, complement at the same time that financial discipline I was talking about in order to meet our financial targets, so in a rapidly changing industry, and we all know it is, we now have the scale and size to be really an industry winner. And we're very much looking forward to sharing the progress that we undertake over 2025 and beyond with you as we get through that. Thank you very much. That's the presentation. We have an opportunity now for questions. And what I'm going to do is take any questions there are in the room, first. Again I think there are microphones coming around to you, so if you would state your name, your form, the school you went to and -- that would be extremely helpful. We know who you are. And then we will go on to if there's any online questions. Ben, good morning to you.

Paul, yes, it's Ben Bathurst from RBC. I've got questions in 3 areas, if I may, starting with 1 on service mix. Paul, you did mention there's been more meaningful advice conversations kind of around and since the budget. And in light of the added complexity that's created for clients and potential clients, how should we think about the mix of planners and investment managers changing going forward? Is the scope to build out the planning capacity further, do you think? And is that a potential use of the capital surplus Iain talked about? And then secondly, just on capital, is it reasonable to expect that we'll hear the results of that review with the half year results in the summer, assuming everything goes to plan with respect to the integration? And then on the client migration, you disclosed a 0.3% decline rate from the clients you've engaged with, so far. I just wondered. Is there any reason why that wouldn't be a fair sample for the broader client book? For instance, have you been sort of attacking the low-hanging fruit, first, meaning we should potentially expect that decline rate to go up? Or put another way, can you sort of share the engagement rate you have, so far, with the 55,000 clients?

Ben, thank you. I'm going to try and remember those. I was scribbling those down as you were saying. Look. Maybe take the last one first. I mean inevitably we always expect a very, very small proportion of clients to express their wishes; and that's what they've done. I think you can take that very immaterial response rate as gospel going forward. We are a long way through the client consent process now, so I don't expect that to change in any meaningful way. The level of engagement, I think, has been a really big priority for us. And we've done an awful lot of work to make sure that communications were clear. I certainly met a senior industry professional a few weeks ago. He was telling me that he was involved in that exercise as well; and found the comms really, really clear. So praise indeed. And we've worked hard on that. So don't expect any more of that. In terms of the service mix, you're absolutely right, Ben. I think the industry is obviously moving to a blend of investment solutions and advice solutions. And I think we've been intimating for some time that in the middle of those -- that Venn diagram, if you like, there's going to be an emerging class of advisers that do a lot more wealth planning. And we're already finding that already; that certainly with some of our up-and-coming people, as part of their career development, they want the choice to be able to give a wider set of advice, obviously within regulated parameters. So the sort of investment management, financial planning, wealth management or wealth planning middle of that Venn diagram is going to be really, really important. And therefore, the mix, you'll see us changing and blending that an awful lot more in the next 5 years than we have in the last 5 years. Iain, I don't know whether you want to comment on the capital.

Yes, happy to do that, Paul. Thank you. Yes, absolutely, we will be concluding on the -- our capital priorities once we are through the integration and we're -- the business is in a steady state and we're no longer investing in the costs of integration. We'll certainly be saying more about our priorities at the half year, but of course, those priorities will include taking stock of opportunities that present themselves and indeed our conclusions on the optimal approach for our growth agenda as well. So whether we'll have all the conclusions at the half year, I wouldn't want to commit to that right now, but we'll certainly be saying more about those priorities at the half year.

Stuart?

Stuart Duncan from Peel Hunt. I've got a few questions as well, if that's okay.

Sure.

Similar actually to Ben's question actually on the capital point. I'd just be interested whether there's any sort of buffer built into the requirement, to sort of get a sense sort what the surplus might actually be. Second question, again similar to Ben actually, but since the budget, I'd be interested to know whether there's been any sort of real change to client sentiment; and that point you made about sort of partial withdrawal from existing accountants, whether that's continued; or whether the budget has given investors a bit more confidence. And then lastly, on the multi-asset side but interested to know how much of the flow in that was internally generated from another part of Rathbones' business; and then just generally how competitive that multi-asset offering is against the sort of fairly crowded MPS space.

Absolutely. Okay, let me take that. And I might even drag Tom in on that, as Tom is sitting in the audience, so just give him a time to a bit of warm-up, all right, Stuart, on that. Let's go to the capital buffer. We'll do it in order, I think, Stuart. I think we owe you that, so Iain...

Yes. Well, Stuart, as we determine our capital allocation priorities, the amount of capital we need to hold in the business as a combined business once we're through the integration process will be -- of course, be a key part of that. We're committed to getting the balance right between a robust capital base and an efficient capital base, so the extent to which we need to maintain an appropriate internal buffer will be part of that decision. And we'll explain that more fully when we come back in due course.

Yes. I think most people -- I think the bank capital rules, Stuart, is if you do -- although the bank may say, "Use the buffers," the implications for investors of that are external intervention and remuneration policy and potentially dividend policy, so it is perfectly normal to be having a capital surplus over and above the regulatory requirement. And as Iain says, we'll put a little bit more flesh on the bones on that in due course. In terms of client sentiment, look. I think, if I were to describe the impact of the U.K. budget: plenty of fear before, plenty of discussion during and after. And the only lasting effect potentially is everybody can read and know about the slightly perilous state of U.K. finances and wonder whether there will be another go at a tax regime, so inevitably that's coming up in client conversations, but that isn't easy to plan for unless you know the form of them. And of course, some of this still has to get into legislation. So I think there's a relative sigh of relief, I think, for -- from a wealth client perspective. Obviously, from a company perspective, there's a slightly different feeling in terms of the economic cost on your profit and loss account but, from a client perspective, a general relief, but I think, if there's one lasting effect of it, it was that there's a lot of focus on those advice conversations. And I can imagine that, that wave and that awareness of the need to plan is exactly why we've positioned the product launches that we're planning. And I expect that to stay for a good while. Now on MPS. I think -- I don't know exactly the number of internal, Stuart, unless Tom has got it in his head, but there was still certainly a -- you'll see it in the disclosures, a number of funds that we're transferring as we completed the Saunderson House migration in the first half. So you'll be able to pick that up from the table, I think. And I'm very happy to take that in detail afterwards. I think, in terms of its competitiveness -- Tom, do you want to say something? Maybe just grab the mic, [ Tom ].

Yes. About 50% of the assets in the multi-asset solution are internal, and 50% external. In terms of its overall competitiveness: Last year, if you look at the [ prelim ] tables, for example, it was doing very well, top of the tables, in terms of multi-asset sales last year. There are a number of advisers who do want to buy it on platform, MPS, et cetera, so in time, I think it is something we are looking at, as whether MPS is an opportunity for us. So -- but I think very much we're very committed to that active space from an MPS solution.

Yes. I think one of the beauty, Stuart, of having an internal -- an asset manager within the group is that we can help and create, manufacture product solutions that are there in the marketplace, which of course helps the economics. As you say, the pricing of sort of core MPS is getting [ keener and keener ].

On -- just on Slide 7, Stuart, that gives you the number you want, where the group eliminations column, on the inflows line, is that [ intergroup ] inflows between the two, so...

[indiscernible]. My memory failed me...

[ No, no. It's all good, yes ]...

[indiscernible]

Well done, Stuart. You got me. Have we got the microphone? Thank you.

It's Rahim Karim from Investec. 3 questions from me as well, if I may.

Of course.

The first was just regarding uses of capital. One you didn't mention was buybacks, so I was just wondering how you think about those in the context of the capital framework given the valuation at this point. The second question was kind of to go back a little bit to Ben's, around the growth of the advice proposition and to understand how much of that is driven organically and how much you think of growing that business through further acquisitions. And perhaps more generally, you talked a little bit, Paul, about business as usual. Does business as usual include bolt-ons and now that we're close to the end of the integration process? And then the third question and probably a little bit ironically coming from me is if you could talk a little bit about the opportunities that you see more broadly with the Investec Bank and how you create those opportunities and share any of the upside or when that is generated by them.

Yes. Look, no loaded questions there at all, [ I don't know, which was asked ]. Rahim, thank you very much. I'm glad you raised the advice thing because I didn't get on to that when Ben was talking. And he'd referred to it as well, so thank you. Iain, do you want to take buybacks first?

Sure, yes. So I did reference, Rahim, that we would take stock of the capacity for potential returns of capital as part of that comprehensive review of our capital allocation framework. So if we ultimately conclude that the appropriate thing to do is to return some capital to shareholders, then we will look at the appropriate options for that, whether that's buyback or dividends and things. And of course, there's different preferences amongst different parts of our shareholder base, so there are a lot to take into account there, but we'll come back with a comprehensive answer on all this in due course.

Yes, absolutely. And I think, Iain, just to make that point, that's exactly right. It's important that we understand the positioning of our investors and where their preferences would be for that. On inorganic advice, I think certainly a couple of observations, as we have certainly seen over the last 2 or 3 years some pretty frothy pricing in that space. We're also quite aware that some advice businesses are looking to liquidate their business or look for a liquidity event more specifically to retire effectively. So there's quite a bit of that going on; plenty of risks for that approach, in terms of the propensity of the clients to stay with the original owner, so the acquisition route is not risk free. One of the reasons that we said yes to Saunderson House was we have the opportunity to effectively internalize the FUM and put that into either our own multi-asset solutions or our bespoke DFM solutions. And if we find opportunities like that in the future that can also improve our distribution reach, then we will, of course, look at them. I'm going to hazard a guess and say we're likely to say no, more than we're likely to say yes, but there are a lot of opportunities out there. And we are always looking to expand our advice footprint. I think the other thing is looking very carefully at the opportunity cost of any investment that we would make there versus the investment that we've already got with our own people and our own infrastructure to develop wealth planning or grow a number of planners or utilize paraplanners better and focus on marketing a little bit more to support that part of the business. So there's always that opportunity-cost debate as to whether that would be the better thing to do. And of course, that's a lower cost of acquisition than some of the multiples that are being asked even now in the marketplace. Does that help, Rahim? And just look. Investec Bank, not to say much more. I think what's really important is the level of dialogue, as you'd expect with a strategic partner, is strong. We can always do more. And if -- and Investec Bank, like us, is a hungry organization for growth. We've already partnered with a number of events to get together, client events. And just as a distribution partner, we really welcome that opportunity. That's why we've restructured the partnership team to [ face up ]. So we will be doing a bit more of that and leveraging that relationship. And I think it's fair to say that, whilst people have been going through the integration, 2024 was not necessarily the best year to judge the amount of flows in between those 2 organizations because certainly the Rathbones side was extremely busy. And we were setting up quite a lot from an integration perspective, but there's a lot to go for as we go into the next couple of years and, as I said, looking over the horizon as to what that opportunity could be. And Rahim, you know Investec Bank well. They are not backward in coming forward. And we really welcome that and lots of ideas to try and explore, so excited about the future. Any other questions in the room? In which case, Shelly, do we have...

All the questions online have been answered within the room, so [indiscernible].

No, yes, maybe...

I don't see any...

Don't see any, okay. Well, going, going, gone. Now can I -- thank you very much for your attention, ladies and gentlemen, this morning. It's been a pleasure talking to you. We're around for a bit, so if you have a few extra questions here, please feel free to come and grab us or any member of the exec team that you can bump into. Thank you very much. I wish you a very good morning.