Schroder European Real Estate Investment Trust Plc (SERE) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining the latest of our deep dives into our separate businesses. We last did a wealth management deep dive in October 2021. So there's been plenty happening since then. The business has been performing very well. And the idea today is that we get into the detail of each of those businesses. I will be joined on stage during the course of the morning by Mary-Anne Daly, who will give us a presentation on Cazenove; David White, who will give a presentation on Benchmark; and Mark Duckworth, who will give us a deep dive into Schroders Personal Wealth. And then we'll come back on stage about 10:00 and take questions both from the room and online. And if we run past 10:30, we'll keep on going to make sure we've answered all the questions. Before we start, I just wanted to set the scene about our strategy. As you all know in this room, wealth is a really important part of our strategy to invest to grow. It's something we've been investing in consistently. I just want to just give you the headlines as to why that is because it's just -- and we'll give you a lot of proof points during the course of the morning that justify each of these 6 points, but it's really important that these are the bedrock of our strategic drive. And the first, being in the wealth market clearly means being very close to your clients, and being very close to your client means you really understand what makes them tick. And that makes us much better wealth managers in the rest of the Schroders business. Wealth management for other clients of other wealth advice firms is an important part of our business. So being close and understanding this segment well is critical. Clearly, we are those clients trusted advisers. These are very long-term relationships. There is very good longevity to use our buzzword in this sector. That longevity is a really important part of driving higher long-term growth rates. The margins in this business are good and stable. There aren't the same pricing pressures evident here as there are in other parts of the market. But importantly, Schroders has a strong growth presence. And I think this -- the reason this is important is it allows us to continue to invest for growth. And one of the themes you'll hear this morning is that we've been consistently investing further in this business to accelerate our growth rate, and you'll see that coming through. Fifthly, we're very fortunate in having both exceptional talent and very strong and deep client relationships. And why that's important is that it enables and attracts other like-minded individuals. And that virtuous loop of people who stay for a long time, attract high-quality clients, talk in the market, and Mary-Anne will unpack that, particularly in the ultra sector, is a very important driver of future growth. And finally, there are some good synergies between this business and our other asset management businesses. And I've talked in the past about the flywheel effect, and I want to unpack that in more detail. There are also important synergies with Lloyds Banking Group, not least the referrals that we get from Lloyds, but also access the banking facilities and if clients needed access to their credit facilities. So 6 quite distinct reasons why we feel this business works well for us. It is intrinsically valuable to us and perhaps more valuable to us because of the interlinkages with the rest of he group, which I just want to unpack quickly. First and foremost, Schroder's investment management capabilities acts as a brains trust. It provides collateral. It provides advisers, it provides thinking. It provides access to experts, which can be then used across our wider business. It also provides, if you like, the cyber, the cloud computing technology, the systems backbone. So that knowledge which exists as a group and investment capabilities is an important power for our wealth businesses. Secondly, and really importantly, in some parts of the wealth market, our leadership in sustainability, which we've got within our investment business, has important resonance for wealth clients. So if you talk something about the charity sector, I think that Mary-Anne will give us the numbers, but around 85% of the money in motion is coming to us because of our leadership in this segment. And the tools that we've built in large -- in the asset management business, in large part have helped support that growth. So that relationship is very symbiotic and helps us get better and better, particularly on things like the active ownership agenda, which is particular important for charities and some high net worth individuals. Investing in private markets, the Schroders capital investment we've made is an important area for clients wanting to understand how they move into those markets, having products which suit those clients and are designed specifically for their needs is something that we are able to manufacture within Schroders as a whole, which may not be as easily available in the rest of the market. You'll hear David talk in Benchmark about how we make Schroder Investment Solutions discretionary models available. Those are created and powered by Schroders collateral and by the brains trust that you'll hear about later. And then for the most sophisticated and long-term clients, our wider solutions business can often provide the thinking, which will enable clients to properly understand the sort of long, long-term decisions they're making in terms of rates of return on different asset classes and how they blend and combine those. So there are whole series of opportunities which arise to our wealth business, which aren't generally available to other wealth businesses. And I think it's a really important characteristic of our business that we maximize the opportunities that come from this because at the end of the day, they make us a better business. They make us a more reliable business, but they also contribute to future growth. So that's the background of strategy and the flywheel, but let's get into our businesses in a little bit more granular detail. And we have several distinct businesses, and I'm just going to work across this page from left to right. First of all, Schroders Personal Wealth, which is our joint venture with Lloyds, where we have a 49.9% stake, advisers on GBP 11.7 billion with 320 advisers. Mark will talk about the transformation of this business in the future growth opportunities. Do bear in mind that we earn 3 different sets of revenues from this business. We earn our share of profits. We earn money from being the platform provider from Benchmark for this business, and we earn money as a manager of assets for this business. So we get advice revenue, we get management revenue and we get platform revenue. And this is a really important part of our strategy, the ability to keep on layering on further levels of the value chain into our fee proposition. And David will talk a lot about that in the Benchmark business. And that brings me to Benchmark. So it's a business we acquired in 2017, has advice revenues of -- assets of GBP 4.5 billion, platform revenues of GBP 17.9 billion. And we also run some money for them within the wider group. The total managed by Schroders for our wealth businesses of GBP 23 billion. We own 90 advisers directly, and David will break that down in addition to the advisers which are on platform. And then Cazenove U.K., which is probably the best-known business, that's the longest standing business. And it's a really mature business. When you look at the split of profit, you can see that both Schroder Personal Wealth and Benchmark are relatively immature businesses, which are putting a lot of emphasis on growth. Cazenove and Schroders international are more mature, at a better inflection point in their profitability, but still with very good growth. And I think that is a really powerful combination that investing for future growth will be a big part of what we talk about today. So Cazenove and Schroders International has advised business of about GBP 58 billion. So for those listening outside the U.K. You'd be aware -- you may not be aware that back in the early 2010s, the government made some changes to the advice market, which meant obtaining advice in the U.K. was really very difficult if you had about GBP 100,000 up to about GBP 500,000. Schroders Personal Wealth and Benchmark seek to address that advice gap. And we think there's a large opportunity in advising more of those people who were denied advices less than 30,000 advisers for a population of 60 million-plus in the U.K. So a big opportunity there. Whereas Cazenove, Schroders International advisers clients in the high net worth and ultra-high net worth space, different brands, different parts of the market, different opportunity sets, different dynamics, but nevertheless, a common DNA of advising people on their long-term wealth needs. Total profitability of GBP 130 million. Just quickly looking at the growth rates before we get into the individual businesses in a moment. Assets under management has grown a 5-year CAGR of 8%, net operating revenue slightly faster at 11% and operating profit at 14%. So a progression that you would expect to see. And then some of the key highlights. I've talked about we earn fees on GBP 115 billion of assets but the advised portion of that is GBP 74.6 billion of assets. Our client retention rate within the high net worth and ultra-high net worth businesses at Cazenove is at 99.6%, not the number we've given before, but I think speaks to the importance of the high longevity, high stickiness and staying with clients throughout their life cycle and often into the next generation. I talked about a attractive and stable revenue margin, the advised margin of 55 basis points we're achieving. But the thing I think we feel the most proud of is the growth rate of new business. And you can see the trend there. If you took this chart further back, to 2015, '16, '17, you saw a much, much more muted growth rate, very, very low single digits, if at all. And what we've seen is a progressive series of investments in this business, which are now starting to drive a better growth rate. And that's a really important dynamic that we think allows us to get into this virtual circle of putting in more regional offices, investing further for growth and picking up the growth rate yet further. So before I step away, 4 takeaways that we would like you to have today. First of all, we think there's a lot more operational leverage in this business. Mary-Anne will talk about some of the changes we're making, but continuing to extract that operational leverage is important. We see SPW as having gone through a transformation and is now really poised for growth, and Mark will talk more about that. We see the Benchmark technology platform as being a really interesting thing. This is not a private equity construct, which is looking for an exit. This is a very long-term, high-quality platform which will drive further advisers onto that platform and has a pretty powerful proposition for advisers across the marketplace. And then finally, Cazenove well placed for future growth in the high net worth and ultra high net worth segments. So each of those areas of our wealth business, all contributing to growth and all enabling us to do 2 things today. And we've issued new guidance which, first of all, to increase our expectation of future growth. We've previously said a 5% growth rate and we want to increase that to 5% to 7%. So we feel confident enough in the growth rate that we can extend that opportunity. But we're also going a step further and saying that even without markets and FX, we believe that the profitability of this business will grow at 10% per annum. Now you will have your own beliefs about what markets can do. We're not trying to put -- bake any of that into numbers. But if you just look at the underlying dynamics, we're saying that profit growth of 10% per annum through to 2025 is very achievable from our perspective. With that, I'm going to hand over to Mary-Anne Daly, who will take you through the Cazenove and Schroders International business.

Thank you. Well, thank you, Peter, and good morning, everyone. So now that Peter has given you an overview of wealth as a whole, let me concentrate for a moment on what we do at the upper end of the wealth bracket. And my objective today is that by the end of my talk, you'll have a really good understanding of what we do, who we are, who our clients are. And importantly, what are the key factors behind our success and to explain to you why we are very confident that these will sustain our success going forward. And in so doing, I will spend a little time on the nonfinancial elements that you see at the bottom of this pyramid because those exceptional scores of employee engagement and client attachment to the business. They are fundamental to our success. And importantly, as Peter said, they feed that continuous virtuous circle of sustained success because happy clients will naturally refer more business. That leads into better revenues, better profits. It means we can reinvest in our people, in their careers and their well-being. And it also means that we can invest in our client proposition. And so that virtuous circle goes. But let me start with a description of our business, first of all. And before I do that, a brief clarification about our brands. We use the Cazenove Capital name in the U.K. and Channel Islands, and we call ourselves Schroders Wealth Management in Singapore and Switzerland. And the reason behind that is very simple. When Schroders first acquired Cazenove back in 2013, we wanted to mark the strategic nature of this first acquisition in Wealth and to mark also our intention to grow Wealth as a pillar of growth, a fundamental pillar of growth for the group rather than just an extension of our asset management activities. And then at that time, of course, the Cazenove Capital name was very well known in the U.K. but it was less the case internationally where Schroders was a much more powerful brand. Hence, the pragmatic decision to use both brands. And I think that's probably enough said on the marketing and the history behind that, but I thought it was important to clarify that. Let me now turn to our business and the here and now. You'll see here that we've got GBP 58 billion of assets under management. The bulk of that, so GBP 48 billion is in the U.K. with our international offices, providing very useful jurisdictional diversification and also allowing us to reach more clients. The bulk of our business is discretionary. So it's a quality business with a recurring dependable revenues. And the other interesting aspect of that business model is that as we build our clients' trust, then more often than not, we will end up managing the whole of their wealth. And this is somewhat in contrast with the key players in this ultra market where relationships tend to be more advisory and transactional in nature. Now in terms of our client profile, you'll see here that we are the largest player in the ultra-high net worth segment in the U.K. And by ultra-high net worth, we're using a definition, which is commonly used in our industry of $30 million plus of net worth, and this is $30 million. And you'll remember that we extended our franchise in this segment with the acquisition of Sandaire back in 2020. And that acquisition has been highly accretive for us in that we retained all but one family and pretty much all of them have added and extended their relationship with us since. Also a common misconception about us is that we primarily look after inherited wealth. Actually, you'll see here that the majority of our clients have made their wealth in this current generation. And that percentage continues to grow as we extend our very strong franchises in the world of finance and business. And last but not least, we are the largest manager of charity assets in the U.K. And as Peter said, we have increased our market share markedly over the last 2 and a bit years in that these clients, typically the big -- the large endowments, big universities, they are particularly attracted to our expertise in sustainability. And Peter rightly said that our multi-asset fund, the charity multi-asset fund called RMAF, responsible multi-asset fund. That actually attracted 85% of the flows of the charity -- of charities into multi-asset funds over the last 4 years. On the right-hand side, I've given you a breakdown of our assets under management by portfolio size. And you will see here that, yes, we do look after some very large clients, some in the hundreds of millions. But equally, you see a very good diversification in terms of client size. And that is, I think, very important and something that we like in that it improves our resilience. It improves our margins because that's better margin business that's at a very high end. And I think thirdly, it improves our -- it allows us to expand our footprint of clients, and therefore, of referrers as a further business. And also, I think this is very important. It allows us to grow with our clients. And that is particularly relevant in the business owner space, where many of these clients, at least initially, their wealth is tied up in their businesses. So by taking on relatively smaller portfolio sizes, you can develop an early relationship of trust and be their natural home as that business grows or is exited. So now let me turn to what we consider to be our strengths in this market. And you see them listed here, award-winning reputation for over 30 years. shareholders strength, investment performance, great people. We believe we have some of the most talented people in the industry and a broad proposition. These are really important and fundamental to success in this bracket. I would say that there must have if you are to get to the table and win on a consistent basis. But to be entirely frank, they are not, when taken individually in their own right, they are not necessarily USPs in their own right. But in combination and in combination with the stability of a family shareholder with 200-plus-year history and culture of investing in the future, whether that is in talent, technology or new areas of investment, well, that is truly powerful and I would say is unique. And maybe just a word on the breadth of our proposition because we have been investing in it since we last saw you some 20 months ago. And on this next slide, what I've tried to do is give you a flavor for the sorts of questions that we are equipped to solve for. And they range from the most basic such as general questions about investment strategy or planning for a retirement or planning for a business exit to the much more complex such as reporting to clients across asset classes, including their personal assets or assets held with third parties, intergenerational planning and advice, philanthropy and of course, private assets and impact investments. And there, absolutely, as Peter said, Schroder Capital's expertise in this segment has been incredibly helpful to us. So with that in mind, how have we done? Well, I'm pleased to say that in an environment where certainly our quoted U.K. competitors have struggled we have delivered industry-leading rates of growth, well in excess of the 5% that we indicated to you some 20 months ago, more like 8%. And as flows stand today and given the pipeline of notified wins that we have, we stand ready to beat that again this year. What is particularly pleasing is, where is this growth coming from? And it is very broad. But it is coming from those segments, those client segments that we have specifically focused on in our strategy and where our USPs and strengths and reputation resonate. So as an example, charities, business owners, the world of finance and ultra-high net worth. But I'll talk more about our strategy in a moment. Also, as we committed to you, that growth has not come at the expense of our margins. Quite the contrary. And you see here that we've increased our revenue margin by 3 bps to 59 basis points. And yes, some of that is, of course, due to interest income, better interest income. But importantly, it is also due to a fantastic investment performance and very strong net new business that have completely dampened the impact of adverse markets on our AUM and therefore, revenues. Lastly, on profit margin, you'll see that we've increased our profit margin as well to 34 basis points. That is the benefit of scale coming through and also a very good -- very rigorous cost discipline. And on costs, I should say that we have initiated a restructuring of our operational resources and to better leverage the Schroder fantastic resources that we have. And that stands to add another 2% to that profit margin from 2025. Unfortunately, it's a bit early to tell you a lot more about that because we have just entered a period of consultation with the impacted employees. But certainly, Richard and Peter will be able to say more at the half year and we'll update you as we can. Right, so much about the history. Now what about the future? And I should start by saying that I am very confident that we can sustain this success in future for 2 reasons. First, the market is very deep, it's very fragmented, and there is plenty more for us to play for. And the second is that our strategy is working. I think the flows that we are seeing right now are a proof point of that, and that should absolutely sustain us for the future. Now let me take each in turn. And first of all, the market. So on the pyramid on the right, you see the depth of the global market, a massive market that we can go for and that we are well positioned for. And if you take just our home market, the U.K. market, the ultra-high net worth segment alone, so I'm talking here of the GBP 30 million plus. That represents 15,000 individuals with over $1.1 trillion of wealth. So you can see here that despite our leading position, we still only scratch the surface. Our market share is probably of the order of 3% to 5%. So plenty more to pay for. The other aspect is I told you that we are not limited to that ultra outer bracket. Our portfolio size span is larger than that. So again, more to play for. Thirdly, despite what the newspapers will have you believe, about the demise of the City of London. London was the only top 10 world city to actually grow its ultra-high net worth population in 2022 as it remains a very attractive place to work and live for these people as a center of finance, education and culture. And lastly, we are very pleased with the success of our decision to expand our business franchise -- business owner franchise into the regions where we've established 4 new hubs, attracted 28 super talented people and are attracting the owners of some really exciting thriving local businesses and of course, benefited from a very strong referral flow from our friends at Lloyds. Now let me turn to the strategy. And the one message I would leave you with is that our success is absolutely not the result of chance. It is the output of a very thoughtful, data-driven strategy, development strategy that is focused on those client segments where our USPs and strengths resonate. And I've given you those on the pie chart on the right. And I think having heard me speak now for the last 10 minutes, they will come as no surprise to you. But let me draw out a couple of points. Firstly, top right, you see our current clients, and they are our best ambassadors. So yes, we are absolutely focused on growing our footprint of new clients because obviously, that improves our referral rate as well. But that is -- we are just as focused on deep on basically delivering exceptional service to our current clients. And everybody in our team knows that, and we watch and measure client satisfaction, client attrition, client additions to their portfolios like hawks. And I think the client retention figure that we showed you earlier on of 99.6%, I think it was, is a testament to that. The second point I'd like to make is that this is absolutely a team method. We don't have any loan proprietary rules here. On the contrary, actually, our culture is one where collaboration and joint success are celebrated and measured. And this is very important for several reasons. First, it makes it a really enjoyable place to work and for our younger generation of advisers to learn. Secondly, it ensures that our current and existing clients will always end up with the most -- the team most -- the best sort of qualified to deliver their specific needs, regardless of where the business originated. And thirdly, it naturally, when you have teams working together, in any -- on any one of these segments. It naturally amplifies our contacts, our reputation, our networks within these segments. It allows us to better -- to develop a better understanding of what these clients need and, of course, to further refine our proposition as we go. And I'll leave you with just one example of that. Private Equity is one segment that we do focus on because our reputation is strong in that area. And in the case of one London-based PE boutique, we started with one partner as a client. We now have 8, and we've just got 2 to go. That's all from me. With that, I'm very happy to hand over to David.

Thank you very much. Thank you, Mary-Anne, and good morning, everyone. So today, I wanted to update you on 4 aspects of the Benchmark business. So firstly, a reminder of who we are and what we do. Secondly, 3 key growth drivers. Thirdly, how we performed importantly over the last 3 years. And lastly, why I remain very positive about our future growth. So let's start with a reminder of who we are and what we do. In contrast to Mary-Anne's business and Mark's business, we are both a B2B and the B2C business. So our customers are both financial advisers and end retail clients. Today, we have relationships with over 1,500 advisers and over 90 of those, as Peter mentioned earlier, are owned by us as a business. Schroders acquired a controlling stake in Benchmark back in 2016. And since then, we've grown significantly, leveraging the greater Schroder scale through resourcing, capital, investment expertise and importantly, distribution reach. With a significant presence as you'll see on the slide, across the U.K., we now have a truly national footprint of offices, managing over GBP 27 billion in assets and generating net new business flows of 7%. We have 3 distinct offerings to our business, and we report the assets according to each of these. So let me explain each of these in turn. Firstly, we have Advised part of our business. This has 2 specific areas to it. Firstly, advice to end clients, and we do this through our own advice business called Benchmark Financial Planning. I'll explain a bit more about that in a moment. And secondly, we provide a range of business services to third-party advisers. So things such as advice oversight, compliance, financing and training. So I think SJP in the U.K. or Edward Jones in the U.S. Moving to the middle box of the slide, our platform business is where we provide proprietary trading, adviser and client-facing platforms to manage investments across pensions, ISAs and cash. This provides advisers with access to over 4,500 funds and over 30 discretionary solutions to use for their clients. So I think AJ Bell in the U.K. or Pershing in the U.S. And lastly and importantly, we come on to manage. So here, we provide a model portfolio service called Schroder Investment Solutions. This gives advisers access to risk mapped index active and sustainable options for them to use with their clients. So I think solutions provided by the likes of Brooks Macdonald in the U.K. or Envestnet in the U.S. With that, I hope you have a clearer picture of what we offer. I'm now going to move on to explain how we work with advisers and how we help them solve the issues that they have as they grow their business and how in turn our success is directly linked to theirs. Before I get into the detail of this slide, though, please picture in your mind a financial adviser. Their life is complicated. Most of them are small to medium-sized businesses. And so they're trying to balance both being a financial adviser, so dealing with regulation, administration and investment decisions alongside being a business owner. So managing cash flow, premises, staff, et cetera. Our goal is to simplify all of these complexities for them, freeing up the advisers to spend more time with their clients and not worrying about administration and day-to-day issues. This simplification in the running of their business improves their productivity and also crucially for them, improves the client experience. So now let's get on to the detail of the slide. The point here is that our solutions help financial advisers at every stage of their life cycle. To bring this to life, we think about adviser's business journey across 4 key stages, all the way from getting started through to them exiting and realizing value. When we talk to advisers, this way of looking at things really resonates with them. It demonstrates that we understand their business and what really matters to them and that our solutions can support both their business as well as their advice needs. So let me bring this to life for you with a story of one of our customers. The customer is Finura, and you'll see that in growing your business stage. They are absolutely at the growth stage of their business. So Finura is run by 3 senior partners based here in London. They started trading back in 2014 where -- and they approach Benchmark actually in 2019 to say, can you help power our growth. Back then, they were 7 advisers, they were managing around about GBP 280 million of assets on behalf of 600 families. We supported them by providing financing, by providing technology solutions and also access to our model portfolio service, Schroders Investment Solutions. 4 years on, not only has Finura doubled the number of advisers that they have. But in terms of productivity, the assets they manage have grown over 2.5x to over GBP 800 million and their revenues have doubled to GBP 5.5 million. This is a powerful yet simple illustration. of how we help advisers and we call that the Benchmark advantage. So in summary, I hope you have a better understanding of what we do as a business and how we help advisers throughout their life cycle. I now want to turn and focus on 3 areas of growth that I see for our business. The first growth driver I want to focus on is what we're doing as I flagged a moment ago to deepen the relationships with our existing customers by cross-selling and why this is such an important driver of growth for us. As Mary-Anne mentioned just a few moments ago about the Cazenove business, the Benchmark, too, deepening existing customer relationships is just as valuable for sustaining growth is attracting new ones. We do this through a dedicated partnership management team. They are the key interface to all of our advisers and they help them develop their business strategy and also ensure that they can access all of our services whenever they need to. And you can see on this slide, since my last update back in October 2021, we have increased the number of services our customers are using by over 7%, driving both margin and revenue growth and further new growth is in our sights. So as you see on the slide, currently, only 14% of our advisers are using 1 service and 25% using 2 services. For me, the scale of the opportunity becomes clear when we move to the right-hand side of the slide. This shows the incremental basis point fees that we generate when more of our services are used. The big step up you'll notice relates to where we take advice revenues alongside platform investment and support services. These are blended basis points as the combination of services varies between each adviser, but the significant upside of cross-sell for me is clear and we have a proven track record of incrementally developing deeper and integrated relationships, and this is set to continue. Moving on from deepening existing relationships. The second driver of growth I'd like to highlight is how we are growing our adviser base. Again, when I last spoke back at Capital Markets Day in October 2021, we had identified several adviser segments that we saw opportunities for growth. One of those we refer to as Breakaway Advisers. We find it useful to categorize them in this way because they represent a distinct group of advisers targeting high net worth clients. They are currently employed within typically a traditional wealth manager. So for example, one of the private banking wealth funds. The opportunity for us is that they've often become frustrated with overly centralized controls in bigger organizations alongside the fact they're having to pay away a significant proportion of the fees that they're generating personally. As entrepreneurs, they're keen to break away, hence the name and set up their own business and they're looking for help to do so. One good example of how this works is Oculus Wealth Management. This is a business that we've been working with since 2016 when they started to use our platform and more recently, accessing Schroder Investment Solutions. Oculus has been highly successful in attracting breakaway advisers and to date, they've taken on over 30. In March of this year, Benchmark took a majority stake in their business to accelerate both their growth and ours for this important sector. To give you an idea of what this means for us, since March, they've already added GBP 100 million in assets and supporting them, we've built their strongest pipeline ever, where they're now in active discussions with 15 separate advisers who are looking to join them, and they have assets under influence of over GBP 750 million, all of which is to say, I'm sure you can now see this segment has valuable opportunities and potential for us. And finally, I come on to the third growth driver and how we are helping advisers create value in their businesses and in turn, for us, at the moment, they look to retire and exit their business. In the U.K. in the past 3 years, the wealth management sector has witnessed significant momentum to consolidate advice firms. The best evidence of this is the 30-plus PE-backed consolidators reportedly now active in the U.K. market. The belief of the traditional consolidator is that they can buy several advice businesses, consolidate them into a single entity and then sell that business on in the future. In reality though, in my opinion, although they are successfully buying up the businesses, they are very rarely integrating them effectively. And as a consequence, the underlying advisers typically remain as separate entities with separate service offering pricing models, but also crucially for us, they retain their client assets on multiple platforms. Our approach is different. Yes, we play an active role in helping advisers to realize value by buying their businesses, but this is the important point over 80% of the firms we acquire, we already have an existing relationship with, and they are typically already using a range of our services. And we are clear from the outset that the final destination for their business is Benchmark Financial Planning, our own national advice business. This is a restricted advice business, which it combines a single advice process with a single primary platform and a central investment proposition, Schroder Investment Solutions. and it has strong credentials with our advisers generating over 36% more revenue per adviser than the industry average. We've now completed over 40 of these types of acquisitions. They're focused ones to date, and we now have a proven and well-trodden path to embrace this consolidation trend but to do it our way. And having built up valuable knowledge and capability in this area, we've accelerated our activity. And in 2023, we are forecast to acquire businesses who between them have over 90 advisers and in turn, have access to over GBP 3 billion of assets. So a significant uplift from where we were in 2021. So how has all this translated into performance? Since I joined the business back in the first quarter of 2020, just before COVID, I can report that we've made excellent progress across a range of fronts. In terms of revenues and profits, we've delivered consistent growth, as you see on the slide, and all importantly, across all areas of the business. I'm particularly pleased with the underlying profit growth, which includes an uplift in investment of both technology and our people, which I see as a hallmark of Schroder's approach when acquiring businesses. And in parallel to this, our market attractiveness has continued to grow. We've simplified our brand and positioning to the market. We've invested in our business development and marketing capabilities and we now work with more advisers than we ever have before. And finally, and importantly, our assets have continued to grow. And all of this against a pretty challenging backdrop of external pressures COVID obviously being the main unplanned event. So what do I see as the future for Benchmark as I look out over the next 3 years. We'll put simply continued strong growth and momentum. Our overall sales pipeline in addition to that Oculus has never been stronger with approximately 200 advisers looking to join our business over the next 12 to 18 months. Deeper and deeper relationships with our advisers will continue, and I see more advisers using more of our services and driving up revenues and margin. But this growth won't come at the expense of effective cost controls. We've now reached a sufficient scale within our operational teams and in turn, a clear inflection point, which means that we'll be able to drive forward, adding more assets with limited operational cost increases and we're continuing to invest and deploy new digital solutions, working alongside Mark and the Schroders Personal Wealth team to improve adviser productivity. For example, we've already launched this year a new digital onboarding an annual review process. And over the next 12 months, we're looking to launch a new mobile app for adviser clients, new user journeys and also e-signature capability. This will drive further and tangible adviser productivity gains, freeing up advisers to spend more time with their clients. Over 215 day hours or 26 days to be precise. Above all else, this is what matters to them. So in summary, I believe we are well positioned as a business. We have clear opportunities to accelerate our growth, attracting new advisers, cross-selling to existing advisers and continuing to deliver growth in net new business. Thank you very much. I'm now going to hand over to my colleague, Mark.

Thank you, David. Good morning, everyone. Since the last time we spoke, we talked how SPW would turn the performance corner, I think there was some doubt in the room. Today, I will update on how we've reshaped our business and how we've transformed the performance. But I'd like just to start by picking up on something that Peter said at the top about why we exist and the role that we play in society. So since 1990, there were 221,000 financial advisers. And today, that number sits at just 27,000. We've lost 88% of the capacity. And over that same window, we've seen the population rise from 55 million to 67 million. So there's a huge opportunity in this sector for us all. And the average age of advisers today across the sector stands at 57. So let's just take a look who SPW are. So we're a joint venture between Lloyds, Britain's largest bank, who have over 36 million clients across the group and over GBP 475 billion of client deposits. And Schroders, I think, who we all know have incredible investment expertise and brand recognition with our clients. We deliver holistic wealth advice, to clients who hold in excess of GBP 100,000 in assets. Today, we have 52,000 clients, 320 advisers and GBP 13.6 billion of assets under management, GBP 10.7 billion of which is at our advised front book of assets where there are 52,000 clients take advice from us. And this has grown by 34% since 2020 in gross inflows. We also have GBP 2.9 billion in assets through 20,000 direct clients who we do not today give ongoing advice to, so another opportunity for us. But I'd now like to just share with you what we've been working on to transform SPW since we were last together. So let's just take a walk around this slide. And the first thing that I focused on was the vision and purpose of the business. We change lives is our vision, and it's provided an emotional connection between our staff and the positive impact that we can have on our clients' lives. And that leads to incremental effort. Giving more advice to more people than any of the U.K. wealth manager is our mission. And it's provided a north star to both our ambition and goals as a business. If we turn to the adviser numbers. Whilst our adviser numbers have risen steadily since we last spoke, the real facts of these that we've changed over 60% of our adviser base and significantly uplifted our productivity by 44%. And I'll share how that compares with our peers later. The leadership team, we've changed over 50% of the team. I've brought people in from across the sector to further accelerate our future growth. And on the referrals process, which we'll take a deeper dive, look at in a second, we've increased the number of referrals by 170% to 50,000 per annum since 2020. We've also improved the conversion of the number of clients who choose to invest with us, up 16% from 9% back in 2020. And we've also reduced the average age of our client by 11 years during that same period. And our client journey, we've reduced the time it takes to help a client invest with us from 14 hours to 4 hours. On the technology, we've now built a technology stack that has no legacy. It enables to drive further automation into our processes as we move forward. And finally, in the investment area, we've added 6 new multi-asset funds with the help of the Schroders Investment Team and we've broadened our overall proposition so that we can tend and care for more of our clients' needs. But let's just take a deeper look now at this referral process. And I wanted to do that because it's a key accelerator for our future growth. So I wanted to really focus on 3 key areas here, which is: one, identifying the right clients that we can help, secondly, creating the seamless experience and journey for our clients as they onboard with us. And thirdly, just reducing the time it takes from the moment a potential client shows interest to the moment that they invest. So let's take each in turn. Firstly, Lloyds have built an intelligent referral engine, and this helps prompt the right clients that we know that we can help. And alongside this, we have built a technology matching tool that helps pair our prospective clients to the right adviser before they've met the adviser. So we're matching needs and adviser skills before the client meets. Secondly, we've also worked with Lloyds in creating joint marketing activities to very specific segments of clients. So we're tailoring needs through testimonials on how we can change their lives for the better, and that helps the prompt. And thirdly, we've changed all of the processes and technologies to reduce the time it takes from when that client shows interest to the moment they invest, and that's gone from 65 days to 23 days over the window. And that's a huge shift in driving up the conversion. And we now believe that the journey that we've built is actually unique and 16% more clients are choosing to invest with us than the start of 2021. And so a lot of work has gone in. So how has that translated into our performance? So for the purpose of comparison, I've highlighted performance through 2021 through to April 2023 and I think this period highlights what has been a difficult period for our sector. And if we now look at the top left of the slide, you can see the referral number, and that referral numbers remained stable during, I think, what we can consider to be difficult market conditions. But against the stability, the performance has markedly improved. So if you look at the top right, the number of clients choosing to purchase from us has increased by 16%. And you can see that's lifted up to 2,400 clients purchasing through to April in 2023. As you go to the bottom left of the chart, also the initial amount that the client trust with us at the initial investment stage has also risen by 29% to GBP 168,000 and our average client holding today stands at GBP 208,000. And it's as a result of these 2 in combination that our net new business has grown by 93% and to GBP 187 million in April 2023. So let's see how that compares to peers. So on the left-hand side of the chart, we can see that the segment had a tough year in 2022, down 35%. And of those peers in the comparison, they include SJP, Quilter, Mattioli Woods, Hargreaves Lansdown, AJ Bell, Transact, Brooks Macdonald and Rathbones. But during that same period, as you look to the right-hand side of the chart, you can see that our gross flows have remained stable, and our net new business has grown by 42%. And this is a result of more clients choosing to remain invested with us and indeed investing more with us. And this trend has continued for us into 2023. But it's a result of materially improved adviser productivity. So our adviser gross flows have increased by 21% to GBP 4.5 million to date this year compared to 2022. And our net flows have increased by 59% over the same period to GBP 2.1 million which is GBP 400,000 higher than the relative peers in just Q1 alone. So GBP 400,000 more in Q1 alone, where they have probably see limited growth, or indeed, gone backwards. So overall, I am pleased with the progress that we've made and actually I'm more confident for the future growth. So let's finish by just taking a look at our plan through to 2025. So given the progress that we've made and the improvements that we've outlined across our processes, our skills and our technology, I will conclude by just sharing 3 key statistics. Our referrals from Lloyds will remain stable over the period at around 50,000, but our conversion of the clients referred will continue to increase. leading us to adding another 18,000 clients through the window, take us up to 70,000 clients by 2025. And our net new business will continue to grow at a rate greater than 7% and through to the period in 2025. This in contrast to many of our peers. So I hope that today, we've demonstrated that SPW has turned the performance corner, and I guess more importantly, it's built the foundations for future accelerated growth. So thank you for your time. And for now, I'll hand you back to Mary-Anne. Mary-Anne?

Thanks very much. Thank you, Mark. And I hope you found those deep dives into each of our businesses, informative. And that having heard from Mark, David and me, you now have a much better grasp of the different dynamics behind our businesses and which are summarized here. But in conclusion, we are confident that these 3 businesses are on a sustained growth path and as we continue to leverage Schroders' fantastic investment and operational resources that we can achieve those ambitious targets that are set out here. I think that's probably all we have time for before Q&A. So I'd like to invite our other speakers and indeed, Richard, to come up, and we'll be very pleased to take your questions from here. Thank you.

All right, questions. If I could just ask you to wait for the microphone, if you wouldn't mind, and then ask you to state your firm's name and begin.

It's Nicholas Herman from Citigroup. I have 3 questions on Cazenove, please. Just within Cazenove, which client segments are you most constructive on over the next 3 years? You are a -- second one, clearly, you are a U.K. -- a leading U.K. wealth manager. I mean who is the #1? You said -- I think you said you have a 3% to 5% market share. Who is the #1 player in the U.K. ultra-high space? And what would their market share be? And I guess also as part of that, you have a pretty complete offering, that's clear. But who would you -- just curious as to who you see as having the best-in-class offering across discretionary or advisory? And then the final question would be just which parts of the business do you still see margin pressure?

Excellent. Well, shall I take those? In answer to your question on which areas are we most constructive on, I think we are constructive on those 4 segments that we are focused on. So finance, obviously, in finance, our brand -- both our brand name, Schroders and Cazenove resonate really well. And it remains 20% really of where the wealth is in this today. So we're very positive on that. And we're seeing continued growth in that area, and it's also a very networked area. So I think we like that a lot. Secondly, I suppose the business owner space is very important to us. And here, we have fantastic referrals from the networks themselves from Lloyds, but also really importantly, from the professional advisers that are operating in this space. So the lawyers, the big accountants, they are also the trust that advises to those clients. And they -- having worked with them now for, as I said, 30 years or so, they really understand our business, and they really trust us. we've got really strong referral flow from that. And I think the ultra space is one where, again, our brands resonate. Sandaire was a way of marking that we are there for those multi -- those very large multigenerational families. So I don't necessarily say there's one particular segment. We're focused on all of them. And that's important. And I'm very sure that our reputation and sustainability will continue to sustain that market share in charities. So it's not a great answer because I know you want me to say there's 1 segment, but there isn't really. Those are the 4. Who is the #1? Well, I think in terms of numbers of ultra high net worth U.K. individuals that we serve, I think that is us. Where we play in that segment is really who do we come across. I think we come across those -- typically those big investment banks, so the Swiss and the American investment banks in the ultra-ultra-high-net worth space. But as I think I explained, they have a different business model to us. They're much more operating -- looking at one sleeve of a client's wealth. We're trying to do something much more holistic because we offer financial planning, inter-generational planning et cetera, to those families. And I think we have the best in class offering to be honest. So I don't think you'd expect me to say anything different. But we are very knowledgeable and this is in the U.K., certainly, we're very knowledgeable of all -- about all the tax implications, et cetera. And we offer a full range of services of structuring and being able to advise those very large families in that, whereas some of the, let's say, the more international firms have less of that. So we've got private assets and impact on one side. We operate an open architecture approach. So we can serve that client best. So I think that's an area where we're very strong because, again, some of our competitors will not have that full range of services. So they might not do the financial planning angle, which is actually what brings us closer to those big firms of lawyers and accountants and gives us credibility with those people too.

Richard, do you want to do the point on margins?

Yes. As Peter mentioned at the start of the presentation today, the margins are pretty stable, and we don't see significant pressures on those underlying margins. But going back to the year-end analyst presentation, I did guide to the aggregate advise margin improving from 57 to 59 basis points, that 2 basis points improvement was predominantly down to net interest margin and the improvement we were expecting in the first half of this year, which has come through. So actually, we see underlying improvement rather than attrition in revenue margins.

It's Arnaud Giblat from BNP Paribas. I've got 3 questions, please, on private assets. So you highlighted quite a few times during the presentation and even during the Q&A that this is an area of synergies. I'm just wondering what the allocation today for your clients in Cazenove are towards private assets and where you're advising them to go towards? Secondly, what is the share of Schroders' private assets sold to these clients? And is there an opportunity perhaps to increase that? And if there is indeed an impact on margins? And thirdly, we've seen a number of traditional managers or other, I suppose, asset managers are doing more M&A, building out capabilities, specifically in private credit and secondaries. Is this an area where you think you can bulk up and offer more towards your clients?

Mary, do you want to talk about that?

I'll take the first 2, if you'd like you to. On the allocation, that is very tailored to the client because obviously, as I told you before, there are some clients -- our clients span is quite wide. So for some of our smaller clients, it will be a less sophisticated clients, it would be probably less significant than it might be for a very large endowment, a very large charity who have a much longer-term horizon and less need for that income to come in. So I think we tailor that absolutely. And we also advise that clients should take sort of a staggered approach to building their exposure to private assets so that they're not sort of limited to one vintage, so they get diversification in vintage. So it's not an easy -- it's not a quick answer to say, 20%, but it ranges from, let's say, 5% to 20%, 25%, even for the very large endowments, just to give you a sense of that scale. And it's a central investment recommendation because we believe in private assets, we believe in that being a strategic part of our client's investments. In terms of how much is the share?

In terms of Schroder Capital flows, it's still a very small number because the U.K. is relatively early in this, I think. And we have really only -- since we've built out the Schroders Capital platform, we're now starting to say, okay, democratization piece is the next big piece. So it would be single-digit percentages. And as you point out, a decent upside for us. And on your point on private credit, et cetera, absolutely. I mean this is a market which is growing. We see a long-term convergence between public and private we see a move to make private a much more fluid market and deepening the secondary markets is part of that, but also initiatives by London Stock Exchange, et cetera, to change the nature of privates and intermittent trading windows. So I think there's an awful lot to go in the space. I mean the idea that when we all grew up, fixed income and equities lived in separate buildings. They're now part and parcel of the same firm. We're going to see the same between public and private come much more close together. Richard, do you want to correct anything?

I just want to correct what I said earlier, 57 to 59. The guidance I gave in February was 55 to 57. We don't normally talk about the individual components of the wealth business. But in aggregate, the margins are increasing from 55 to 57 in the segment in advised.

It's Hubert Lam from Bank of America. I have three questions. Firstly, on the net new money growth target, I just want some clarification on that. So you said 5% to 7%. I assume that also includes SPW, which Mark said, is growing at more than 7%. So just running for the core business or the business excluding SPW. Is it towards the lower end of that range? Or is it still 5% to 7%, what you're looking for there?

Again, the guidance of 5% to 7% is against the AUM in its entirety, not just against Advised. So you've heard today some very compelling stories in terms of the Advised segment growing strongly. But yes, 5% to 7%, we think is a good long-term target for the Advised -- in the aggregate, but clearly, Advised is growing very nicely at the current time.

I think, Hubert, your point is a fair one in so far as each business highlighted that they were growing at a higher rate. We are observing the headwinds in the rest of the sector and was thinking, actually, do we want to put a target given the headwinds that are out there, which in aggregate is in excess, but each of the businesses feels like they've got growth targets, which can get to the 7%. But we're just not going to put our necks out there all the way given the headwinds in the sector.

So 2 other questions. Firstly, on the penetration of Schroders Asset Management products. Can you talk about the percentage of that in each of -- different segments? How much potential there is to grow that penetration further? And are there any limits to that? And last question is for Mary-Anne again. Can you talk about potential stemming from the Credit Suisse and UBS whether or not you see that as an opportunity for your wealth management business in U.K., international in terms of getting the potential new clients from that transaction and potential to get more bankers?

So perhaps the aggregate managed assets are GBP 23 billion of assets. David, it's probably worth you talking about the opportunity in SIS.

Yes, sure. So in terms of Schroders Investment Solutions within the Benchmark business, it's around about 10% today is in Schroder funds. I mean they are unfettered. So we make a commitment to select of the best funds and our Chief Investment Officer will make that decision accordingly. But it's around about 10% today. So there is opportunity, obviously, for further growth.

Well, in our case, again, it is a result -- the result of our asset allocation. And therefore, we don't have a target that would be actually a conflict of interest for us to sort of say we're going to do this. So it will vary between, let's say, 7% to 15%, 20% because we operate on an open architecture approach. And it will depend on whether -- where we are in the cycle. So for example, last year, we felt that it was important to be at the short end of duration for our fixed income portfolios. And therefore, we were not holding that much in Schroder funds, which were positioned differently. But it is a result, not an objective. Having said that, clearly, firstly, we -- it's very attractive for us to invest in Schroder funds because it's -- we get access to those funds at a very attractive rate. because we're a major holder. And secondly, we know the group very well. So it's something that we actually would like to do more of, but ultimately, we have our clients' interest in mind, and we're doing the right thing by them. And Mark?

Yes. So I talked about the 6 multi-asset funds that they recently have just launched, they are starting to pick up, so inflows rise into them rapidly in quarter 1. Of the multi-manager funds, pretty similar to Peter's response earlier, we're still single digit across multi manager, but I do see there's an opportunity, leveraging some of what Mary-Anne talked of earlier to expand the amount that we hold within Schroders' funds. But right now, it's single digit.

Mary, do you want to talk about Credit Suisse?

About UBS and Credit Suisse well, yes, we have seen some flows from that, absolutely. And it's primarily people worried about the financial aspect of holding in. And it's interesting to note that we're a very cautious bank and therefore, when there are periods like this of disruption, we've tended to see a lot of flows in, and the same happened during the great financial crisis. So we will get flows from that. Whether or not we will hire from that angle, we hire people that are culturally aligned to us and to our business and to how we think and how we -- so it will only -- it will depend. And I think that's been the success of the business, both in terms of our acquisitions and in terms of our acquisitions of people, is that unless they are culturally aligned, we won't have them. But if they are, we absolutely welcome them. So some of the advisers that we have hired in the regions, for example, have come from those sources. But again, we're very, very discerning on who we hire.

It's Bruce Hamilton from Morgan Stanley. I've got 2 questions. One on sort of AI implications. I imagine there might be a range of use cases around perhaps time to serve customers and other efficiencies. So I'm interested in how you're thinking about the potential benefits, but also any kind of potential disruptive impacts on the business? And then secondly, just going back to the sort of private market opportunity. Would I be right in thinking it's going to be mainly at the higher-end affluent or higher net worth because it's into your traditional sort of drawdown funds? Or do you have or have plans for any kind of semi-liquid offering so that you can penetrate further down the sort of wealth curve?

I'm sure everyone's got a view on AI,but let me start by saying, our view is that it's a profound change and we have run very hard to make sure that we have a contract in place with OpenAI very early on. We've made the Genie available to every one of our staff within Schroders in a safe space. We're protecting the relevant things that you would expect to be protected. And there is a much larger plan being put in place to how we systematically change our business to do it. So I think the easy wins are things like translation, et cetera. But you can see -- in fact, we've already done it in Singapore as a mockup, the automation of the advice journey. Singapore is a particularly easy place because all the regulations exist in one place so you can just simply take the act and reproduce it. So the question is how you can make a much better client experience. I think we know that client relationships matter and especially if you are the clients trusted adviser, but empowering that relationship. And I know Mark's got some interesting use cases that he's been -- in terms of keeping customer records and the rest of it. But I don't know if anybody wants to offer a view?