St. James's Place plc (STJ) Earnings Call Transcript & Summary

Hello, everyone, and welcome to the St. James's Place 2022 Half Year Results Q&A session. My name is Emily, and I will be facilitating the call today. [Operator Instructions] I will now hand the call over to our host, Andrew Croft, Chief Executive of St. James's Place. Please go ahead, Andrew.

Thank you, Emily. Good morning, everyone, and welcome to the live Q&A. I hope you've had the opportunity to watch the presentation before this. And I'm joined here today by a number of my executive colleagues. But we just go straight into questions. So first question, please, Emily.

[Operator Instructions] We will now start our question-and-answer session with our first question from Andrew Sinclair from Bank of America.

Three from me, as usual, if that's okay. First one was on controllable expenses. I thought it was great to see you're still on track for your target of under 5% for the year despite inflation. I just really wondered if you can tell us what levers you've been able to pull to keep costs under control and just give a bit of color on what the outlook could be for 2023. . Secondly was on the Academy. I think at the Investor Day in 2021, you talked about the Academy delivering about 400 into the partnership from 2022. I think we're around 350 something in the Academy at the moment. And I think you said in your recorded remarks about 300 should come through this year. I just really wondered if you can square the circle and kind of what's needed to ramp up to that 400 mark? And then final question was just outside the Academy, can you talk a little bit about the hiring environment? We've heard some comments that perhaps some of the PE back names have been quite aggressive in terms of recruiting recently. Just really wondered if you can give some context on what you're seeing?

Okay. Thank you very much, Andrew. I just hand straight over to Craig on controllable expenses, and then we come back on the Academy.

Yes, Andy, so 2022, you're quite right, we've recommitted to controllable overheads growing by no more than 5%. But you're quite right, the onset of that inflationary environment was probably upon us at a point which we last gave a commitment, which is at the end of February. In fact, it's probably more pronounced. But I'd probably echo what I said at that point, which is that we've had very clear visibility of what our cost base was for 2022. We've got very strong disciplines within the business, and a lot of the stuff that we would have been spending our resources on was contracted at that stage. Now that's not to say there haven't been some areas where we've seen increases that we may not have expected. But within an overall cost base gross of GBP 300 million, we're able to toggle that and manage through. And I think discipline is probably the keyword there. So we're in a position where we could recommit to that for the second half. 2023, I'm not going to put a number on it yet because I can't. I don't know what the environment is going to look like as we move towards closure of the budgeting process. At some point in Q4, we'll clearly be updating when we publish our year-end accounts and giving a very clear indication of what we expect. But I think what I can say at this stage is that we're going to do everything we possibly can to make sure that the impact on controllable overheads is less than whatever the headline rate of inflation is. The discipline that we set out as part of the 2025 plan will continue, but we'll have to make decisions that are right for the business and the growth that we're seeking within that plan.

Thank you, Craig. On the partnership, I'll just sort of give a sort of backdrop and then hand over to Peter Edwards. I just want to recap on those 2025 targets. So we said we're confident of doing 10% per annum in gross flows over to 2025. Look, it is never going to be in a straight line. We knew that. And within that, the confidence that we can achieve it through a combination of [2G] experienced advisers, academic graduations, technology and efficiency gains, et cetera. But if you remember, we never set explicit targets for each individual one of those and don't plan to do so. We will continue to grow the partnership. But the most important thing is we've got to get the right people, and we're not going to play any numbers games today. And just on that backdrop, I hand over to Peter to answer the questions.

Yes. Thank you, Andrew. Andrew, in answer to your question about to the phase of the ramp-up and what's needed from our core positions to trade in about 400 a year, I think what we benefited from through COVID was the ability for us to slightly pivot the model away from 4 distinct locations in Edinburgh, Manchester, solihull and London to worthy academy processed through all of our 21 regional locations as well as individual partner practices. As Andrew said, we're not in the business of playing the exact numbers games, but we do believe that with have the new way that we train people through the Academy and the time that we're taking to ensure that they are sustainable in their own right, that actually perhaps that move from 300 to 350 to 400 and potentially beyond that in the future is something that we will do on a management phase basis, something we're very confident that we can achieve.

And in terms of the hiring environment for experienced advisers?

Yes, look, recruitment of experienced advisers has never been easy, and it will not be easy. The pool of available talent that meets our criteria by definition decreases as time goes forward. And it's important to remember that the bar we set is in terms of the criteria to join the partnership is significantly higher than the average bar out there in the independent sector, for example. So we're very selective. It's all about getting the right people into joining the partnership. I think the combination of experienced hires and the Academy in the way that I've just described gives us confidence that we can achieve the [need] growth targets that we've got. But we're very confident about our ability to continue to recruit appropriate members of the partnership moving forward.

Our next question comes from David McCann with Numis.

First one, just to follow on actually from Andrew's question there about the cost inflation number. And except on the comment you just made there, when you said that 5% target, the underlying, I guess, reasonable inflation expectation might have been 2% at the time. Obviously, we're now higher than that. And I think you just commented there, Craig, that you'd expect future years to come in below that rate of inflation. So yes, I guess, accepting that your cost might be at quite under 5% but now at a discount to inflation. I just wondered what the gap was there and just kind of help us rationalize that? That's the first question. . The second question is, obviously, the FCA published their consumer duty update recently at it -- in the business on the segment, mainly is on the exit charges where these around need to be deemed reasonable. I guess what is your thought process behind how you justify your exit charges has been reasonable to meet that definition? Any other comments you might have around that?

Do you want to do the inflation one?

Yes, sure. So thanks, David. You're quite right that there was a level of inflation when we drew together the 2025 plan. And I guess the context for that is that, that was planning that happened over the course of summer in 2020, so the outlook on inflation looked somewhat different. I think the way I would see this is that we've got some costs that are very clearly framed to inflation. So the 2/3 or so of our problem lay aheads are related. Then I think it's important to think more in terms of professional wage inflation rather than just headline inflation, [impact] issue in different directions. . But there are also some areas that we have a pretty substantial property costs [annually] within our books. And of course, things like rents don't necessarily move in line with inflation. So there are some things we can do with our overall buildup costs to manage within. What we're not going to do is make compromises on investments in the business. So that will continue to be a priority. It's perhaps also worth me just emphasizing the fact that when we talk about controllable overheads, if you think about our total costs, think about all costs within the entire group. The bit that we flag as controllable overheads are only with about 17% of our total cost base. And what we've done with the remainder is build a business model with a cost base that largely moves in line with volumes and markets. And so the [particular] potential impact of a headline rate of inflation on a cost base rate of tax of GBP 2 billion, which wouldn't be enormous. I'll leave you to do the math. But because we've been able to build a business model protects against that, only leaving 17%, we're then left with a subset of that 17%. It isn't necessarily directly index inflation, so there is a lot we can do. And the other thing I would also emphasize that we will continue to do regardless of the operating environment is look for opportunities to improve the way in which we run the business. So when we put 5% on the table in our plan, critical to remember that, that 5% is a net figure. So within that 5%, we're always looking at ways of reducing costs that's no longer needed in order to introduce investment as needed for the future. So hopefully, that brings a bit of color to the equation.

Thank you, Craig. On the consumer duty point, David, I'll just start by just sort of remembering the fundamentals of our business. So our business is long term, and clients are investing. So we do not see our [cut in bill] charge as unreasonable. It's also fully disposed to clients on a regular basis. So we don't see any change.

Our next question comes from the line of Andrew Baker with Citi.

Two from me, please. So the first one is on the net flows. You've previously talked about normalization of the surrender and withdrawal rate over time. Seems were again low in the second quarter. Just curious on your view on what -- where you're seeing these for the rest of the year and then when you would expect to see some type of normalization here? And then secondly, just again, that inflation but a slightly different angle. Are you seeing any inflationary impacts on the partners business? So presumably their costs are going up, obviously, income this year, let's say, flat. So if we see extended inflation for a period of time, do you expect this to have any impact on adviser retention or any other impacts that you see there?

Yes. Thank you, Andrew. What I'll do, I will start with the partner business for inflation on the topic, and I'm going to ask Peter to answer.

Yes. Thank you, Andrew. I guess the inflationary pressure is felt by all [concised group] specifically around the partner businesses, which whilst they're not immune to inflationary pressures, all the benefits of being a partner of St. James's Place is that we obviously have to support them via our network and field management team, for example. We have the flexibility to support partner businesses financially should that need to arise. We haven't noticed any significance or cries for help, I should say, from the partnership. So while we've not seen any requests in the short term, they do have the backstop of St. James's Place to support them. I think one of the things to remember, though, about the partnership is the businesses are well capitalized. The partner businesses benefit from the support of their contract as well as from St. James's Place, so we're not seeing anything that this causes of concern. As they are managed locally, we will now shift that change.

Thanks, Peter. I'll answer the next part, and Craig might jump in as well. So I think the specific point you were talking about, Andrew, is negative withdrawal rate, and that's essentially people taking regular income from that plan. That's what we expect. And what we saw even before COVID was the level of regular withdrawal is declining. And certainly, during COVID, we saw it declined further. Part is, People weren't spending money and, therefore, were keeping the money invested. And what we guided at the February results, we would expect that regular withdrawal rate to return to some kind of normality once we are fully out of lockdown, et cetera. We are not seeing that yet. I think we expect to see it at some point. It isn't going to suddenly happen overnight. And my guess as to why we're not seeing it right now is people are still using savings accumulated during the pandemic. Craig, I don't know if you want to...

Thanks. I probably [indiscernible] I think I said at the last meeting we have that it may normalize. And I think in the longer term, we may see a move in that direction. And I think Andrew is right. When we last discussed this back in February, we were very much talking about the effect that excess savings have had in not spending opportunities and contribution that had made. So what I think we described at the time of exceptional retention. But I think there might also be a little bit of the same outcome but slightly different reason because when we experienced choppy markets in difficult environments generally and uncertainty, it does have the effect of slowing down decisions. You see that in gross flows on occasion. But I think it also encourages people to stay invested because it doesn't feel like a good time to not stay invested. So I think it's a complicated pattern, but it is interesting to see the continuation of that pretty exceptional level of retention. And I don't think I can add other things to when it will change other than if there ever is such a thing as normal again, it might.

Our next question comes from Andrew Crean with Autonomous.

Three questions, if I can. Firstly, could you comment a little bit about the investment performance relative to sort of a normal private client indices in the first half? Secondly, could you enumerate the property costs which you alluded to within your controllable expenses? And thirdly, could you tell us how many new customers you put on in the first half and what the customer numbers are now in total?

Okay. Thank you, Andrew. I'll ask Craig to do the propert costs. First of all, [on may be] investment performance. And then I'll come back on the new customer.

Yes. We don't actually disclose total property costs. But if you imagine a property portfolio, that pretty much spans the nation. It's a reasonably substantial one. And one of the reasons why I wouldn't give analysis is obviously that you got rent reviews at different stages. So the real point I'm trying to make with property end is inflation may be by, whatever, 5 percentage points, but that's not the immediate reaction that you would see in the property portfolio. But if you had in mind something like, I don't know, 15%, 16%, 17% of establishment expenses, you wouldn't be a million miles away. So that's property [indiscernible].

And Rob, nd Rob, do you want to pick up the investment one.

Yes. Andrew, Rob here. So firstly, I'd point you to our value assessment statement that got published 2 weeks ago and is on our website. I think first thing to point out is to make sure that when we look at performance on an apples-with-apples basis, so when we look at our investment performance, we look at net of our underlying for managing costs but gross if SIP fits. So I'll talk about portfolios, and I'll talk about funds. All of our clients may invest in a mixture of funds, 8 to 10 funds. And over 70% of our part will invest in one of our model portfolios. And so let me start with our model portfolios. The 7 out of 8 of those are outperforming [marks]. 8 out of 8 of those are outperforming [DII] sector. And when it comes to relative performance versus our fund managers, it's fair to say we got approach on the outperforming our Global Value Fund, which we launched 2 years ago, this having a fantastic performance. So I think it's up 16% relative to benchmark since we launched it 2 years ago. And then we've got others that are doing less well. But the good news is, and this is the point I pulled out in the first statement, in the last 3 years, we've made over 30 changes on GBP 100 billion. And where we have made those changes, those funds are now outperforming on a relative basis by 1.4%.

On the clients, Andrew, we say we've got over 900,000 clients and the actual number is about 903,000. And I think we disclosed 868,000 at the end of the year, so perhaps there's 30,000-odd. And then just as a bit of light relief within that number, we've got 201 clients over the age of 100, and we have 855 clients under the age of 1.

Our next question comes from Ashik Musaddi with Morgan Stanley.

Just a couple of questions I have is, first of all, is the new business margin was a bit lower compared to the gross flows. I think you mentioned it is to do with some expenses of last year and the growth of last year. I mean would you mind elaborating a bit more on that? Because if I'm not wrong, historically, that has been a bit more stable. And in this first half, you wrote more pension business. So I would have assumed that it should have gone up rather than gone down. So any thoughts on dynamics on that would be very helpful. And secondly, I mean this time, you've been a bit more specific on gross flows and net inflows, which I have never seen in the past. Maybe I missed the last couple of quarters, but I've never seen you being such specific in terms of gross flows and net flows. What is driving that confidence on the specific number, I mean, and what would you say is some upside or downside risk on that specific guidance?

Ashik. Yes, so the first thing I should say just for emphasis is that this is not product related. You're right that products does contribute to varying margins on the net income from FUM, but they tend to sort of accommodate each other as they fall in some mature funds. So that's all part of the construct of the basis points guidance we've given on net income. What this is, is the point at which investments are made. And for the most part, these are pretty binary. So there is a charge levy that we collect, passed on to the clients in the form of additional advice, and that's all very, very kind of straight line, if you like, in terms of margin. But there are 1 or 2 allowances that we have across our adviser base that for reasons of being able to run and plan the business effectively, we set Europe apart based on Iberia productivity. So for example, what you see, if you think about 2021, when our gross flows grew by 27%, those allowances would have been lifted. You then get into 2020, and let's say for the sake of the example, we're flat. You're getting the same level of new business coming through, but you've got the allowances that are higher because of the productivity, and that's if you're comparing the margin 2022 to 2021. The other way of looking at it is that when we sat down at the end of February and we were thinking about what the possibility might be for gross new business for this year, we were talking at that stage, and that was right to a lot of developments in the operating environment somewhere in the region of 7%. But simply, that would have been 7% of additional new business without any change in these allowances that I'm referning to. So there's always a little bit of movement within the overall margin on new business. And typically, you'd expect that to come back in a growth situation.

On the outlook, what we're expecting in the second half is basically more of the same in the first half. And therefore, if you do the math, you get to that GBP 18 billion and GBP 11 billion. And we thought that was more useful in putting percentages down particularly given the comparatives. That's also within the range of consensus. And I think you asked what could change that on the upside and the downside. I think on the downside, it would be further shocks to the financial system. And on the upside, as I said in the presentation, when events and markets stabilize, historically, we've seen an acceleration of flows.

Just one follow-up on that. I mean would you say that this GBP 18 billion and GBP 11 billion includes some some sort of recessionary risk? Or would you say that, that probably is not baked into this number?

Look, I think it's -- market conditions continue with what we're essentially saying.

Our next question comes from Rhea Shah with Deutsche Bank.

I have 2 questions. So the first one is back to the cost but slightly different. Craig, you were talking about rent reviews and them coming at different points. So what are the length of all of your contractual agreements and average loans? And essentially, are we going to see a lagged effect of inflation coming through over X many years? And then secondly, around the EV results, you raised your persistency expectations and the results. Can you give a bit more detail on this? And how should we think about these in the context of future outflows related to historical levels?

Yes, look, I think the best way for me to answer the first question is there really isn't anything to see there. We've got a normal -- we've got a very normal rolling property portfolio that has rent reviews and lease and rent clauses that when in itself contribute any shock to any future planning, so I wouldn't have to hand exactly what it is you're looking for there in terms of contractual commitments. But we typically sign leases anywhere between 5 years and 15 years, depending on the location and depending on the long-term price of that property at any given time. We've got a number of those running, but it's certainly not anything that will contribute to any future shock. On the EV results, you're quite right, we have booked persistency adjustments. And it's not dissimilar to the adjustment we booked last year on bonds pensions, but this one relates to [ISAs] and unit trusts. And as ever, there's a complication here, but there's a really simple narrative around this, which is that if you think about behavior -- savings behaviors [ISAs], when they first came along, I think most of you would have seen them as a short to medium-term savings vehicle, whereas the reality would squeeze elsewhere they become part of mainstream pension planning. And that's what we've seen on the [focks] and that's what we've adapted to. Now we have also, you're quite right, talked about this exceptional retention that we expect to normalize or at least move towards normalizing. Clearly, when you're setting long-term assumptions and an embedded value, you see through that. So we won't allow exceptional experience to influence our analysis of long-term experience and, therefore, our judgment on future long-term assumptions.

And if I could just go back -- sorry, if I could just go back to what you were saying about the leases, so I get those are 10 to 15 years. But if we look away from the property leases to just other types of contractual agreements, would the years be -- the average years be different there?

I don't think we would even see it in that way. We don't look at average contracts. We've got multiple contracts with multiple cases, some of them are long term. Some of those long-term contracts will have clauses in them that allow income expense to grow will be fixed. I think I go back to the statement I made earlier, which is that as we plan ahead, we will do so with discipline and do everything we possibly can to keep it lower than the headline rate of inflation. Now I don't think I have any appetite to start picking that apart on a contract-by-contract basis.

Our next question comes from Nasib Ahmed with UBS.

I've got 2 here that are slightly related. So firstly, on the net impact on DAC, so that's trending down. And I think you've guided previously that over 5 to 6 years is kind of going to normalize. Is that kind of the trend that we should be seeing going forward on the net DAC? And then related, so given your IFRS results in 1H is quite strong, is there an upside to the payout ratio of 70% if you were to kind of keep this second half EPS flat or increase it?

So I think there are 2 questions, if I've understood, just to play it back as I think you had a question around the DAC and the amortization period of DAC. And then I think you had a second question around dividend payout. Is that right?

I must stay I struggle to hear. The line is a little bit crackly on the DAC question. But on DAC, I'll try and answer it. If you don't think it's answered the question, I'm sure you tell me. But generally speaking, the DAC follows the same pattern that we expected it to some time ago because you might remember, when the retail distribution review came along, we were unable to defer as many of the costs that we used to. So those were locked up and are being deferred over a longer period. And then we have a continuation of deferred expenses but at a much lower level. So I'm not sure there's anything particularly unusual in the past and of either accumulation of DAC or amortization. And Nasib, sorry, does that answer your question?

Yes, it does.

On the dividend question, I'm afraid that was a bit crackly.

Yes, so just to reiterate, we said we would pay 70% of the underlying cash flow by way of dividend. That's obviously an annual thing. The interim dividend is just a mechanical calculation.

Yes. So what we've done is we set the interim dividend as a percentage of the prior year table dividend and so, mathematically, is exactly what you would expect if you pick up the guidance that we gave.

Sorry, the question was around whether you can increase the 70% for this year given the IFRS result is quite strong.

No, because we haven't -- if you go back to the guidance we gave, this was all geared towards long-term planning, which accommodates variances in IFRS results. You're going to see a lot of volatility in IFRS results for all the reasons that many of us are familiar with. So I think when you're thinking about the future, you should just use the guidance that we've given, which is 70% of that underlying cash figure. And what that does is it accommodates all of the complexity that IFRS is capable of either bringing or taking away.

Our next question comes from Enrico Bolzoni with JPMorgan.

Just had a couple. So on recruiting, first of all, can you tell us on the 70 new advisers onboarded how many joined from the Academy? And linked to that, I just wanted to know, your 10% gross -- growth in gross inflows target, on what assumptions in terms of adviser growth stands? By that, I mean how many advisers would you expect to have by 2025? Second question is related to actually competition and fee pressure. So clearly, market today came down quite a lot, so a lot of prospect customers lost quite a lot of money. Do you foresee a change in fee pressure. So clearly, you charge an initial product charge, 1-odd-percent on certain products, as some of the other competitors don't. Do you think that this potentially can be an issue that we might see a bit of pressure there? And finally, partially related to that, do you expect any increase in terms of pricing pressure from the third-party companies you deal with, so the actual fund providers, in terms of how much they are expected to be paid given again the markets year-to-date?

Yes. Okay. So let me try and pick that apart as well. I think around the liquidity and the 10% gross inflow target, as I said at the beginning, we're confident achieving our 10%. And we're going to be doing that through the experienced advisers, academy graduations, and technology is helping efficiency, new brand, et cetera, et cetera, et cetera. But we're not going into the game of breaking that down by individual targets. And that also applies between experienced recruitment in academy. So I'm not going to give you specific answers for those 2. On the -- on competition and fee pressure, I'll start off by saying you need to remember we are a long-term business here, and the value of advice is very, very powerful. So we are not seeing to a large degree any particular fee pressure on what we're doing. In terms of the investment management fees, which I think you're asking at the end, are we seeing investment managers asking for addition fees, I'm going to hand over to Rob -- or no, I'm handing over to Craig.

So it could be either because I have to give the same answer. I don't think I might do. The short answer is no. Why is that? What we're able to offer are volume and consistency. And that's an enormous value to fund managers, and I'm sure everyone on the phone will understand that. So if anything, over time, we would expect to negotiate even keener prices. And that would, of course, be to the benefits of our clients.

Hopefully [indiscernible] that answer your first question. Hopefully it [indiscernible] what you need to...

Yes. And sorry, if I may, because it's something in the past that you disclosed at times, can you give us the breakdown in terms of the new adviser joined or is it something that, at this stage, you cannot tell us?

I think you sort of said what we're going to say in the presentation this morning.

Our next question comes from Larissa Van Deventer from Barclays.

Two questions related to how we should think about AUM going forward. So on fund under management, which indices would you say that we should think about tracking? Is it as simple as MSCI Global or is there one towards a specific region? And then related to that, how are you thinking about asset allocation in your instructions to asset managers considering the current market volatility, please?

And just to repeat those questions, what's the best indices to use for AUM in your model, as I quite understood it? And then the second question was around asset allocation. So we'll pass to Rob.

Larissa, Rob Gardner here. Just at a very high level, and again, I point you to annual value assessment statement, which is breakdown of all of our funds and our benchmarks and our managers. So roughly our funds are about 70% equities, 15% fixed income, 10% alternatives and about 4% cash. And the big shift that we have been on over the last 3 years, and we're still on that journey just moving to a global benchmark, so it's fair to say that if you go back sort of 5 years, it will be much more sort of focused on FTSE and gilts, our target long-term asset allocation is MSCI World. But actually MSCI and then a kind of global fixed income benchmark [indiscernible]. So that's the direction of travel. We're not fully global yet, but that's where we're heading. In terms of asset allocation, that's our job and our partners job, too. So fundamentally, our job is -- our partner's job is to sit down with clients, understand their goals, understand their time horizons and build a portfolio that meets their return, risk, fee, ESG profile. And so we have our underlying funds and building blocks for those partners to choose from. And then on top of that, our job at SJP is to give partners model portfolios, unitized portfolios to meet that. So the underlying fund managers' job is really around asset selection. SJP owns the strategic asset allocation and portfolio construction to meet the needs of those 900,000 clients. And just a little fact, but with those -- with all of our funds, we can create 5 million different possibilities. And that's exactly our goal and the value of the [indiscernible].

But actually, the question was on how are you thinking differently about asset allocation given the current volatility.

Yes. So our mantra at SJP is decades not days. As I say, our job, I think you've heard Andrew and Craig talk about how our average client has been with us for 14 years. You've just heard how we've got clients who are literally babies and we've got clients who are 100 years old. And the most valuable thing that we can do is get our clients to invest for the long term. You'll know from your kind of parties, the equity study that the best way to beat inflation over the long term to invest in equity. So over 30 years, if you've been invested in MCI World, your money will be worth 7x more than inflation. And so really, the most important thing is to get our clients to have the right equity mix, right fixed income mix to meet leveraging return goals. And then our underlying fund managers might -- that's where they try and outperform their relative benchmark. But in terms of the long-term strategic asset allocation, everything references our investment release, which are again on our website.

We have a follow-up question from Rhea Shah with Deutsche Bank.

Just going back to one of the previous questions around the dividend. Hypothetically, if the cash result did for such that you need to cut the dividend per share, would you look at cutting it? Or would you look at increasing that payout ratio and certainly to keep it flat?

Thanks, Rhea. I think the answer to that question can only be given when you know what the trading environment is you're operating in and what the outlook is from that point on. And that's probably what I can say. Boards make decisions on dividends based on the circumstances prevailing at the point at which any dividends is declared.

Our next question comes from Greg Simpson with BNP Paribas.

Just 2 on flows and 1 on costs. The first in terms of flows. I'm just wondering how much forward visibility do you have on -- within the business. So do you see the paperwork and forms a few months before the money actually comes in, for example? Just wondering about your targets in an uncertain backdrop. Second one is also how much of the business is typically transferred in of already invested assets? So if -- when markets fall, you kind of get an external impact on those -- on that value being lower. So just [indiscernible] transfers. And then lastly, apologies if I missed it in the presentation, but is there any guidance on miscellaneous costs for the full year? I think there was an element that was more one-off related to lower market values. But there was also a more recurring element of higher foundation activities now have a lockdown. So just any way to think about this line going forward? It is a bit lumpy.

Yes. Really good news is Craig's putting his hand of it. I was actually scratching my nose, Craig.

So I think the first question was around pipeline and visibility on what we see going towards. So yes, I suppose that each part of practice will have a very clear pipeline, but we don't necessarily have complete visibility of that. Once sales force is up and running, the possibilities might change in that regard. But we have a very clear view of new business coming towards us at the point of which is written. Now there's clearly a gap between the points which is written and issued. But depending on what type of product it is and depending on what the circumstances of the investments are, we get a pretty good feel for what's happening out there. The real -- the sort of critical long-term pipeline, though, is the -- I know it's the day-to-day work that advisers do, finding new relationships, nurturing relationships, and that can be a very long pipeline indeed. That's not the sort of thing that lends itself to spreadsheet management, if you like, but it's something we can get a pretty good feel for through our field management team because they will pick up how the partnership is feeling around the sort of evolution of their own businesses. There was a point there on miscellaneous in guidance. I haven't given explicit guidance, but I think what I would do is take last year's charge and add a bit. I'm not going to start calling the market so to give a view on what the mark-to-market calculation is going to look like on the 31st of December. But if you just make an assumption that the backlog sticks for the time being, it could be the miscellaneous might be GBP 3 million, GBP 4 million higher than it was for the last financial year. But it is there. It is -- there are a number of things within that line, as you probably understand, but that's probably what I would say for the time being.

Okay. And I think your final question was on transfers, and this is where individuals are consolidating different pots for -- the defined contribution pots and just a couple of things there. Firstly, the money is already invested, so it tends to be less sensitive to the market in terms of device transfer. But of course, if markets are lower than the transfer, the value was lower. So there's a sort of 2-edged sword there. And in terms of how much, that's really, really dependent upon different clients and initial clients begin with, so I can't really give you a number there.

Our next question comes from Andrew Sinclair with Bank of America.

Just one final follow-up for me was just I noticed there was a decent step down in the level of bank loans in the period. I just really wondered how we should think about that. Is that going to be a continued lower level of debt?

I think that's for Craig.

Yes. There's -- one of the key contributors to that, obviously, is the kind of the net balance of managing working capital. But in the area of business loans to partners, there's been more activity off balance sheet than on. So in some years, you find that partner business loans are a use of cash resource. At other times, they return cash resource. And we've been in that return environment, good working on that.

Our final question today comes from Andrew Crean with Autonomous.

Just one quick question. Any early thoughts on IFRS 17 or when you might be able to talk in detail on it?

I'm going to pass that swiftly to Craig.

The potential [indiscernible] of a question to end up. But the good news is very, very limited for us because, although we do have a very small number of old pure insurance-type products, the mainstay of what we do qualifies as an investment contract, and therefore there will be some disclosure points. The sort of order of the primary statements might change around, the key metrics won't change, which I'm sure is good news to anyone [indiscernible].

That's it. So just leaves me to say thank you for your time. Look, I think the business is in great shape. I think the long-term outlook remains positive. So look, good luck for the rest of the reporting season. I know you're busy at this point in time and have a great holiday season. And thank you.