While profit margins at wealth firms continue to buckle under the strain of the credit crunch, execution only business had its best quarter in nine years. 

The latest research from bench-marking and research consultancy firm ComPeer showed a sharp rise in the number of transactions in the first quarter on the back of the return of risk appetite.

‘In this quarter alone, close to 5.7 million trades were transacted by UK retail stockbrokers, up 11% on the previous quarter,’ said the update.

‘Of these, 3.5 million were by execution-only firms, an increase of 1.1 million on the same period of last year and 400,000 more than in Q4 2008. As a result the execution-only firms have been successful in maintaining profit margins above 25%.’

The number of trades in the first quarter was the highest since the first quarter of 2000. ComPeer said the growth also appeared to be spilling into the second quarter of 2009, which it said should help wealth firms maintain profit margins above 25%.

The execution only business will play a crucial role for wealth firms in the coming months. According to ComPeer, advisory assets fell by 6.2% and discretionary assets fell 5.9% in the first quarter versus an Apcims Balanced Index loss of 7.7% over the three months.

The falls have continued a long-term trend of falling profit margins at wealth managers, which slipped to 20%, down from near 30% a year ago. Overall assets have fallen 16.6% over the past year from £379 billion to £316 billion.