Encouraging Quarter for Wealth Managers, whilst Execution Only Stockbrokers Complete a Successful Year

The fourth quarter has been a period of both growth and decline. Rises in both the FTSE APCIMS Balanced Index (up 2.5%) and the FTSE All Share (up 4.8%) have coincided with a 2.2% increase in investment assets in the UK Wealth Management Industry. This has resulted in a similar level of growth in investment management fees for wealth managers (up 3.1%). However, trading activity levels in the fourth quarter have fallen from the extreme levels set in the second and third quarters of 2009. Therefore income from commissions has decreased, putting pressure on total revenue. This has especially impacted the fourth quarter results for execution only stockbrokers, who have had an exceptional year prior to this.

Despite this drop in trades, execution only stockbrokers appear to have continued with their expansion plans. Acquisitions from some of the key players in the industry have brought further staff into the sector (up 8.1% on Q3 2009). Coupling this with improvements in efficiency, the execution only sector is in well positioned for another successful year in 2010.

The improved stability in the markets has provided wealth managers with more encouragement. Revenues increased for the second consecutive quarter, up 0.4% in Q4 2009. This would have been a greater increase had it not been for a reduction in commissions and treasury income. However, there continues to be a need to closely monitor costs in order to raise business performance. Quarter on quarter costs for wealth managers rose by 4.4%, thereby resulting in pre-tax profit margin reducing from 26.5% to 23.0%.