Financial firm Nucleus eyes boost from FCA's platform report

Member News | 12.06.2018

Financial firm Nucleus eyes boost from FCA's platform report

The chief executive of Edinburgh financial business Nucleus Financial has said he expects the Financial Conduct Authority’s (FCA) upcoming report into the investment platform market to provide a boost to the business he set up in 2006.

The regulator’s study is examining whether platforms, which allow clients to manage their investments in one place, operate in the best interests of customers in terms of helping them make investment decisions and offering value for money.

David Ferguson, who has led Nucleus since it was launched 12 years ago, said he does not expect the FCA’s findings to have a negative impact on the firm because it has only ever operated as a platform rather than being created off the back of an existing asset management business.

However, he said that “platforms that have asset management businesses attached” may be forced to look at their models as a result of the study, adding that that “should create a boost” for Nucleus.

It comes after the firm announced a solid set of financials for the 2017 financial year.

After seeing net inflows rise by 72 per cent to £1.7 billion in the 12 months to the end of December, the firm posted a 21% rise in revenue to £40.4m and 19% rise in operating profit to £5.1m.

Mr Ferguson said the numbers had been achieved in part because Nucleus saw between 40 and 50 additional firms of financial advisers transfer their clients onto the platform during the year.

Including a white-label arrangement with advisory network Paradigm, which has brought 200 adviser firms to the site, Nucleus is now used by around 800 IFA businesses.

The turnover rise comes despite Nucleus last year cutting the fees it charges to customers with large portfolios, with a drop from 0.25% to 0.175% for accounts worth £500,000 to £999,999 and from 0.15% to 0.05% for anything bigger.

Assets under administration on the platform grew by 22% to £13.6bn last year due to a combination of existing clients adding funds to their to pensions and ISAs, existing advisers who use the platform adding new clients and new advisers coming on board with their clients.

“Last year we also had a bit on the back of rising markets,” Mr Ferguson said, adding that the firm’s current assets under administration figure is £14.3bn.

Around 70 of the firm’s 200 staff have equity stakes in the business, with most of those who joined at launch and some senior staff members who were hired more recently holding shares.

They received a portion of a £4.8m dividend paid out by the business during the financial year – the first since it was founded in 2006.

Around 75 IFA businesses that bought into Nucleus at launch also received a share of the payout, as did South African insurance business Sanlam, which owns 43 per cent of the firm.

In total, the firm’s staff and management own seven per cent of its equity.

In terms of investments, Mr Ferguson said that Nucleus spent cash on moving into new offices at the Greenside development next to Calton Hill in Edinburgh city centre during the year as well as on upgrading its technology.

“We were in a position where we were spread across two sites – the office move was a big investment for the business and it’s made a big change to our working environment,” he said.

“We’re trying to promote the way we want to work in terms of being a great company to work and being collaborative.”

He added that the firm is also “continuously trying to create more and more automation and more and more digital capability that advisers can use with clients” on its platform.

“It’s an ongoing investment each year – in a business like ours it’s a continuous process,” Mr Ferguson said.

“Last year we made enhancements to our client reporting capabilities and capital gains tool.”

Source: The Herald

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