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AFH maintains 50 per cent profit margin despite platform fee cut

Wealth management, platform and advice business AFH has held margins on its investment business above 50 per cent, despite its decision to do away with platform fees.

Last July the firm, which is best known for its adviser acquisitions, announced that clients using its in-house platform AFH Direct would no longer pay platform fees.

In financial results for the six months to the end of April, released this morning, AFH says that gross margins on its investment business were maintained at 54 per cent, including when accounting for the impact of absorbing platform fees for AFH Direct clients.

AFH notes that while clients do not have to move across to its platform or discretionary management services, it believes that the lower cost of the solution can make it appropriate.

The results read: “Our model allows clients’ portfolios to be retained on existing platforms and products where appropriate but enables them to move to our cost-effective discretionary service where a clear benefit to the client can be demonstrated.”

Over the six month period, AFH says revenues have increased 61 per cent to £36.6m, and post-tax profit has increased 80 per cent to £4.5m.

The firm says it will still look to acquire advice firms as its latest deals continue to bed in.

The results read: “Due to the number and size of acquisitions completed in the second half of 2018, regulatory approval and the subsequent business integration has taken longer than in previous periods.

“As a result, the level of new business written and ongoing management fees from these larger acquisitions was delayed during the period. These acquisitions have now been transitioned in line with our internal processes and this new business and recurring revenue is expected to accelerate during the second half of the current financial year.

“Our model remains to expand our distribution capacity through both organic and acquisitive growth whilst maintaining centralised investment, advice and compliance functions to drive increased profitability and shareholder value.”

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