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Cost cutting drives James Hay profit rise

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Rising fees and falling investment costs saw platform and Sipp provider James Hay push adjusted operating profits up 26 per cent in the first half of the year.

But rising regulatory costs have restricted profits at parent company IFG Group.

Half year results, published today, show James Hay’s adjusted operating profits – which excludes amortisation of acquisition related intangible assets, exceptional items and discontinued operations – rose to £3.8m year, compared to £3m in 2014.

IFG chief executive Paul McNamara says: “We’re putting more discipline into our margin management. There have been a small number of pricing changes and in the mix of the book we are getting fairer value for the services we provide.

“In addition, we ramped up our costs in the past – putting significant investment in infrastructure and product development – and that has now tailed off. The cost per Sipp has tailed off, so we can do more without increasing the cost base.”

In March this year James Hay increased fees on non-standard investments.

The provider now administers 45,613 Sipps, up from 43,348 at the same point last year.

But IFG-owned advice firm Saunderson House saw adjusted operating profits fall from £3m in the first half of 2014, to £2.7m this year.

The group says the drop was caused by “significantly increasing” regulatory fees and levies, as well as investment in technology, products, and a graduate programme.

Saunderson House added 166 new clients over the period and now has around 1,750 clients with an average annual fee income of approximately £15,000 per client.

Across the whole group, pre-tax profit is up to £2.3m, from £2.17m.

However, FCA fees and the FSCS levy have more than trebled – from £300,000 in the first half of 2014, to £1.1m this year.

McNamara says the rise in regulatory costs is “frustrating”.

He adds: “We’re not sure it’s predictable or fairly charged given the different risks different companies have.”

He adds: “We’re very pleased with the first half. The results are doing what we said they would do, and profit growth is coming through, particularly in James Hay.”

In May, James Hay acquired 4,000 Sipp clients from Towry, the impact of the transfer will be reflected in results for the second half of the year.

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  1. Take The High Road 27th August 2015 at 10:42 am

    Mr McNamara has perhaps every right to be frustrated however, I would doubt that the FCA & FSCS increased levies were ever taken into consideration when IFG sold any of its previous advisory businesses but in any case, even when a business is sold, this demonstrates it does not diminish the potential future liabilities for many companies. In fact, it is well known that when a business is bought/sold(or when advisers leave), the ‘risk’ of rising complaints grows even higher and this will also be one of the deciding factors when levies are calculated.

    Still, at least with the addition of the Capita and Towry SIPP books, the increase in FCA/FSCS fees will help compensate!

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