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F&C cut to dividend ‘will help develop specialist products’

F&C’s decision to cut dividends to plough millions of pounds into the business is a welcome move for advisers, says the firm’s head of communications and strategy Jason Hollands.

Shares in the group fell by 18 per cent as it announced that the board had endorsed a three-year accelerated growth plan which will see the development of a number of more specialist and higher-fee products, particularly for the institutional side of the business.

Hollands says: “This is extremely good news for advisers as we will be investing in new products and fund manager talent as we look to match the growth of specialist products in the institutional marketplace. This will include more hedge funds, a collateralised debt obligations platform and global tactical asset allocation products.”

The cost of expansion is expected to damage profitability as operating margins will drop from about 40 to 30 per cent. The new dividend will be charted once the group’s full results are released on March 15.

Hollands says the announcement of a dividend cut has not led to a heavy selling of shares, with around 75 per cent held by Friends Provident (52 per cent), European group Eureko (20 per cent) and staff.

He says: “Advisers should not be alarmed by the reports of large outflows as we have known about most of them. For example, the 20bn we lost from Resolution Life was due to the deal with Britannic which everyone has known about since 2005.”

Hollands says an increase in Oeic sales of 98 per cent reflects the strength of the retail business but it is the institutional side where the group has the ability to make major strides.

He says: “While it may not be fantastic for shareholders immediately, for advisers, investing in fund manager talent, resources and products is nothing but good news.”

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