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Nucleus cashes in on platform market ‘shambles’ as profits increase

Nucleus profits rise 21 per cent as platform positions itself as “stable” option

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Nucleus chief executive David Ferguson

Advisers’ thinning patience with replatforming projects and consolidation is partly behind an uplift in net inflows seen by Nucleus in the first quarter of 2017, the company says.

Nucleus has reported a drop in net inflows to £1.1bn in 2016, down from £1.3bn the year prior for 2016.

However, in the fourth quarter of 2016 net inflows increased 27 per cent, an improvement that has continued into Q1 2017 with Nucleus recording a 77 per cent uplift year-on-year at £452m.

Nucleus chief executive David Ferguson says being seen as “stable” has helped increase flows.

He says: “We are starting to see some firms lose patience with people that are replatforming or going through M&A activity. We are seen as a much more stable market participant now than some of the others, which has attracted some new users. Stock markets are up so if money is transferring from somewhere else it is worth more than it was a year ago.”

“Our users, in general, are just having a very buoyant time. We have always tried to work with firms who have got a similar outlook and mind-set and those sort of IFA firms are really booming at the moment.”

He says advisers started moving clients to Nucleus because of replatforming and consolidation around nine to 12 months ago.

Ferguson says: “We would expect that to become a bigger theme. You will be aware that most of the replatforming exercises are turning into a bit of shambles to various degrees despite the repeated optimism of the various people going through it.”

Elsewhere in its results, Nucleus reported pre-tax profit of £4.3m for the 12-month period and assets under administration grew 23 per cent to £11.4bn.

The profit result was a 21 per cent increase on a like-for-like basis from £3.6m in 2015.

The wrap platform’s turnover increased to £33.3m over 2016, which was a 15 per cent rise on the £29m reported in 2015.

Conflict of interest concerns

Ferguson defended his company’s business model – where advisers can buy shares in the company – after it was highlighted as being a potential conflict of interest in a Money Marketing investigation this week.

He says: “The demonstrable thing we have done through that is deliver a better outcome for clients. The model we brought to market 11 years has ultimately reduced the cost of platforms in the UK market quite dramatically as long as that is true then it is an entirely legitimate model.”

Asked if advisers looking to join Nucleus can still buy shares in the company, Ferguson says: “Not at the moment, we do not have that mechanism at the moment, it is something we are hoping to bring back at some point but it is not available now.”

As announced in March, Nucleus will reduce its charges for clients with £500,000 and above from 1 July.

Clients with assets between £500,000 and £999,999 will pay 17.5 basis points compared to the current charge of 25 basis points. Clients with £1m and over will pay 5 basis points compared to the current charge of 15 basis points.

Asked if further price changes are likely, Ferguson adds: “Not in the course of the year but there is a general direction of travel for larger clients that I wouldn’t be surprised if you see some similar or if we repeat what we we have just done for larger clients in the fullness of time.”

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