Bank of America upgrades Quilter to 'Neutral' on adviser headcount growth
Quilter has 'taken impressive action on expenses', the BofA analysts said
Analysts Andrew Sinclair, David Barma and Freya Kong cited Quilter's growing financial adviser headcount, gaining nine throughout H1 (0.6% growth) after a 19% decline since 2020.
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The analysts had previously cited the «relentless decline» in adviser headcount as their «key reason to be bearish», but the turnaround had pushed their expectations for the firm.
«This is critical for us. We believe financial adviser headcount is Quilter's 'right to win' and that it acts as a leading indicator for future new business flows,» the analysts said.
The firm has also «taken impressive action on expenses», the analysts added, with expenses down 2.5% year-over-year in absolute terms.
This has allowed the company to confirm it will complete its target for £45m of simplification cost savings over 2021-2024 by the end of 2023.
BofA now forecasts that Quilter can achieve its target of a 25% operating margin one year earlier than its 2025 ambition, warning that while weaker markets could make this challenging, «good cost control makes it possible».
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However, the analysts argued «flows remain the key challenge for Quilter», after net outflows throughout the second quarter of 2023.
The bank now estimates flows to remain depressed throughout the year, reaching 0.4% annualised net inflows, with 1.6% in 2024 and 2.7% in 2025, below its aspiration of 4-5% in a 'normalised' flows backdrop.
«The challenging UK macro backdrop means flows are likely to remain tepid over the next 12 months,» they added.
Nevertheless, the analysts argued that a return to headcount
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