IFG reports strong growth in assets under administration

IFG Group, a Dublin-listed UK-focused financial services company, reported growth of 5 per cent in assets under administration in the first three months of the year, but warned that falling interest rates hit revenues and profits.

The company said the UK revenue’s investigation into the Elysian Fuels investment product is as yet uncertain, but it will incur ongoing legal costs as a result.

Assets under administration in the three months to March 31st, 2017, rose to £28 billion (€33.2bn), up 5 per cent from December 31st, 2016, and by 17 per cent on the year.

Assets in the group’s retirement wealth planning platform, James Hay, rose 5.4 per cent to £23.3 billion (€27.6bn) as the number of new clients rose 45 per cent to 1,600, “demonstrating the benefits of the focused distribution strategy”, the company said.

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Saunderson House, the group’s independent financial adviser, now serves 2,017 clients, up from 1,956 in December 2016. Assets under advice rose to £4.7 billion (€5.6bn) from £4.6 billion in December 2016.

However, falling interest rates hit the group as the lowering of the UK base rate in the third quarter of 2016 impacted James Hay revenues and profits by £1.6 million (€1.9m) compared to the first half of 2016.

Asset growth

“Pricing changes will take effect in H2 2017 leading to an improved revenue and operating margin trajectory from H2 2017,” the group said.

John Cotter, group chief executive, said it was "another strong quarter of client and asset growth", noting that the impact of interest rates "is being mitigated whilst we continue to drive improvements to our propositions and operating capability".

Looking ahead, Mr Cotter said he expected “both businesses to continue to grow, and the changes we have made will deliver, from H2 2017, improved underlying financial performance” .

As previously signalled, IFG is moving its support function to London, resulting in the closure of the company’s office at The Oval, Shelbourne Road, Dublin, on May 15th, although it will keep a registered office in Dublin .

This month it was disclosed that former IFG chief executive Paul McNamara, who quit the group suddenly last year, has taken up a new role as head of financial technology provider EValue in Newbury in the UK.

Elysian Fuels

In its interim statement IFG also referred to a UK revenue investigation into a non-standard investment known as “Elysian Fuels”.

A structured investment in biofuel businesses, it was initiated between 2011 and 2015, an equity component of which was held by some investors through their SIPP. According to IFG, around 500 of James Hay’s 57,000 clients invested a total of about £55 million (€65.2m) in Elysian Fuels.

The company noted that it did not advise investors in relation to these investments; it acted solely as pension administrator. It said that James Hay received, in April 2017, assessment notices for sanction charges from UK revenue for the tax years 2011/2012 and 2012/2013 in total for £1.8 million, and these have been appealed and are the subject of ongoing discussions with UK revenue .

The group said that the extent of any “ultimate exposure” was uncertain at this stage, and may be mitigated by indemnities.

“We believe James Hay acted appropriately and in accordance with its clients’ instructions in relation to these investments. We will be incurring ongoing legal costs in relation to this issue,” the group said.