0 Agenda 1. Our Objectives David Nicol 2. Overview David Nicol - - PowerPoint PPT Presentation

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Agenda

• 1. Our Objectives

David Nicol

• 2. Overview

David Nicol

• 3. Results

Andrew Westenberger

• 4. Key Initiatives

Stephen Ford

• 5. Future Developments

Stephen Ford

• 6. Outlook

David Nicol

• 7. Q&A

David Nicol Andrew Westenberger Stephen Ford

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Vision Primary Goal Corporate Objectives Strategic Priorities

• 1. Our Objectives

To be the leading provider

• f personal

discretionary wealth management in the UK Generate shareholder value by growing revenue and delivering a high quality service to our clients, efficiently Build a business to be proud of based on values of client service, teamwork and integrity Manage responsibly for long term Be an excellent employer Grow our dividend in line with earnings Improve our efficiency Maintain sufficient capital to maximise

• pportunities and

cover risks Grow the number

• f clients we serve

and therefore the revenue we generate

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Growth + Efficiency + Delivery

=

Shareholder Value

ADJ EPS +19% 14.9p 12.5p Dividend +20% 8.6p 7.15p

• 2. Overview

Our strategic priorities Our strategic priorities Delivering good results Delivering good results

2013

£’bn

2012

£’bn

Discretionary FUM +17% 21.3 18.2

£’m £’m

Core income +19% 245.5 205.5 Total income +9% 283.7 260.4 ADJ PBT +22% 52.3 42.9 Margin +2% 18.5% 16.5% Capital sufficiency 226% 123%

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• 2. Overview

Delivered through management action Delivered through management action With disciplined approach With disciplined approach

• Raised £38.6m to strengthen capital

base − To withstand the risks − To ensure initiatives funded

• Announcing dividend policy to

maintain discipline and ensure returns passed to shareholders

• Two new strategic priorities to

underpin our long term goals: − Capital sufficiency − Dividend growth

• Detailed KPIs – measure progress

Completed and embedded

• Standard pricing
• Cost discipline
• Restructuring of centre
• Branch consolidation

Underway

• Simplify and streamline
• Enhance service model
• New technology
• Building organic growth channels

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• 2. Overview - Key Initiatives

Current and planned initiatives driving margin and growth to deliver against strategic priorities

Re-focus Simplify New services Technology- enabled Growth-

• rientated

Scalable

2012 2013 2016 Onwards

Completed/ Embedded

• Standard pricing
• Cost discipline
• Restructuring of

centre

• Branch

consolidation Underway

• Simplify and

streamline

• Enhance service

model

• New technology
• Organic growth

channels

• Business to

Business (BtoB) Planned

• Direct to Client
• High Net Worth

16.5% 18.5% 25%+ Adj EPS 12.5p Adj EPS 14.9p

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• 2. Overview – New Dividend Policy
• Dividend in line with earnings 2014 onwards
• Interim dividend + variable final dividend
• Target dividend pay out ratio 60-80% (adjusted EPS)

7 Margin 18.5% 16.5% Adjusted diluted EPS 14.9p 12.5p 19% Dividend 8.6p 7.15p 20% Underlying free cash flow 24.6 14.1

• 3. Results: Key Themes

2013 2012 Change £bn £bn FUM

• Discretionary
• Advisory
• Execution only

21.3 6.9 6.7 18.2 7.7 5.4 17%

• 10%

24% £m £m Income

• Core
• Other

Total 245.5 38.2 283.7 205.5 54.9 260.4 19%

• 30%

9% Costs

• Fixed operating costs
• Variable staff costs

(188.7) (43.7) (183.7) (34.6) 3% 26% Adjusted profit before tax 52.3 42.9 22% Statutory PBT 28.6 29.9

• 4%

Capital solvency 226% 123%

Discretionary – good net inflows continuing Advisory – outflows from service review Strong core income growth Improved pricing / reduced risk Fixed costs under control Strong underlying profit growth PBT down – restructuring costs and provisions Balance sheet strengthened with capital raise £38.6m and profit retention Margin improvement Dividend growth in line with adjusted earnings Free cash flow up due to lower investment capex – staying disciplined

• n acquired growth

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• 3. Results - Details

2013 £’m 2012 £’m Change % Core income 245.5 205.5 19% Other income 38.2 54.9 ‐30% Total income 283.7 260.4 9% Staff costs (105.3) (98.6) 7% Non‐staff costs (83.4) (85.1) ‐2% Total fixed operating costs (188.7) (183.7) 3% Profit before variable staff costs 95.0 76.7 24% Variable staff costs (43.7) (34.6) 26% Adjusted operating profit 51.3 42.1 22% Net interest 1.0 0.8 25% Adjusted profit before tax* 52.3 42.9 22% Amortisation of client relationships (12.5) (11.9) 5%

Redundancy costs (4.8) (0.6) Gain on disposal of available‐for‐sale asset 0.9 ‐ Additional FSCS levy (1.1) (0.5) Onerous contract provisions (6.2) ‐

Exceptionals (11.2) (1.1) Profit before tax 28.6 29.9 ‐4%

* Excluding redundancy costs, additional FSCS levy, onerous contract provisions, amortisation of client relationships and disposal of available‐for‐sale asset

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• 3. Underlying Profit Growth – Income growth, operating leverage

£m 23.8

52.3

Increase Profit Share (variable staff costs) Branch Staff Costs Central Staff Costs Trail Interest Non Staff Costs (14.4) Standard pricing Market/ FUM Growth 18.6 (9.1)

42.9

(5.1) (1.6) (4.5) 1.7

Sept 2012 Sept 2013

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• 3. Funds Under Management
• Focus on discretionary service paying off – real growth above market
• Service review / de-risking driving advisory decline

Sept 2013 Sept 2012 Change £'bn £'bn % Discretionary 21.3 18.2 +17 Advisory Managed 4.8 4.9 ‐2 Dealing 2.1 2.8 ‐25 Total Advisory 6.9 7.7 ‐10 Total Managed/Advised 28.2 25.9 +9 Execution Only 6.7 5.4 +24 Total Funds 34.9 31.3 +12 At 29 Sept 2013 At 30 Sept 2012 Indices FTSE APCIMS Private Investor Series Balanced Portfolio 3,315 3,014 +10 FTSE 100 6,513 5,742 +13

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Inflow Outflows Service Switching Net Flow % Market Move % Total Delta % £'bn Discretionary 2.1 (1.0) ‐ 1.1 +6 2.0 +11 3.1 +17 Advisory ‐ Managed 0.1 (0.5) (0.2) (0.6) ‐12 0.5 +9 (0.1) ‐2 Advisory ‐ Dealing 0.1 (0.4) (0.5) (0.9) ‐31 0.2 +6 (0.7) ‐25 Total Advisory 0.2 (1.0) (0.7) (1.5) ‐19 0.6 +8 (0.8) ‐10 Total Managed/Advisory 2.3 (2.0) (0.7) (0.4) ‐2 2.7 +10 2.3 +9 Execution Only 0.9 (0.7) 0.7 0.9 +16 0.4 +7 1.3 +24 Total Funds 3.2 (2.7) 0.0 0.5 +2 3.1 +9 3.6 +12

• 3. Fund Flow

Good net inflows in primary discretionary service

£’bn

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• 3. Core Income

Sustainable pricing – total core income +19% yoy vs 11% average FUM growth

Average FUM Income Average Yield Average FUM Income Average Yield £' bn £' m bps £' bn £' m bps Discretionary 20.0 192.7 96 17.1 156.3 91 17% 23% Advisory Managed 5.0 27.5 56 5.1 23.3 46 ‐3% 18% Dealing 2.5 7.2 29 3.0 12.8 42 ‐18% ‐44% Total Managed/Advised 27.5 227.4 83 25.2 192.4 76 9% 18% Execution Only 6.0 18.1 30 5.0 13.1 26 Total 33.5 245.5 73 30.2 205.5 68 Yoy change 11% 19% 2013 2012

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• 3. Income Summary

2013 £’m 2012 £’m Change Commissions 93.5 84.1 +11% Fees 152.0 121.4 +25% Core Income 245.5 205.5 +19% Financial Planning 11.7 9.3 Trail 14.8 29.2 Interest 11.7 16.4 Other Income 38.2 54.9

• 30%

Total Income 283.7 260.4 +9%

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• 3. Costs

Management actions during 2013 have brought costs under control

• H2 reduction due to central

function restructure

• Headcount growth stopped
• Control over discretionary spend

98.7 89.7 (4.7) 183.7 105.3 84.2 (0.8) 188.7 Staff Non staff Insurance recovery Total fixed operating costs +7%

• 7%

+3%

Change

£’m 0.6 4.9 4.1

2013 Margin impact %

(1.4)

FY 2012 FY 2013

47.1 51.6 53.4 51.9

42.1 42.1 45.1 44.6

+10% +3%

• 3%

nc

• 7%

+1%

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5.5% Gross Savings (net 4.1%)

16.5 18.5 0.6 0.6 1.1 1.9 0.8 0.5 (1.4) (2.1)

%

Central staff costs Other staff related costs Property/ infrastructure Professional/ Marketing Operational Other Lower insurance recovery Higher variable staff pay out rate 51.2 32.7 83.9 (0.4) 83.5 52.5 29.4 81.9 (0.4) 81.5

Staff cost/income Non-staff cost/income

2012 2013

Interest Cost/Income ratio

• 3. Margin Progression

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• 3. Balance Sheet - strengthened, free cash flow improved

2012 2013

Net intangible capex Profit retention Other P&L reserves Capital raise/ AFS revaluation 60.6 108.7 (5.0) 3.2 4.8 45.1 £’m Requirement (49.3) (48.2) Surplus 11.4 60.5 123% 226%

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• 3. Cash Flow

2013 £’m 2012 £’m Change ∆ Statutory operating profit 26.6 29.1 Discontinued loss ‐ (3.5) Non cash adjustments 28.1 26.4 Pension contribution (3.0) (3.0) EBITDA 51.7 49.0 2.7 Interest/Tax (5.3) (4.5) Underlying cash from operations 46.4 44.5 1.9 Investment ‐ Teams (3.4) (6.9) ‐ Fixed assets/software (19.6) (23.8) ‐ AFS Income 1.2 0.3 (21.8) (30.4) 8.5 Underlying free cash flow 24.6 14.1 10.5 Financing ‐ Dividends (18.1) (16.9) ‐ Net equity 41.7 (1.2) 23.6 (18.1) Movement in working capital 17.6 (12.1) Movement in cash 65.8 (16.0)

Underlying EBITDA broadly flat on continuing basis No new teams post H1 Capex on new technology Sale of N+1 stake Non cash provisions Higher variable pay accruals Receipt of insurance debtor Increase in shares in issue (mainly placing) £38.6 raised on placing

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• 4. Key Initiatives – Standardise, Refocus & Grow

Strategic Priority Strategic Priority

National pricing Cost discipline Review branch network

To be the leading Discretionary Wealth Manager in the UK

Initiatives Initiatives

New technology platform Enhanced service model Build organic growth “pipes” Business to business-B2B Direct to client-D2C High net worth Phase 1 ~ 2012/13 Standardise rates & Simplify services Phase 2 ~ 2013/14 Refocus on primary services & efficient delivery. Refine operating model Phase 3 ~ 2014 Capitalise on the brand & Expand offering

Improve market competitiveness and drive organic growth Improve market competitiveness and drive organic growth Achieve operational excellence to improve quality and lower costs Achieve operational excellence to improve quality and lower costs

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• 4. Standardise & Simplify - Primary Vs. Ancillary Services

Sept 2011 Sept 2012 Sept 2013

5 10 15 20 £25B

FuM

£3.3B £5.1B £15.6B

Primary

+17%

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Post RDR growth in primary services has been strong despite reorganisation

• 4. Standardise & Simplify - Primary vs. Ancillary Services

Primary Ancillary

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• 4. Standardise & Simplify – Impact on Discretionary Client size

Client segmentation by portfolio size Distribution of clients portfolio size

20% of our DFM clients <£100k = 2% of our discretionary FuM

Average Discretionary Client = £418k

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Services 2012 Now Proposition Options Discretionary Managed Advisory EXO Advisory Dealing Direct accounts under £50k Services/Custody Traded options Probate (new business) CREST Sponsored members* Certificated Accounts* Appointed Representatives

• 4. Standardise & Simplify – Propositions, Services & Custody
• We have reviewed the risk,

profitability and demand for many of

• ur ancillary services
• Many of these are either in the

process of being closed or are no longer available

• Managed Advisory will remain as a

service but will not be open for new business <£5m

*Stocktrade currently provides certificated accounts and CREST sponsor membership

Providing a personal service within a manageable proposition

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• 4. Standardise & Simplify - Branch Network

Branch network has been reshaped: 2011 42 branches 2012 41 branches 2013 35 branches 1) Improve the client experience 2) Build scale at each location 3) Increase efficiency 4) To retain & develop our talent

Offices merged or closed during 2012/13

We remain committed to a local presence

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• 5. Refocus & Refine - Enhanced Primary Service Model

Tools and technology to improve the BD client experience

Client service Client service Integration Integration

Enhanced investment framework around client “risk budget”

Researched Researched Consistent Consistent Transparent Transparent

Improved assessment of client needs and risk appetite

More control for clients More control for clients Holistic approach Holistic approach

Simplify literature and processes for primary propositions

Simplicity Simplicity Clarity Clarity

• To enrich the client experience
• Deliver better outcomes to client needs
• Deepen client relationships through a “whole
• f wealth” approach
• Maintain the blend of personal service within

a more robust oversight framework

• New CRM system to support the Brewin

client experience

• Improved approach to client need and risk

assessment

• New risk profiles and monitoring tools
• New mobile enabled technology for clients

Why change?

How? Financial planning is a critical part of our enhanced service model

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• 5. Refocus & Refine – Growing our Primary Services

Direct Clients

Refocus website in 2014 around primary services and increase our marketing presence Deepen the services we offer to existing clients

Business to Business

Increase flow from Financial Advisers Enhanced service model will allow us to develop new national partnerships with Financial Advisers

Client Advocacy

New CRM system should allow us to leverage our high “Net Promoter Score”

Professional Services

Our proposition to accountants and solicitors has become dated and will be rebuilt during 2014

Direct Clients

Refocus website in 2014 around primary services and increase our marketing presence Deepen the services we offer to existing clients

Business to Business

Increase flow from Financial Advisers Enhanced service model will allow us to develop new national partnerships with Financial Advisers

Client Advocacy

New CRM system should allow us to leverage our high “Net Promoter Score”

Professional Services

Our proposition to accountants and solicitors has become dated and will be rebuilt during 2014

To achieve 5%pa growth in discretionary FUM - net of the market Clear, Focused & Relevant Propositions

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• 5. Refocus & Refine – Business to Business
• 2012/13 saw significant reorganisation

and talent management

• Inflow up by 8.3% on 2011/12
• Assets introduced surpassed £500m in

2012/13

• Monthly inflows already up on the

average for 2012/13

• Our enhanced service model should

allow us to increase growth significantly

• MFS – Managed Fund Service is now

available on 6 platforms

• Strong growth in AUM during 2012/13 –

to £74M

• Monthly inflows now c.£10m
• Brewin Dolphin fees 0.30%pa plus VAT
• MFS won Citywire’s Best Cautious

Portfolio award

Model Portfolios for Financial Advisors Discretionary Portfolios from Financial Advisors

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• 5. Capitalise on Brand & Expand – Potential New Growth Channels
• 27% of our clients & 3% our total FUM

could be eligible for a D2C service

• Discernible trend to Self Directed

solutions

• Advice Gap is real and needs a solution
• We have an award winning multi asset

class portfolio service

• We have 250+ Client/Family

relationships >£5M

• Client relationships >£5m represent

14% of our discretionary FUM

Direct to Client – D2C Dedicated Proposition >£5m Explore & Evaluate Business Case Brewin Dolphin “Black”?

£5M+ 14% £1M to £5M 28% £500k to £1M 21% Sub £500k 37%

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• 6. Outlook – Key Performance Indicators

Strategic Priority KPI Progress this year Target Revenue Growth Discretionary FUM inflows 6% 5% Discretionary service yield 91 → 96 bps 95 bps Managed advisory service yield 46 → 56 bps 75 bps Revenue growth 9% Improved Efficiency Adjusted PBT margin 16.5 →18.5% 25%+ Discretionary income per CF30 £283k → £370k £490k % of managed FUM in discretionary service 70 → 76% 80% Discretionary FUM per CF30 £33m → £41m £50m Support staff to CF30 ratio 2.5 to 1 2.0 to 1 Average client portfolio £420k £500k Capital Sufficiency Solvency ratio 123% → 226% Min 150% Dividend Growth Dividend pay out 57% → 58% 60 - 80% Adjusted EPS growth 19.2% Dividend growth 20%

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• 6. Outlook
• Right strategy to deliver our objectives
• Cutting costs and increasing investment
• Improve competitiveness by investing in our services, technology and people
• Reduce risk and make more scalable – deliver higher margin
• Significant transformation underway
• Risks remain: culture and implementing operational change
• “Change is not a choice - but how we respond to change is”

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• 7. Q&A

Questions?

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Standardise & Simplify - Pricing

£20.0 Bn

Standard rates

£34.9 Bn

Total Funds

£26.1 Bn

Primary Funds

£18.3 Bn

Standard rates

70% of our primary managed FUM is on our national pricing We will migrate the remainder over the next 12 months

10 20 30 40

National Pricing

All FuM £20.0B

Other

Total FuM on standard rates (£Bn)

£34.9 Bn

Out of scope Yet to be moved to standard rates

£14.9B

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Rate card First £1M Next £1M Next £3M Balance First £15k Next £15k Next £20k Balance

Fee only

1.30% 0.90% 0.60% 0.25% Nil Nil Nil Nil

Fee & Commission

0.75% 0.60% 0.375% 0.15% 1.25% 1.00% 1.00% 0.50%

Discretionary Investment Service – Rate Card

No account charges No additional ISA management charges No foreign dealing charges No custody charges No valuation charges

Annual Management Fee Transaction Commission Clear, transparent and all inclusive charging structure

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Primary Services - Asset Allocation

Current Asset Allocation APCIMS Balanced Index

Bonds 17% UK Bonds 16% Overseas Bonds 1% Equities 76% UK Equities 48% Global Investments 10% North American Equities 8% Asia Pacific Equities 4% Emerging Market Equities 2% European Equities 3% Japanese Equities 1% Alternatives 4% Absolute Return 1% Commodities 1% Other Investments 1% Property 1% Private Equity 0% Cash 3% Cash 3% Cash Product 0% Grand Total 100%

Asset class

Equities 70.0% Alternatives 7.5% Cash 5.0% Bonds 17.5% Bonds Cash Alternatives Equities

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Funds Under Management

Opening 18.2 15.6 4.9 5.1 2.8 3.3 7.7 8.4 25.9 24.0 Inflows ‐ Organic 1.6 1.0 0.1 0.1 0.1 ‐ 0.1 0.1 1.8 1.1 ‐ New Business 0.5 0.4 0.1 ‐ ‐ ‐ 0.1 ‐ 0.5 0.4 Total 2.1 12% 1.4 9% 0.1 3% 0.1 2% 0.1 2% ‐ 1% 0.2 2% 0.1 2% 2.3 9% 1.5 6% Outflows (1.0) ‐6% (0.4) ‐3% (0.7) ‐15% (0.6) ‐12% (0.9) ‐33% (0.6) ‐18% (1.7) ‐22% (1.2) ‐14% (2.7) ‐10% (1.6) ‐7% Net Flows 1.1 6% 1.0 6% (0.6) ‐12% (0.5) ‐9% (0.9) ‐31% (0.6) ‐17% (1.5) ‐19% (1.0) ‐12% (0.4) ‐2% ‐ 0% Market Movement 2.0 11% 1.6 10% 0.5 9% 0.3 6% 0.2 6% 0.1 2% 0.6 8% 0.4 5% 2.7 10% 2.0 8% Closing 21.3 18.2 4.8 4.9 2.1 2.8 6.9 7.7 28.2 25.9 Total Managed Funds with Dealing 2013 % 2012 % Total Advisory 2013 % 2012 % Advisory Dealing 2013 % 2012 % Advisory Managed 2013 % 2012 % Discretionary 2013 % 2012 %

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Board

• Chairman – Simon Miller
• Senior Independent Director – Jock Worsley
• Non-Executive Director – Angela Knight
• Non-Executive Director – Sir Stephen Lamport
• Non-Executive Director – Ian Dewar
• Chief Executive Officer – David Nicol
• Finance Director – Andrew Westenberger
• Head of Investment Management – Stephen Ford
• Director – Michael Williams

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• f these slides in any jurisdiction where action for that purpose is required. Persons into whose possession these slides come are required to inform

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• f them form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. No

reliance may be placed for any purpose whatsoever on the information or opinions contained in these slides or the presentation or on the completeness, accuracy or fairness. Certain statements in these slides are forward-looking statements which are based on the Company's expectations, intentions and projections regarding its future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which may use words such as "aim", "anticipates", "believe", "intend", "estimate", "expect" and words of similar meaning, include all matters that are not historical facts. These forward-looking statements involve risks and uncertainties that could cause the actual results of operations, financial condition, liquidity, dividend policy and the development of the industry in which the Company's business operates to differ materially from the impression created by the forward-looking statements. These statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of such statements and, except as required by the FCA, the London Stock Exchange or applicable law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or

• therwise.

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• performance. No statement in these slides is intended to be a profit forecast and no statement in these slides should be interpreted to mean that

earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company. The price of Ordinary Shares and the income from them may go down as well as up. Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, these slides.

4th December 2013

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