Abrdn is set to acquire wealth management firm Exo Investing as part of plans to scale-up its wealth management business.
The deal, for an undisclosed sum, was announced as part of the group's half-year results, which also revealed a assets under management and advice (AUMA) rising to a record £8.7bn across its discretionary business.
However, total AUMA fell to £532bn, compared to the same period in 2020, due to reduction to “flows and corporate actions” partially offset by positive market movements.
Exo specialises in 24/7 digital wealth management via an app. It's artificial intelligence-powered investment technology lets customers create a unique portfolio built around their individual risk profile and preferences.
“Exo Investing will complement our existing personal vector capabilities, including open banking insights, simple risk-rated savings, financial advice and now digitally-driven wealth management," read a statement from Abrdn. "Our ambition is to be the company individuals turn to when developing their savings and investment goals.”
Chief executive Stephen Bird commented: “Exo was the first of its kind to offer a fully automated wealth management platform, leveraging machine learning to feed into portfolio decision-making.
"There is a downward pressure on fees, changing customer expectations and increasing regulatory requirements - it’s important to address these issues by providing a highly-scalable, next-generation service to investors.”
Lennart Asshoff, chief executive at Exo's parent company Nucoro, commented: “We built Exo Investing on the Nucoro Platform to fulfil the vision of democratising wealth management by harnessing the power of cutting-edge investment technologies. Abrdn’s forward-looking digital strategy makes the company both an ideal partner for Nucoro and the ideal home for Exo to drive that vision and use its reach to deliver the proposition to customers.”
The deal is expected to complete during the fourth quarter.
The group's operating profit increased by 52% from £105m to £160m year-on-year. Total earnings also rose to £113m during the first half of this year.
Abrdn managed to reduce net outflows to £5.6bn, including liquidity net outflows of £3.7bn.
As at 30 June 2021, the group's regulatory capital resources were £3.9bn – including £700,000 from the sale of a further 4.99% in HDFC Life.
"This gives us the capacity to invest more in our business to accelerate growth," the report noted.
“Our outlook is the same as we provided in our full year 2020 results in March - we are aiming to improve our operating leverage by arresting revenue decline in the near term, inflecting to a high single digit three-year revenue CAGR over the period to 2023."
While the trading update accepted that in the medium term costs will grow, this reflects a more variable base to track performance.
Abrdn spent £113m on restructuring the business, including corporate transaction expenses, which reflected the cost for “integration, separation” from Phoenix and implementing its simplified operating model.
The Phoenix separation has so far cost the business £300 to date, with a further £18m in the first half of 2021. It is anticipated the total separation cost it will incur will remain at £310m.
John Moore, senior investment manager at Brewin Dolphin, commented: “There are number of positives in today’s results from Abrdn, following a tricky period of restructuring, cost-cutting and rebranding.
“The reduction in net outflows, improved margin, and increase to profits, in particular, look positive, while the dividend remains in line with plans and is among the highest on the FTSE 100 – even after it was re-based last year.
“There are some positive signs, but despite some big moves over the last few years, there remain strategic questions over what is next for Abrdn.”
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