abrdn H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 4, 2025

Key Takeaways

  • 2024 Financial Results: Adjusted operating profit rose 2% to $255 million and net capital generation grew 34% to $238 million, driven by improved efficiency across all three businesses.
  • Transformation Program: On track to deliver at least £150 million of annualized cost savings by end-2025, with £106 million already achieved in 2024 and significant benefits for clients and colleagues.
  • Pension Plan Agreement: Trustee deal will unlock about £35 million of additional net capital generation annually from July 2025 by redirecting DB surplus to DC contributions.
  • 2026 Business Targets: Interactive Investor aims for 8% annual customer growth and a sub-20 bp cost-to-assets ratio; Advisor targets £1 billion net inflows and NPS > 40; Investments seeks £100 million adjusted profit and three-year performance beating 70% of benchmarks.
  • Group Ambition: Set to achieve at least £300 million adjusted operating profit and around £500 million net capital generation in 2026 to support a resilient dividend and sustainable growth.
AI Generated. May Contain Errors.
Earnings Conference Call
abrdn H2 2024
00:00 / 00:00

Transcript Sections

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Jason Windsor
CEO at Aberdeen Group

Good morning, everyone. Thank you for coming. Lovely to see you all. Welcome to our presentation. Today, I'm joined by Ian Jenkins, our interim CFO, and on the front row are all the members of my senior leadership team, so before I start, just one change that you will no doubt have noticed this morning: that we are changing the name to Aberdeen Group plc with the name written out in full. For me, this was a pragmatic and simple decision, allowing us simply to demonstrate our pride in the name and the brand Aberdeen and make the most of it in the marketplace, and we also have the name Interactive Investor, so we've got two principal brands, and that's how we will be marketing ourselves and going forward this year, so enough on that. I'll now just turn to the presentation.

Jason Windsor
CEO at Aberdeen Group

I'll start with the key points, then I'll hand over to Ian, of course, to take us through a little bit more detail on the 2024 results. I'll then give you an update on our strategy and targets and the path forward for the group. And of course, then we're up to Q&A. So let me start just with the highlights and the overview of the strategy at the highest level. Well, how do I see Aberdeen? It is a wealth and Investments group. And that's how we're going to describe ourselves. The wealth business, of course, is Interactive Investor and Aberdeen Adviser, both of which operate in the U.K. with excellent customer experience built on efficient technology at the heart of their success. Aberdeen Investments operates internationally. And in a competitive and rapidly changing industry, we need to act with pace and with clarity to be successful.

Jason Windsor
CEO at Aberdeen Group

When I started at Aberdeen, I knew we had to reverse the decline in performance. And as CEO, I have been able to get to grips with the business. And I'm happy to say that we have seen a shift in momentum, but there's much further to go. Last year, profits increased across all three of our businesses, with adjusted operating profit up by 2% to GBP 255 million and net capital generation up by 34% to GBP 238 million. So we are seeing improvement overall. But I want to be clear on this: none of our businesses are close to their full potential, which is why our number one priority is to transform performance. And this requires many things, including simplifying the business, removing drags on profitability, and focusing on where we have competitive advantage.

Jason Windsor
CEO at Aberdeen Group

Our transformation program delivered well against the targets we set out a year ago, with significant savings as well as benefits for our clients and our colleagues. And we're on track to deliver at least £150 million of annualized savings by the end of this year. We're also announcing today we've made progress on our pension plan, which will improve capital generation from mid-2025. And this, in turn, supports the dividend. And with the changes to my leadership team and other key appointments across the business, I'm confident we've now got the right people in the right roles at a senior level, which is very much in line with the strategic importance that I place on strengthening talent and culture.

Jason Windsor
CEO at Aberdeen Group

Of course, my other overriding priority is for us to improve client experience with a focus on our service and our products, which neatly takes me on to my next slide. So today, we're setting out a clear path forward for each business to deliver more for our clients. And we're establishing a set of clear and relevant performance targets. Interactive Investor had an excellent performance last year, achieving number one position in the U.K. direct-to-consumer market measured by net flows and now serves nearly 440,000 customers. Our priority for Interactive Investor is to sustain that growth. And we're targeting 8% per year growth in customer numbers. We'll do that by meeting a broader set of customer needs, building on the Interactive Investor brand further, and always remaining very efficient.

Jason Windsor
CEO at Aberdeen Group

Adviser is number two in an attractive growth market, but we recognize that the recent trends in flows have been disappointing. With a revamped management team now in place, we're redoubling those efforts on client service, enhancing our offering, and sharpening our pricing, all with the aim of returning to net flows as soon as possible, targeting GBP 1 billion of net inflows in 2026, and for Investments, our key focus is on delivering a step change in profitability. This will be achieved by repositioning the business to concentrate where we have real competitive advantage and clear growth prospects, and we're targeting GBP 100 million adjusted operating profit in 2026, so with a relentless focus on execution, I'm confident these priorities will lead to a significant improvement in financial performance, and to that end, putting these business unit targets together, we're announcing new group targets.

Jason Windsor
CEO at Aberdeen Group

We're targeting adjusted operating profit of at least GBP 300 million in 2026, which is an 18% increase on 2024, and together with much lower expected restructuring costs and the pension scheme arrangement that we've entered into, we're targeting net capital generation of around GBP 300 million in 2026, which is a 26% increase on 2024, and of course, this will support the dividend, and I'll share a few more details on our strategy in a moment, but first, let me hand over to Ian to go over the results.

Ian Jenkins
Interim CFO at Aberdeen Group

Thanks, Jason. Thank you. Good morning, everybody. Let me begin with a summary then of our key financial highlights. The group delivered growth in 2024 with continued strong momentum within the Interactive Investor and a marked improvement in flows within Investments, partly offset by the outflows in the Adviser business. We improved the group's efficiency through the good progress on our transformation program, resulting in a 7% reduction in adjusted operating expenses. This delivered an increase in the group adjusted operating profit of 2%, with profit growth in all three of our wealth and Investments businesses. This result is reflected in both the adjusted and the net capital generation, and dividend cover improved to 1.2 times on an adjusted basis and 0.9 times on a net basis.

Ian Jenkins
Interim CFO at Aberdeen Group

These improved cover metrics do not yet reflect the action taken to unlock the value from our DB pension surplus, which is expected to improve capital generation by around GBP 35 million per year from July 2025. So let's now move on to the 2024 group results. The group delivered an adjusted operating profit of GBP 255 million, a 2% increase on 2023, benefiting from the significant progress we have been making in achieving our efficiency savings. Adjusted net operating revenues were GBP 1,321 million, 6% lower than 2023, reflecting the impact of net outflows from higher margin products, as well as the revenue related to disposals, including our private equity businesses and Aberdeen Capital. Adjusted operating expenses were GBP 1,066 million, 7% lower than 2023, and slightly below our previous cost guidance.

Ian Jenkins
Interim CFO at Aberdeen Group

IFRS profit before tax significantly improved from a loss of GBP 6 million in 2023 to a profit of GBP 251 million in 2024. This improvement reflects lower restructuring costs, a lower loss from the change in fair value of significant listed Investments, obviously including Phoenix, and lower amortization and impairment charges. Adjusted capital generation was up 3% to GBP 307 million, whilst net capital generation increased by a third to GBP 238 million as a result of lower restructuring corporate transaction expenses net of tax, which fell to GBP 69 million compared to GBP 121 million in 2023. These results, together with our strong capital position, enable us to maintain our total dividend at 14.6p, with improved coverage ratios on both an adjusted and net capital generation basis. Turning now to our businesses' results. Each of our three businesses delivered growth in adjusted operating profit in 2024.

Ian Jenkins
Interim CFO at Aberdeen Group

Within ii, adjusted operating profit excluding Aberdeen Capital was up 5% to GBP 116 million, with higher revenues partly offset by increased investment as we create that capacity for future growth. Within Adviser, adjusted operating profit grew 7% to GBP 126 million. This reflects the 12-month revenue benefit from the previously reported revised distribution agreement, offset by a modest increase in expenses. And across Investments, we've improved adjusted operating profit by 22% to GBP 61 million, with lower revenue more than offset by an 11% reduction in operating expenses through the progress we've made on our transformation program. So now, perhaps looking at each business in more detail. Within Interactive Investor, then, continues to deliver strong customer growth, reinvesting in the business to sustain this growth and create additional capacity. Total customers were up 8% in 2024, with SIPP customers, obviously a key focus area of the business, up 29%.

Ian Jenkins
Interim CFO at Aberdeen Group

We've seen strong momentum in flows, with net inflows of GBP 5.7 billion almost doubling compared to 2023 and ranking Interactive Investor as number one for net inflows in the U.K. D2C market. Excluding Aberdeen Capital, revenue grew by 7% to GBP 278 million, with the business improving the cost-income ratio then to 58%. Particularly strong growth was seen in trading transactions, with revenues 46% or GBP 22 million higher and benefiting from a 28% increase in trading volumes. Treasury income increased by 3% to GBP 138 million, reflecting growth in customer cash balances. The average cash margin was 229 basis points compared to 236 in 2023. Subscription revenue was up 3% to GBP 60 million gross of marketing incentives.

Ian Jenkins
Interim CFO at Aberdeen Group

Excluding Aberdeen Capital, operating expenses increased by 9%, reflecting investment in marketing, proposition development, creating capacity for future growth, with the benefits of this investment already evident in the improved brand awareness. In summary, Interactive Investor continues to make great progress in delivering sustainable growth while maintaining the operational rigor that underpins its efficient business model. Turning now to the Adviser business. Net outflows were £3.9 billion for the year. AUMA of £75.2 billion was broadly flat as higher market movements offset net outflows. Revenues increased by 6%, primarily reflecting the full 12-month benefit of the revised distribution agreement for the Wrap SIPP. And overall,

Ian Jenkins
Interim CFO at Aberdeen Group

net revenue yield on AUMA was slightly higher at 31.2 basis points. Treasury margin on cash balances was 263 basis points, up 35 and consistent with the figure reported at the half-year. adjusted operating profits grew 7% to £126 million. Expenses were 5% higher, reflecting Investments made to enhance our client proposition and included the one-off, again, gain or a £17 million benefit from a temporary third-party outsourcing discount. While we've seen some early encouraging signs in addressing past service-related issues, we recognize there remains work to be done and returning the business to positive flows. Moving to our Investments business. Institutional and Retail Wealth saw a significant improvement in flows.

Ian Jenkins
Interim CFO at Aberdeen Group

Gross flows, excluding liquidity, were up 31% to £25.5 billion. And net inflows of £0.3 billion were over £18 billion higher than the £17.9 billion of net outflows in 2023. Recognizing net flows in equities continues to present a challenge. There's been good momentum in our quant strategies, liquidities, and alternatives, with net inflows in both real assets and alternative investment solutions both key areas of future growth. Insurance Partners net outflows increased to £4.3 billion compared to £1.1 billion in 2023, and primarily related to the ongoing run-off in the heritage business. Total AUM across Investments was up 1% to GBP 370 billion, as positive market movements more than offset the net outflows and corporate actions. Excluding the sale of our European private equity business and the acquisition of closed-end funds from First Trust, AUM increased overall by 3%.

Ian Jenkins
Interim CFO at Aberdeen Group

adjusted operating profit grew by 22% to GBP 61 million, driven by cost savings, which more than offset the lower revenue. We remain focused on driving efficiency in Investments and expect further improvements to profitability as this transformation work continues. Adjusted net revenue yield was 21.3 basis points compared to 23.5 for 2023, as the asset mix continued to feel the effects of those industry headwinds. So now moving to the transformation program and the benefits it's developing for the group. As Jason outlined in January last year, we're targeting annualized savings of at least GBP 150 million by the end of 2025 compared to the expense base we reported in 2023. The program remains on track to deliver this target, and we have realized GBP 70 million of in-year savings in 2024.

Ian Jenkins
Interim CFO at Aberdeen Group

As a result of these efficiency improvements, 2024 adjusted operating expenses were GBP 1,066 million, and that's down 7% year on year. In total, GBP 106 million of the annualized run-rate savings have now been achieved from the actions already completed in 2024. This strong progress and visibility of future savings underpins our confidence in achieving the GBP 150 million target. These actions create capacity for some reinvestment across the group, while also improving our net capital generation and supporting shareholder returns. As well as the cost-related benefits, the programs delivered improved outcomes for both clients and colleagues, and this work is very much continuing. So now turning to the capital generation. In 2024, adjusted capital generation increased by 3% to GBP 307 million due to higher profits.

Ian Jenkins
Interim CFO at Aberdeen Group

Net capital generation was 34% higher at GBP 238 million, as restructuring and corporate transaction expenses net of tax reduced to GBP 69 million. Looking ahead, we expect net capital generation to converge with adjusted capital generation, and we continue to expect much lower restructuring costs in 2026. On an adjusted capital generation basis, dividend cover was also stronger at 1.2 times, up from 1.1 times in 2023. We remain committed to improving capital generation to support shareholder returns, and now turning to the group's capital position. We continue to benefit from a strong capital position with CET1 of GBP 1.5 billion, covering 139% of our regulatory requirement.

Ian Jenkins
Interim CFO at Aberdeen Group

This is further enhanced by GBP 0.8 billion of gross AT1 and Tier 2 debt, GBP 0.5 billion of which contributes to that regulatory capital. In addition, we have GBP 1.3 billion of net assets not included in capital. This comprises GBP 0.5 billion stake in Phoenix and a GBP 0.8 billion IAS 19 pension plan surplus. Our Phoenix stake underpins a very important relationship, and we receive a GBP 56 million dividend in 2024 as a result of holding this. This source of capital generation continues to support our dividend. So in summary, our capital base remains strong, enabling us to maintain our dividend and invest in our business. So finally, now turning to the outlook for our business and financial guidance for 2025. Within Interactive Investor, we expect continued strong growth in customers, net flows, revenues, and adjusted operating profits.

Ian Jenkins
Interim CFO at Aberdeen Group

Cash margins are expected to be in the region of 200-220 basis points and benefit from the higher customer cash balances. For Adviser, the repricing announced last year has now been rolled out to the existing customers earlier this quarter, and we expect this to lower Adviser's revenue margin by around three basis points in 2025. Adviser's cash margin is expected to reduce to around 225 basis points, and profitability is expected to reflect the end of the third-party outsourcing discount, which again benefited expenses by GBP 17 million in 2024. Across Investments, we do expect some further contraction in revenue margin. In total for 2025, we expect this to be below 21 basis points, around 30 basis points for Institutional and Retail Wealth, and around 8 basis points for Insurance Partners.

Ian Jenkins
Interim CFO at Aberdeen Group

Based on what we know today, we are expecting net flows in our core Institutional and Retail Wealth business to be roughly flat in the first quarter. However, we are anticipating a redemption of around GBP five billion from a very low margin insurance mandate, with an average revenue value of about GBP one million. Operating expenses are expected to continue to benefit from our transformation program, and the majority of the remaining cost savings will be reflected within the Investments business. At a group level, we remain confident in achieving our transformation program target of delivering at least GBP 150 million of annualized cost savings by the end of 2025. Thank you very much indeed, and I'll now pass you back to Jason. Thanks.

Jason Windsor
CEO at Aberdeen Group

Thank you, Ian. So our strategy is actually quite simple, and that's to seize the opportunity in each one of our three core businesses. I and my leadership team are really excited by this opportunity, and we're committed to driving this group to new heights and to set up Aberdeen for sustainable long-term growth, so with this in mind, I'd like first to talk about our ambition for the group. Our purpose is to enable our clients to be better investors, and this is what unifies us as a group, and our ambition is to become the U.K.'s leading wealth and Investments group.

Jason Windsor
CEO at Aberdeen Group

We'll build on the strong positions that each of our businesses hold in their respective markets and our deep and long-standing relationships with customers. We will target fast-growing U.K. wealth market through our ii and Adviser businesses or focusing asset management capabilities where we have existing strength. This will be underpinned by a commitment to excellence in client service, investment in technology, and in our talent.

Jason Windsor
CEO at Aberdeen Group

We have an enviable base from which to build, but we do know there is much more to do. It's an exciting time for the group, and we think we can deliver much more for stakeholders. Just let me take a moment to touch on the market growth opportunities. On this slide, we set out the structural factors that we, as a group, are well positioned to benefit from. In the U.K., over GBP 5.5 trillion of wealth is expected to transfer between generations over the next 25 years. The number of people retiring annually over the next three years is expected to be around 750,000. This is a huge opportunity for both our wealth businesses, given their deep expertise and breadth of products, and the opportunity to do more in retirement solutions.

Jason Windsor
CEO at Aberdeen Group

As we know, individuals are increasingly having to take more control of their long-term savings and retirement planning, driving the need for easily accessible solutions to access their savings and Investments, whether directly or through advice. With the advice gap continuing to grow, with at least 20 million people in the U.K. estimated to be in a gap. In this context, the government and consumers are looking for affordable, tailored guidance and execution. Both of our businesses in wealth are well placed to address this need, and our Investments business is also able to offer relevant products through its managed solution range. In asset management, we see investing requirements becoming more complex, supporting the need for active asset management, especially in higher margin alternatives where we already have the scale and a strong product offering. One area where we are seeing growth is the transition to low carbon energy.

Jason Windsor
CEO at Aberdeen Group

Given the strength and scale of our real assets business and our capabilities in sustainability, Investments is well placed to capture this opportunity. I'll now talk to each of our businesses in turn, starting with Interactive Investor. ii continues to go from strength to strength. Richard Wilson and his team have done an exceptional job in creating the fastest-growing D2C platform in the U.K., measured by net flows. I'm genuinely excited about the future growth prospects for ii. As this slide sets out, the D2C market currently comprises less than 10% of U.K. savings and wealth, and ii have a 20% share of that D2C platform market. The market is forecast to grow assets by over 13% per annum. This is a market where the four biggest players last year accounted for around 90% of net sales.

Jason Windsor
CEO at Aberdeen Group

ii has a disruptive and market-leading subscription pricing model, underpinned by a platform which has excellent customer experience, which, of course, you can test for yourselves. Our proven service and exceptional customer value offering, alongside our program of product innovation, has resulted in ii winning a number of accolades. Last year, ii had more five-star Trustpilot reviews than all of our direct competitors combined. We'll continue to invest in the Interactive Investor brand, and last year, we achieved a 12 percentage point increase in brand awareness to 25%. Turning now to the outlook for ii's performance. As you can see from the chart on the left, ii achieved strong organic growth in its platform business in 2024, with total revenues, excluding cost of sales and marketing, 12% higher than in 2023 and up by 45% compared to 2022.

Jason Windsor
CEO at Aberdeen Group

Importantly, ii benefits from having three diversified and resilient revenue streams, all of which increased last year. Trading revenues improved substantially year on year as customers made increasing use of the platform's trading and FX capabilities. Subscription revenues are also higher year on year, and treasury income remains an important component with the potential to grow as cash balances increase. As Ian just noted, treasury margins for ii are expected to be between 200 and 220 basis points in 2025. And beyond this, we see margins as being less sensitive to future base rate changes than is currently assumed by the market. Taken together with an expected continuation of strong customer growth, particularly in SIPPs, where cash balances are slightly higher, I am confident about the outlook for treasury income, and I do not foresee, and we are not witnessing, regulatory concerns on the ii pricing model.

Jason Windsor
CEO at Aberdeen Group

In fact, we're convinced we offer exceptional value to customers, which is indeed at the heart of the business's success. Turning now to how ii is innovating to meet broader customer needs. Our strategy is to focus on sustaining efficient growth by building on our differentiated proposition and investing in the Interactive Investor brand. Let me talk through each of the three pillars briefly in turn. First, new offerings for 2025. We're launching three innovative and exciting propositions to serve more of our current customers' needs and appeal to new customer segments, segments that are currently underserved in the U.K. D2C market. Following our Managed ISA launch last year, we'll be releasing a Managed SIPP product this year, again designed by Aberdeen Investments. This will provide more support and guidance to less confident investors. We'll be launching ii 360, an advanced trading platform to support more sophisticated and active investors.

Jason Windsor
CEO at Aberdeen Group

We will launch ii Advice, a digital advice service which brings our disruptive and tech-led ethos to the world of financial guidance, where there is a clear need for something different and better. Our second pillar is continuing to drive customer engagement through value-added products and continued investment in the Interactive Investor brand. Of course, that leads to positive customer recommendations. The third pillar is to ensure ii sustains efficient growth. In fact, it's already very efficient with a cost-to-asset ratio of 22 basis points in 2024, but we're going to go further with a combination of strong growth, operational discipline, and the scalability of the business. We're aiming to reduce this ratio to less than 20 basis points by 2026.

Jason Windsor
CEO at Aberdeen Group

So in summary, by leveraging our excellent technology base and disruptive pricing model to deepen and widen customer engagement, we are well placed to enjoy the compound effects of gaining a growing share of a growing market. Turning now to Adviser. Before I talk about the action being taken by Noel and his team, I want to discuss the opportunity and ambitions for this business. We are absolutely focused on realizing the value from the significant investment we've made in Adviser. We're number two in the U.K. market, serving over 50% of IFAs with just over 400,000 end customers. We have an 11% share of the advice segment, a segment which is set to also grow at 13% a year. So as demand for advice continues to grow and IFAs look for ways to serve their clients better and more efficiently, the opportunity for us is clear.

Jason Windsor
CEO at Aberdeen Group

Following this significant investment in the upgrade, the Wrap platform is now working well with the tools and infrastructure to support our IFAs to serve their customers. We have brought in more competitive pricing to support our commercial objectives, and we've strengthened the leadership team with three new appointments. Overall, we're well placed to respond to clients' evolving needs, and our primary objective now remains to return to growth. So I'll now turn to the actions being taken by the team for our clients. Over the past year, the business has improved service delivery with reduced times across a number of core processes. Examples include the average speed to answer calls, which has been reduced by about 80%, and the time to process SIPP cash transfers out, reduced by a working week.

Jason Windsor
CEO at Aberdeen Group

We're building on this with additional resources to support onboarding processes and assist with peaks in demand, as well as taking further steps to automate and improve other key processes. We will further enhance our product offering. Last year, we launched our Money Market MPS option in February and cash saving solution in July. We're now building on this with the forthcoming launch of our Aberdeen SIPP. We're also focusing on creating capacity for IFA clients to grow their business with us. Adviser holds an enviable position in an attractive market. Over time, we're focused on re-establishing a leadership position in this market, but our first priority is to return to growth as soon as possible. We're targeting a Net Promoter Score of greater than plus 40 and inflows of plus GBP 1 billion in 2026. Turning now to Investments.

Jason Windsor
CEO at Aberdeen Group

We have a scale Investments business with GBP 370 billion of AUM, with strong recognition internationally and many talented investment professionals. However, for various reasons, some structural, some that were avoidable, we are not yet growing with sufficient profitability. As highlighted by our significantly improved net flow position and our improved one-year investment performance to 77% beating benchmark, 2024 was much better than 2023 or 2022. We therefore look forward with optimism and conviction about the Aberdeen Investments business of the future. We believe there are significant opportunities for specialist active asset managers in a transitioning industry. To do so, we will build on our heritage and across key growth asset classes where we hold competitive strengths. These are specialist equities, public and private credit, and real assets. I would like to highlight two areas we will focus on.

Jason Windsor
CEO at Aberdeen Group

First, private markets and alternatives, and second, wholesale, where predicted growth rates are 10% and 7% per year, respectively. Alongside their growth potential, I would note that both these markets have margins that are typically one and a half to two times higher than for traditional institutional business. With a careful repositioning of the business, we can therefore not only drive increased flows, but also capture improved revenue. With our new leadership in Xavier Meyer and our new operating model, we're able to apply greater focus and pace to building a specialist asset manager that can optimize in existing areas of value. So how will we win? In the near term, our focus is to deliver a step change in profitability, targeting over GBP 100 million of profit in 2026 by delivering further on efficiency and repositioning the business to those areas of strength and growth opportunity.

Jason Windsor
CEO at Aberdeen Group

In private and alternatives, we have £70 billion in AUM across real estate infrastructure, private, and hedge fund solutions. Notably, in real assets, we will look to build on our excellent capability and scale of £42 billion. In wholesale, we have good scale with £64 billion of AUM. We're a top 10 player in the U.K. with 50 funds globally rated four and five star by Morningstar. By expanding access to our institutional grade, credit, and specialist equities products, we're looking to achieve growth globally in wholesale. We're also positioning our offering for areas of potential future demand. This includes private market solutions and active ETFs, where last week, we converted two funds in the U.S. with approximately £130 million of AUM into active ETFs.

Jason Windsor
CEO at Aberdeen Group

We are also seeing opportunity in scaling our existing strengths, focusing on insurance solutions and on closed-end funds, where we're the fifth largest manager in the U.S. and the U.K. Of course, we recognize the importance of sustained investment performance in attracting and retaining clients. So we'll continue to build on the progress already made by our CIO, Peter Branner, and his team. This will include further investment in people, processes, and technology. Our target is for three-year investment performance to be better than 70% by 2026. We'll also continue to enhance the business's operating model to improve agility and enable us to add scale efficiently, which I'll come back to in a moment. I'll now turn to the senior leadership team. Since I was appointed CEO, I've taken action to evolve our approach to delivery across the group. Put in place a new streamlined group operating committee in November.

Jason Windsor
CEO at Aberdeen Group

Alongside me, this committee combines the three CEOs of our businesses, our CFO, our Chief People Officer, Tracey Hahn, and our Group General Counsel, Rushad Abadan, all of whom are here today. Ian has done a phenomenal job as interim CFO on his second stint and has announced on Friday Siobhan Boylan will be joining us this summer as our permanent CFO. The smaller group has been instrumental in bringing greater discipline to how we operate. We meet weekly with a clear remit to transform the group's performance, increase the pace of decision-making, drive accountability, and accelerate progress against our priorities. We'll ensure that capital is deployed where the rationale is strongest and provides most value to shareholders. We're also focused on strengthening our talent and culture. First, let me just take a moment to thank all of our colleagues.

Jason Windsor
CEO at Aberdeen Group

They've been instrumental in the shifting momentum we've seen across our businesses. Strengthening talent and culture is one of my three priorities, and there are four aspects I'll just briefly touch on. First, the importance I place on leadership. We're redefining what leadership means at Aberdeen by resetting our expectation around the role leaders play in creating clarity, fostering teamwork, and driving performance. In addition to the leadership changes I just outlined, we've appointed Alain Courbebaisse, previously CCO and Interactive Investor, as Chief Operating Officer of our investment business. Second, operating model. Alongside the Group Operating Committee, we've revamped the Executive Leadership Team to have a more commercial and client focus, adding our investment CIO and all of the most senior client and product colleagues from across the three businesses. The ELT ensures effective cascade of our growth and efficiency objectives and removes any obstacles to better decision-making.

Jason Windsor
CEO at Aberdeen Group

Third, we're reaffirming our commitment to invest in our people. We have incredible talent at Aberdeen. We're committed to doing more to support career development and providing opportunities for learning and growth. I want this to be a business our people are proud of. And finally, we're evolving the culture. We want to make Aberdeen a place not only where talent is our competitive advantage, but to create a culture that drives innovation, understands the power of automation, and is constantly looking to be more efficient for our clients. And where we're seeking better is the constant refrain. Which neatly moves me on to our new COO and transformation. In November, Richard Wilson was appointed as Group COO in addition to continuing in his role as Interactive Investor CEO.

Jason Windsor
CEO at Aberdeen Group

Building on more than three decades of experience delivering change in this new role, Richard has overall responsibility for our technology capability, implementing automation, and driving efficiency, and Richard will take on a leadership of our transformation program. To call out three examples of where we will focus. First, enhancing our operating model and Investments, including reviewing our key processes. Second, driving efficiency across technology and operations with a particular focus on rationalizing third-party supplier relationships. And third, reviewing our functional support model, including improvements to our control environment, so overall, Richard is tasked with driving the organization harder and improving operational efficiency, leveraging what has already been achieved in Interactive Investor. By doing all of this, we'll be more focused on growth, deliver better outcomes for clients, create a more agile cost base, and invest more in developing our colleagues.

Jason Windsor
CEO at Aberdeen Group

I'm confident Richard will help me unleash the potential of this group. So now, change gear and just a word on capital management. We set clear principles by which we allocate capital across the group. As you'd expect, the overarching aim, of course, is to direct resources to where they can generate the best return for shareholders. But first and foremost, we will sustainably grow earnings across our businesses. This is the source of capital for future investment and for dividends. Second, we'll preserve our strong balance sheet by increasing net capital generation and retaining additional sources of capital, not least our GBP 500 million stake in Phoenix, which underpins our strategic relationship with them. We do expect to reduce our gross debt over time, although we have no immediate plans to do so. Our commitment to shareholders is that the group will have a resilient dividend.

Jason Windsor
CEO at Aberdeen Group

Over the medium term, I'm not expecting to grow the dividend per share, but I am expecting the coverage to improve markedly to improve that resilience. The actions we're taking to unlock value from our defined benefit pension plan will support this aim. I'll come back to that in a moment. While there are no immediate plans for significant inorganic activity, I would note that any such activity would be subject to a demanding return hurdle. So onto that pension agreement. The group's DB pension plan has been successfully managed over many years, and that's resulted in a significant surplus. We're pleased to announce today that we've reached agreement with the trustee to use the surplus to fund the cost of providing defined contribution benefits to our U.K.-based employees.

Jason Windsor
CEO at Aberdeen Group

We expect this arrangement to deliver a significant boost to net capital generation of about £35 million per year, starting from July 2025. Whilst this is a structural solution with a significant annual benefit to capital generation, it does not preclude optionality in the future, for example, an insurance buyout. I'd like to thank all of my team involved and the trustee for reaching this agreement. So to close, we have significant headroom in each of our three core businesses. We've identified the key focus areas to enable them to realize their growth and profitability potential. Interactive Investor will enhance its offering further, investing in its differentiated platform and brand to sustain efficient growth. We're targeting 8% per year customer growth and a cost-to-asset ratio of less than 20 basis points by 2026.

Jason Windsor
CEO at Aberdeen Group

Adviser will focus on delivering leading client service and improving our product offering to support a return to net inflows. We expect a net promoter score of greater than 40 and net inflows of at least £1 billion in 2026. Investments will seek a step change in profitability by further repositioning to areas of strength and opportunity. We're targeting adjusted operating profit to increase to more than £100 million in 2026 through further improvements in efficiency. In addition, we're aiming for the three-year investment performance versus benchmark to rise above 70%. Today, we're setting group targets for 2026, namely to increase adjusted operating profits to more than £300 million and net capital generation to around £300 million. Achieving these targets will support the sustainability of the current dividend. This ambitious set of targets reflects our confidence in the group and its future prospects.

Jason Windsor
CEO at Aberdeen Group

I see this as a position from which we can build. It's by no means the limit of what we think the group can achieve in the longer term. We can create a much stronger business that our colleagues can be proud to work for, that delivers better outcomes for our clients, and that offers much more attractive returns to shareholders. And with that, we'll open up to your questions. Thank you. Give me a moment. Right. Nicholas, I think you've got the mic.

Jason Windsor
CEO at Aberdeen Group

Thank you, Jason. Thank you. Yeah, thank you for today's update. It's a lot to digest, but really appreciate the detail. I guess I'll just start at the top in terms of, I guess, group overall targets, please. But yeah, so three questions from me. Just firstly, can you please talk about the embedded assumptions and market assumptions in your plan? Secondly, can you give us a sense of whether and how much your new targets are ahead of the implied targets that you announced to the market in January 2024? And I'm just trying to get me obviously notably ahead of consensus. I'm just trying to understand how much of it is you upsizing your targets versus maybe consensus market expectations just getting a little too cautious. And then finally, if I think about the bridge from market expectations to your 2026 targets and look at the divisional targets,

Jason Windsor
CEO at Aberdeen Group

it looks like the biggest delta to expectations may be in treasury income in Interactive Investor. Is that fair? And as part of that, thank you for providing us with that slide 21 with the expected cash margins over time. Can I just ask on cash balances? Cash balances are now 8% of AUA. That's the highest it's been since June 2023. Presumably, that continues to tick up given the growth in SIPP and maybe also falling interest rates. So where do you see cash balances as a percentage of AUA trending to settling out over time from the 8% today? Thank you.

Jason Windsor
CEO at Aberdeen Group

Okay. There's quite a lot there. If I don't answer all of that, then forgive me. In terms of assumptions, basically to hit these numbers, we're not assuming the market's going on a rip. We've got the way we plan is to have very conservative fixed income and equity growth assumptions. That's on which this is built. If there were a material crash or reduction in fixed income values, that would be a problem to hit this target. But it's not predicated on major growth.

Jason Windsor
CEO at Aberdeen Group

But obviously, if people are taking more risk and investing more, markets tend to go up, and there tends to be a compound effect there. In terms of the plans versus consensus, I think we set out I was quite new when we set out the transformation target last year. It was something that we thought hard about, and Ian helped design, and we implemented as a sort of re-engineering of the business. So we're comfortable that was the right plan for then. We've made really good progress in 2024 and will continue to seek further efficiency. But Richard will pick up the mantle of this, and we'll take it on. We'll finish the program. That's a 2025 objective. And then we'll continually be looking for efficiency within that business because the revenue shift in Investments will continue. We are expecting margins to fall further.

Jason Windsor
CEO at Aberdeen Group

So we will need to continue to be more efficient to be successful and to hit our targets. On the expectations versus market, I think we've largely got easy one for me is market's largely got Adviser about right, which is a step down because of pricing and the way that the costs are going through. I think on Investments, there's more to do for us to convert people over. But broad, it's not a million miles off. I think revenues will continue to be under pressure. It's not to say flows are under pressure, but we are seeing growth in lower margin areas. We have to face into that. But we can do more on cost. And then Interactive Investor, I think you're right.

Jason Windsor
CEO at Aberdeen Group

There's a series of elements where I think we're doing better than people are expecting, both in terms of growth, but also in terms of treasury income. And we've given some clear guidance on that. Richard, on the cash balances, they're probably ticking up slightly. Anything you would add?

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

Yeah, I don't have a great deal to add to what Jason has said. You're right that cash balances as a percentage of AUA in 2023 were at a historic low. And as the rates environment evolves, we're expecting that to uptick marginally. And as Jason pointed out earlier, the relative or comparative percentage of cash on AUA in SIPP is moderately higher than it is in the other wrappers. So with our ongoing growth in the SIPP penetration, we'd expect that to expand moderately.

Jason Windsor
CEO at Aberdeen Group

Thank you. We'll go to Hubert next in the second row.

Jason Windsor
CEO at Aberdeen Group

Thanks. It's Hubert Lam from Bank of America. I've got three questions. Firstly, on slide 13, you do show that cost base continues to go down this year as well as next year. Where are the cost savings coming from after already doing a lot of cost saves already? Second question, again, sorry, I want to dig a little bit deeper in terms of the Investments profit guide of GBP 100 million plus in 2026. How much of that is driven by revenues and how much driven by costs in terms of the profit improvement? And again, in terms of assumptions, do you still expect revenue fee margin to come down further? Because obviously, that's a headwind in terms of improving your revenues. And lastly, in terms of year-to-date flows, thank you for the guidance around flat this year. So far, this quarter, sorry.

Jason Windsor
CEO at Aberdeen Group

Are you seeing any improvement in terms of demand for equities? Just given that there's been a shift from the U.S. more to possibly China, EM, etc., are you benefiting from any of that change? Thanks.

Jason Windsor
CEO at Aberdeen Group

Okay. Ian, do you want to cover the source of the cost saves?

Ian Jenkins
Interim CFO at Aberdeen Group

Yeah. So transformation, I mean, we've obviously got GBP 106 million to date. That's predominantly come from contract negotiation, third parties, tech, some AI innovation, right-sizing a little bit of the teams we did right up front, a lot of work on process simplification. And we'd expect much of that to continue under as Richard sort of pushes forward. So we've got a good book of work to complete our GBP 150 million, and that's how it's really set up.

Jason Windsor
CEO at Aberdeen Group

So on the second question, Toby, you can get ready to talk about demand for equities. On the second question on the outlook for revenue and cost, it's mainly cost that will come through, and we've set that out. As I just said, previous question, we do see basis points ticking. They're probably not as fast as we've seen as the book shifts between some of the more traditional products and some of the areas where we're growing. So I don't anticipate revenue growth in Investments.

Jason Windsor
CEO at Aberdeen Group

That's not to say we're not anticipating growth in the outlook for the business to be more positive and to make up the difference. We are going to become more efficient. On the year-to-date flows, we did want to highlight the one redemption that we've had. There's a revenue value of around GBP 1 million contract value. So it will look bad in Q1 numbers from a flow perspective. It's not a big revenue issue. I just want to be clear on that. And then, Toby, do you want to talk about the outlook for the specialist equity business?

Jason Windsor
CEO at Aberdeen Group

Sure, definitely. So from an industry point of view, appetite for equity has actually slightly recovered over 2024, and the trend is continuing. It's not necessarily a massive trend, and it's also a trend in 2024 that has been very much directed towards the U.S. and Mag 7 in particular. What we are now seeing, actually, which is a very recent trend, is opportunities and pockets of opportunities in a more specialized area out of Mag 7, if you think about small cap, for example. So it's quite early in the year to know and have a precise view whether it's going to be a very supportive year for equity or not.

Jason Windsor
CEO at Aberdeen Group

But we are operating in an environment that is better than what we have been facing over the last two years. This being said, emerging markets, and in particular Asian equity, is still a bit of a challenging picture. Our eyes, in terms of opportunities, are focusing on China and the stimulus and the reasonable stimulus that are expected to come from China.

Jason Windsor
CEO at Aberdeen Group

Thank you. Enrico, I think. Pass the mic back to Rose, please. Thanks.

Enrico Bolzoni
Enrico Bolzoni
Executive Director of Equity Research at J.P. Morgan

Thank you. It's Enrico Bolzoni, J.P. Morgan. First question on AI. I think pretty impressive stats also on market share. You have a number of new features that are coming out this year. Can you remind us on whether some of these will be available by the end of the ISA season? So might see a tangible benefit already. And then on the Managed SIPP in particular, can you remind me if this will include also decumulation? So you'll be able to actually provide managed solution when it comes to the decumulation phase. That would be helpful. And then again, I guess related to that, we are expecting from the FCA the outcome of the Advice Guidance Boundary Review. What implication do you expect for the business? Do the targets include any tailwind from that at all? So these are my questions. Thanks.

Jason Windsor
CEO at Aberdeen Group

I think that is a perfect chance to get Richard back on his feet.

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

Thank you. So in terms of the first question, which is the feature set, the answer is no. There won't be major new releases prior to the tax year. And we are entering into the beta release of ii 360 in the coming days. We're going to spend whatever time we need to harden that environment over the coming months before we go into GA or general release. The Managed SIPP live date is in Q2. And the initial version of the Managed SIPP is accumulation. And I can't remember the third question. Accumulation, yeah.

Enrico Bolzoni
Enrico Bolzoni
Executive Director of Equity Research at J.P. Morgan

Yeah.

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

Oh, yes. The Advice Guidance Boundary. Clearly, as we all know, that's going through an extended level of review with the regulators. So we don't have a hard fix on the boundary position between targeted support and personal recommendation. Our engineering is insensitive to that. Having said that, we don't have any great expectation in terms of a hockey stick on the financials from the digital advice offering. That's a multi-year commitment. So we'll adapt our journeys when that guidance position becomes clear. And that for us will just be part of our flex. We've got no interest in taking conduct risk. So we'll be very prudent in terms of how we deploy.

Jason Windsor
CEO at Aberdeen Group

Thank you, Richard. Michael

Michael Werner
Michael Werner
VP of Investment Banking at UBS

Thanks, guys. Michael Werner here from UBS. Thanks a lot for the presentation today and all the details. Just two questions from me. First, on the capital generation coming from the pension plan, can you just give us a little bit more color? Is this something that we should think of as like an annuity? Is it going to be stable over time? How is that going to potentially change in terms of, I guess, the transfer from the surplus into your capital base? And then second, there was a news report, I believe, a week or two ago about a potential tie-up with a Chinese bank. I was just wondering if you could provide any commentary there. And then ultimately, just thinking about any incremental opportunities you have and how that might have an impact on your 2026 targets. Thank you.

Jason Windsor
CEO at Aberdeen Group

Okay, so easiest one is the cap gen target. It is an annual benefit. It's about GBP 35 million or so. The surplus depends how you measure it, of course. But IAS 19 is about GBP 800 million. Economic surplus a bit lower. But the surplus will, on average, refresh itself as we expect the performance on the assets to be higher than the payments out of that surplus. So it's not going to deplete the surplus materially. And certainly, I mean, it's only whatever it is, under 5% of the accounting surplus per year. And the cap on it is effectively how much contribution we're making to DC. So that's rather than anything to do with the surplus.

Jason Windsor
CEO at Aberdeen Group

It's just the actual cash cost of providing pensions to our employees. So as I say, it's a structural solution, and we see that as an annual benefit. I mean, nothing on those news reports. They were news reports. They weren't comments from us. So I can't really say anything further on that. Incremental opportunities, of course, we are always eager, red-blooded and all that, to find things for us to do that is more and more exciting. But M&A is not a massive part of the way I think about it. We might take opportunities if they arose.

Jason Windsor
CEO at Aberdeen Group

But we're not sitting on a sort of pipeline of ideas and things. It's very much a self-help, fix, get the cost base right, get the marketing right, get the product and service areas right, and really focus on the core businesses. And hopefully, that came through in the presentation. But let me just repeat that. That's what we're doing. Who's next? Charles, then Andrew.

Jason Windsor
CEO at Aberdeen Group

Thank you very much. A couple for Richard, if I can, on ii 360. I was just wondering if you could flesh out what the offering will look like. We're expecting CFDs, futures, options, margin lending, etc. Or is it going to be a bit more streamlined than that? And are you going to be competing with IBKR, Robinhood? Is that the idea? Just wondering whether this will entail a sort of two-tiered pricing structure where commissions and FX are cheaper on the active trader platform. And then finally, just be interesting to know how you've managed to build out a new offering without materially upgrading the cost guidance. Thank you.

Jason Windsor
CEO at Aberdeen Group

Yeah, Richard, go for it, please. Thank you.

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

Thank you for that complicated question. First of all, like most of the developments that we undertake, they are very carefully thought through. And we do nothing which will conflict with our underlying discipline and focus to make sure that our operating capability and our ambition stay connected. We've been working on a number of initiatives, which hopefully, for those of you who make the journey to Manchester in June, we can show you the underpinnings of. We've been working on those for a number of years.

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

An example of that is ii Community, our social investment platform that went live initially in October of 2024. We've been working on that for four years. ii 360, we've been working on that for a number of years also. The proposition is, ii as a brand is a long-only investment platform. It targets long-term investment and is not geared or priced to attract active traders.

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

That clearly is a very close adjacent market. And we have a number of sophisticated customers who would prefer to have those services, which today we can't offer. The platform will provide access to all the world's markets. It will be long-short. You will have stock loan. You'll have CFDs and derivatives. I don't have an ambition to offer the kind of leverage and churn and burn model that some of our colleagues elsewhere in the market offer. And we'll stage that deployment over the next quarters as we harden the environment. The pricing, we will disclose when we're ready. But you can assume that it will be on the disruptive side as opposed to on the monetizing side. Hope that answers the question.

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

And the costs, Richard?

Richard Wilson
COO and CEO of Interactive Investor at Aberdeen Group

The costs, we come from, myself and my wonderful colleagues come from a market infrastructure background. So we're very careful and thoughtful about how we layer adjacent services so they interoperate. So the vast majority of the costs that we have incurred are already in the book. So there's no material balance sheet carry on that investment. And we work very closely with very close partners to make sure that we can deliver that in a non-dilutive way. So don't expect any cost surprises on that.

Jason Windsor
CEO at Aberdeen Group

Thank you. Mr. Crean.

Andrew Crean
Andrew Crean
Equity Research Analyst at Autonomous

Hello, it's Andrew Crean at Autonomous. Three questions. Of the remaining GBP 80 million of cost savings, how many will fall in 2025 versus 2026? Secondly, looking at your capital generation, net capital generation target of GBP 300, if I took the 2024 of GBP 238, took out the restructuring costs, and then added in the benefit of the pension scheme, you'd be at sort of GBP 340-ish.

Andrew Crean
Andrew Crean
Equity Research Analyst at Autonomous

So the target of GBP 300 looks as though it's a bit lower than that. Why is that? And then can you tell us what is the flows? I mean, you said it for the Adviser business, but what is the flows ambition within the Investments target in 2026? And if we can get a sense of that, I mean, it's all very well doing loads of liquidity flows, but they're irrelevant to the revenues. So if you could give us a sense as to the high-value flows within that target.

Jason Windsor
CEO at Aberdeen Group

Okay. So on the cost saves, I think we'd expect we did GBP 70 million in the P&L this year out of GBP 106. So a minimum of GBP 36 will come through. Somewhere between we've got to separate here. The cost saves that will hit the bottom line and then offset by growth in ii primarily. So it's somewhere in the sort of GBP 50-GBP 70-ish million at a net basis, I would say. Yeah, in that range. I don't know yet. It depends on what we do in terms of reinvestment and what we do in terms of the overall. But we should be able to get really good progress on that through the year.

Jason Windsor
CEO at Aberdeen Group

At the new saves over and above the GBP 106, about two-thirds of that will be recognized within the P&L. We may well use some of that to reinvest, but the other third will bleed into 2026. So it's going well, that program. On the capital generation side, I mean, we've given you a sort of profit aim point for 2025. We've got the pension and we've got the Phoenix dividend. And then we've got restructuring costs. We're not saying they're going to get a zero.

Jason Windsor
CEO at Aberdeen Group

There'll be some, but they'll be materially lower. As you think through, I think that gets you to about GBP 300. The one line item that will probably come down a little bit is the return on group cash. It's a contributor to PBT and capital generation. Normal rates, we think, will be lower. And we also think we'll have slightly less cash. So I'd see that figure coming down just a little bit. That's another contribution. And I'm not going to be foolish enough to give you flow targets for 2026. We're going through this. We've got plans. We're trying to set up an opportunity to grow in certain areas. And of course, we've got plans in the business. And Xavier has cascaded very clear plans to his team. But markets change and things change. But we are very committed to returning to positive flows, obviously, in that business.

Andrew Crean
Andrew Crean
Equity Research Analyst at Autonomous

But if you're giving us a profit target, you must have a flow target.

Jason Windsor
CEO at Aberdeen Group

Well, I just said we've got flow plans, but I'm not giving out targets on it externally. Question over here.

David McCann
Director and Equity Research Analyst at Deutsche Numis

Morning. It's David McCann from Deutsche Numis. Free. From me as well, please. Question on the advice business because we haven't had one on that yet. So you've obviously given us the GBP 1 billion flow target in 2026. I mean, in the context of its GBP 75 billion or so of assets, its position in the industry, GBP 1 billion doesn't really reestablish that business as a market leader. Your words as to what you want to do with it, it probably should be like three or four. So maybe you can talk about what's your ambition beyond 2026 in terms of flow for that business.

David McCann
Director and Equity Research Analyst at Deutsche Numis

I appreciate GBP one billion is better than it is now, but it's still not really a market-leading business, as I would view it. Secondly, on the pension surplus, what prevented you from doing a more complete pension buyout here rather than the plan you have adopted in terms of using it for DC pension contributions? Noting that you said you hadn't ruled it out forever, but what has stopped you doing it right now? And then final question, really, Jason. Just wanted to confirm that you do remain, as you said before, committed to the three core divisions, using your language, for the long term of this business, not just the short term. Just seeking that confirmation would be great. Thank you.

Jason Windsor
CEO at Aberdeen Group

Well, I'll start on the three. Absolutely. The configuration of the group I'm very comfortable with. We're wealth and Investments. We're very committed to improving all three and maintaining the growth in all three of our core businesses, but also making sure that we stay laser-focused on developing those, not getting distracted. I'll go in reverse order. On the pension surplus, we think what we've done, it does create significant value and a sustainable value.

Jason Windsor
CEO at Aberdeen Group

As you say, we haven't got full legal and tax clarity to do a buyout. And I mentioned that six months ago. So right now, that wasn't an available option to us. It might become one in the future, but that has proven much more tricky than I certainly anticipated. So be it. That's where we are. But it could take a number of years for us to get that clarity. It's a complex, archaic structure that we're unable to get the confirmations that we would need to go ahead with it.

Jason Windsor
CEO at Aberdeen Group

We would then have the choice in what we would do. But we're very comfortable with what we've reached today. A good point on Adviser. We're coming off minus 3.9% in 2024. So to get to plus 1% is a GBP 5 billion swing, give or take. So I talk about shifting momentum. It would be great if we could do more than that. I just think it will take time. And I want to give us and make sure that we've got sensible plans to get back into that leadership position. But it's not an overnight fix. You need to win the confidence over. People don't chop and change platforms. It's not the sort of thing people change often. So it takes time to build relationships. It takes time to build confidence. It takes time to get people back into the right place to commit to this platform.

Jason Windsor
CEO at Aberdeen Group

We come at this from we're still number two position in the market. So we've got great relationships. Noel built those over many years. Just getting people back into the vein of working with us and growing with us, I think it will take a little bit of time. I see 2025 as very much a year of transition, and we'll expect to grow in 2026. Any more questions?

Ian Jenkins
Interim CFO at Aberdeen Group

In which case we should go to the phones, please?

Jason Windsor
CEO at Aberdeen Group

Are we going to? Oh, we're opening up. Any questions on the line?

Operator

As a brief reminder, press one to ask a question over the conference call. And we do have a question from Bruce Hamilton from Morgan Stanley. Please go ahead. Your line is open.

Bruce Hamilton
Bruce Hamilton
Managing Director at Morgan Stanley

Hi. Thanks for all the detail. Thanks for taking my questions. Hopefully, you can hear me loud and clear. In terms of the kind of the benefits of the three divisions sitting side by side, can you maybe talk a little bit more around any further kind of revenue synergy opportunities, perhaps around retirement solutions, any products, or just how to think about that? Obviously, the tech backbone and the ability to drive efficiencies across costs, I can see, but just in terms of the revenue opportunity. Secondly, on the equity sort of performance and strategy, obviously, there's been a decent pickup in the one-year performance across the Investments division. But within high-margin equities, could we get a number there? Because I think that's been the bit that's been lagging.

Bruce Hamilton
Bruce Hamilton
Managing Director at Morgan Stanley

And on your active ETF strategy, is the way to think about that? It's really going to be U.S. products and converting mutual funds into ETF, or do you have broader ambitions to kind of launch new active ETF products? And then finally, on costs, I think in the annual report, you say cost below £1 billion and £25 million in 2025, but that wasn't on the slide. So I just wanted to check that that's the way to think about the 2025 cost-based sort of trajectory. Thank you.

Jason Windsor
CEO at Aberdeen Group

Yeah, on the costs, I gave Andrew I can hear you loud and clear, Bruce, so thanks for the question. On the costs, that's about right, below that figure. I don't want to get too fixated on a precise P&L figure. So the number I gave to Andrew was sort of the gross number, but we've got some investment opportunity on the cost side as well. On the group configuration, I'm very comfortable with the way that we are. We collaborate around running the investment business. We focus with one regulator. We have simplified processes. So that works. In terms of products,

Jason Windsor
CEO at Aberdeen Group

I think there is more that we can do. You pull into decum products, which will be huge. We talked for many years about what, other than annuities, could we offer to people in decumulation. Absolutely, we've got the componentry to do better in that market, and there is clearly an opportunity there. Right now, we've got managed products that Noel's team offer, and we've got the Managed ISA and the Managed SIPP products through Richard. Plus other things that we can do.

Jason Windsor
CEO at Aberdeen Group

Obviously, ii has an independent position in the market, and we're not going to undermine that. That's an important part of the way that we face it. But we've been very helpful, for example, in investment trusts. ii customers own 14% of the investment trust market. Aberdeen has got a big investment trust business. So we can bring the two together in terms of content, meet the manager, voting preferences, and start to create a community of interest in investment products, certainly within the U.K. wealth sphere. So there's definitely more that we can do without majorly changing what we do. Equity performance, actually, Xavier, do you want to take equity performance and our plans in active ETFs, if that's all right?

Xavier Meyer
CEO of Investments at Aberdeen Group

Yeah, sure. So overall performance has increased materially from 55% over one year to 77% on the one-year performance. If you look at the equity component of that, we have also seen a material improvement from 15% outperforming benchmark a year ago to 32% outperforming benchmark right now. It's not yet at the level we want it to be, but 2024 has been a very difficult year for any equity asset manager on the active side to outperform the benchmark. So that probably put us in line with peers in terms of overall equity performance for 2024. In terms of margin of that business, the margin that we see on our growth flow on the equity business is at par, if not slightly higher than the average margin of our book of business on equity, and regarding plans for active ETF, it's an instrument that we have keen interest on.

Xavier Meyer
CEO of Investments at Aberdeen Group

We are making active conversion in the U.S. on some of our funds into active ETF, as referenced by Jason earlier on. And we also have an active ETF in Europe, and we are complementing that vehicle with two other listings to come soon in April.

Jason Windsor
CEO at Aberdeen Group

Thank you. Next question on the phone.

Operator

Our next question comes from Gregory Simpson from BNP Paribas. Please go ahead.

Gregory Simpson
Gregory Simpson
Equity Research Analyst at BNP Paribas

Hi. Yeah, morning. Thank you for the presentation. A few from my end. Firstly, the release mentioned a strategic review of Finimize. I think this was a loss-making business. Can you confirm the operating loss from this business last year? And then secondly, I don't think you talked about your Financial Planning business, which I think was also loss-making. Can you confirm if you were doing a review here and what kind of loss that had last year?

Gregory Simpson
Gregory Simpson
Equity Research Analyst at BNP Paribas

Then finally, just on ii, subscriptions grew by 3%, excluding marketing incentives, but declined by 4%, including them. Can I just check what these marketing incentives are? Are they mostly targeted at new ii joiners where you maybe pay up year one, but then they have high customer lifetime value? Thank you.

Jason Windsor
CEO at Aberdeen Group

Okay. So Finimize, we do need to review what we're doing with it. It made a small single-digit loss last year. And as I've said before, I want to be focused on the three core businesses as to what we're doing. So I like what Finimize does. It's got a great sort of business model. We haven't yet been able to commercialize it into something that makes profit. So we need to take action to do that. So that's what the strategic review means. Financial planning, I think, simply makes a very small contribution. It depends.

Jason Windsor
CEO at Aberdeen Group

It's an all-in company. It depends how much overhead you layer them up, but they make a positive contribution for any overhead, probably a small negative with a little bit of overhead. Richard's done a great job at sort of streamlining that business under his leadership. We'll continue to make progress with it. On ii, I mean, they have marketing incentives, and I don't know, vouchers, discounts, offers that you actually make to entice people. I hope most of you have signed up to ii because they will be offering you all sorts of SIPP incentives to join. There are other types of propositions in the marketplace to get you to join. It's just simply the quantification of those marketing incentives to bring people in. You expect, obviously, there's a sort of new business strain in insurance speak.

Jason Windsor
CEO at Aberdeen Group

You'd expect then the actual percentage growth in customers to throw through into subscription revenues over time. And clearly, 8% growth in customers in a year doesn't mean 8% growth in subscriptions because you don't win them all first of June. Any more on the phones?

Operator

We currently have no further questions over the telephone.

Jason Windsor
CEO at Aberdeen Group

Okay. Any more in the room?

Jason Windsor
CEO at Aberdeen Group

Well, look, thank you all very much for attending. I really do appreciate your interest and taking all the questions. Look forward to following up with you in the coming days and weeks. Thank you.

Analysts
    • Analyst 1
    • Xavier Meyer
      CEO of Investments at Aberdeen Group
    • Analyst 2
    • Richard Wilson
      COO and CEO of Interactive Investor at Aberdeen Group
    • Analyst at Bank of America
    • David McCann
      Director and Equity Research Analyst at Deutsche Numis
    • Ian Jenkins
      Interim CFO at Aberdeen Group
    • Enrico Bolzoni
      Executive Director of Equity Research at J.P. Morgan
    • Michael Werner
      VP of Investment Banking at UBS
    • Jason Windsor
      CEO at Aberdeen Group
    • Gregory Simpson
      Equity Research Analyst at BNP Paribas
    • Andrew Crean
      Equity Research Analyst at Autonomous
    • Bruce Hamilton
      Managing Director at Morgan Stanley
    • Company Representative at Aberdeen Group
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