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Profits at UK wealth managers fell sharply in the three months to September, hit by investor caution in the face of turbulent markets and rising costs across the industry.

Total revenues at £1.4bn were almost 5 per cent lower than the previous quarter, according to data from Compeer, the research group. Funds under management dropped by 3.3 per cent, the second consecutive quarter of declines. At £702bn, however, the total still represents a 1.7 per cent increase on 2014.

James Brown, the report’s author, said that reduced assets under management and a wider move in the industry to a fees-only model combined to pull down profits over the quarter.

“What the industry really needs is further growth in term of inflows,” he said. “Lots of firms are looking at IFAs and intermediaries in terms of getting them to outsource their business to wealth managers. They’re looking at ways of winning new business.”

Execution-only stockbrokers also suffered, as investors were swayed by the continuing market uncertainty, the report noted.

Yet despite lower levels of trading, purchasing figures were higher over the quarter with many investors seeing the market turmoil as a buying opportunity.

Mr Brown stressed it was not time to panic yet. “Even in 2008 the wealth management industry survived and, if anything, it came out the other end better off,” he said.

“Asset values have recovered to more than they were after the crash. The asset management industry is very good at bouncing back.”

Copyright The Financial Times Limited 2017. All rights reserved.
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