Charles Stanley : Annual Report & Accounts

Progress and momentum

Annual report and accounts 2021

charles-stanley.co.uk

Our vision is to become the UK's leading wealth manager.

We define leading in terms of quality rather than quantity. Focusing on client satisfaction as well as staff engagement and equity market rating, we measure our progress against these targets year on year.

Who we are

Charles Stanley provides holistic wealth management services to private clients, charities, trusts and institutions. Its origins trace back to 1792 and it is one of the oldest firms on the London Stock Exchange.

The Company has a national presence, with 26 locations and over 800 professionals. Its wealth management services are provided direct to clients and to intermediaries.

Our values

Charles Stanley has three core values. It aims to be Caring, Fair and Progressive. These values underpin the Company's strategy and the way it operates. The Company believes that it should work in the best interests of its clients and seeks to offer

a truly personal service.

Our purpose

Our purpose is to build on our long history, traditional values and strong reputation to help our clients prosper, by meeting their goals through the highest standards of holistic wealth and investment management services. We are passionate about building long-term relationships with both our clients and staff and in contributing to our local communities.

Contents

Strategic report	Governance	Financial statements

1. At a glance
2. Our business
3. Our markets
4. Chairman's statement

06 Chief Executive Officer's report

08 Strategic report - Where we are going

12 Strategic report - What we are working towards

1. Strategic report - The focus for the year
2. Strategic report - Executing the strategy

18 Key performance indicators

1. Review of the year

1. Risk management and principal risks

1. Assessment of the Group's prospects and Viability statement
2. Environmental, Social and Governance report

1. Governance introduction

1. Board of Directors

1. Executive Committee

1. Corporate governance report

1. Audit Committee report

1. Nomination Committee report

1. Directors' remuneration report

1. Risk Committee report

1. Directors' report

1. Directors' responsibilities
2. Independent auditor's report to the members of Charles Stanley Group PLC

1. Consolidated income statement
2. Consolidated statement of comprehensive income
3. Consolidated statement of financial position
4. Consolidated statement of changes in equity

1. Consolidated statement of cash flows
2. Notes to the financial statements

157 Parent Company financial statements

160 Notes to the Parent Company financial statements

1. Unaudited five year record
2. Glossary

1. Company information

1. Financial calendar
2. Where we are

At a glance

Group highlights

FuMA at	Stable	Dividend
record levels	revenues	up 33.3%
Year on year Group FuMA	Reported revenues remained	FY 2021 dividend increased by
increased by 26.7% to	stable at £171.2 million	33.3% to 12.0 pence per share
£25.6 billion (2020: £20.2 billion)	(2020: £173.0 million), despite
	lower average market values

Capital resources	Evolving holistic	Improving staff
up 6.9%		proposition		satisfaction
6.9% increase in Group's	Meeting the changing needs of	Increased score of 79% from 75%,
regulatory capital resources	clients and developing relationships	a big achievement in light of the
to £100.6 million		across different stages of their financial	COVID-19 pandemic
		journey by broadening our service offering
Financial highlights				Divisional revenue
Underlying profit	Underlying pre-tax	Reported profit	Reported basic		Investment Management
before tax (£m)1	profit margin (%)2	before tax (£m)	earnings per share (p)	Services

	19.3			11.7			17.3			28.03		£151.6m
		17.2			10.0
			9.3								(2020: £154.8m)
							13.4			20.16
13.3
					11.0			17.74
										Financial Planning
												£10.0m
												(2020: £8.7m)
												Charles Stanley Direct
2019	2020	2021	2019	2020	2021	2019	2020	2021	2019	2020	2021	£9.6m
												(2020: £9.5m)

Dividend per	Return on capital	FuMA (£bn)	Discretionary
share (p)	employed (%)3		funds (£bn)

report Strategic

Governance

statements Financial

		12.0		13.4		24.1		25.6			15.2
									13.1
8.75	9.0				10.5		20.2			12.0
			8.2
2019	2020	2021	2019	2020	2021	2019	2020	2021	2019	2020	2021

Group revenue

£171.2m

(2020: £173.0m)

1. The underlying figures represent the Group results excluding adjusting items which are listed out on page 25.
2. This represents the underlying profit as defined in note 1 above and excluding the charge in respect of non-cash share options awarded to certain investment management teams under revised remuneration arrangements settled in 2017, expressed as a percentage of underlying revenues (see page 23).
3. Return on capital employed represents reported operating profit for FY 2021 and FY 2020 divided by capital employed (total assets less current liabilities as at the reporting period).

charles-stanley.co.uk

Charles Stanley Annual report and accounts 2021

01

Our business

Charles Stanley offers a high-quality,award-winning personal service across the full range of wealth management services. Our clients value our approach and we score highly for overall client satisfaction. This has been maintained in an unprecedented year dominated by the COVID-19 pandemic.

Our commitment to holistic wealth management is delivered through three core offerings: Investment Management Services, Financial Planning Services and Central Financial Services.

Central Financial Services is a newly-created division, effective 1 April 2021, to house our centrally-managedoutcome-oriented products and services. This includes Charles Stanley Direct, our Telephone Execution-only service and the Asset Management division historically reported under Investment Management Services.

Our three divisions each have the capacity to grow revenues in their respective markets. Together they offer a set of complementary services that support our ambition to be the UK's leading wealth manager.

Holistic Wealth Management

Investment Management

Services

Offering personal Discretionary, Advisory and broker-ledExecution-only services to private clients, trusts, charities and companies. Our bespoke service allows deep relationships with clients and creates investment portfolios built around each client's individual needs.

Clients include financial advisers, defined benefit pension schemes, institutional investors and high net worth individuals.

Financial Planning

Services

Our experienced financial planners provide tailored advice to help our clients plan and structure their wealth.

As the savings, pensions and inheritance tax landscape becomes ever more complex, they provide a range of personalised solutions.

Central Financial

Services

1. newly-createddivision comprising centrally-managed products and services, focusing on three specific growth markets:

• Asset management capabilities serving retail and institutional intermediary markets
• Foundation Planning simplified advice and guidance services to clients historically impacted by the advice gap
• Online investing via Charles Stanley Direct.

Focusing on you

02 Our business/Our markets

Our markets

FY 2021 was an extraordinary year, which spanned arguably the worst peacetime recession in a century. The global economy contracted by twice the amount experienced in the 2008 financial crisis and stockmarkets plunged. The turmoil highlighted the importance of trusted, high-quality wealth management relationships and advice, which enable clients to navigate the crisis.

report Strategic

Governance

Overview

The COVID-19 pandemic changed the way we engaged with clients over the year, but with no diminution of our high service levels. The financial year also saw reduced interest rates, a highly competitive market, Brexit take effect and an uncertain regulatory environment.

We are now entering a vaccine-enabled recovery, and the emphasis for wealth managers will be on reshaping and innovating. Charles Stanley is well placed to take advantage of the opportunities that have emerged, having laid solid foundations around our use of digital platforms and processes.

An uncertain market

The markets defied expectations by recovering from a sharp bear market at the start of the global pandemic and surged to finish nearly 14% up. In contrast, the economy shrank.

The International Monetary Fund recently raised its forecast for British economic growth although it is unlikely to regain pre-pandemic levels until 2022. Against this backdrop,

we are nevertheless confident of a resilient wealth management sector and growing demand for advice.

An evolving market

Technology-driven innovation

Technology is a crucial pillar in driving transformational changes and responding to changing client requirements. The importance of digital channels and capabilities were highlighted by the pandemic and will continue to be a priority for us in the year ahead. We believe that technology will enable us to be more flexible and innovative but will not replace the enduring need for face-to-face advice, particularly for more complex financial requirements.

Intermediary sales

The industry continues to recognise the role that intermediaries are playing in the delivery of services to clients, and they represent one of the fastest growing markets for distribution. Linked to this is the continuing rise in popularity of Model Portfolio Services which provide cost-effective managed portfolios for clients who do

not need require a bespoke solution.

Embracing ESG

Growing awareness of socially responsible investing was heightened by the pandemic, and there is increasing focus by companies on their ESG (environmental, social and governance) strategies. This focus will continue and regulation is expected to pick up, including additional measures to address climate change. We are embracing this change and responding to evolving client demands, aware of the role we can play in helping to influence a better tomorrow.

Tailored and personalised services

We believe that factors such as decumulation, the intergenerational transfer of wealth and the growing demand for ESG factors means that our client-centric approach puts us in a position to appeal to a broader range of clients and their specific needs. We are working towards putting in place an integrated client experience across multiple touch points in an omni-channel environment.

statements Financial

Industry assets (£bn)

The chart below is based on a calendar year

	1,139	1,061			Execution only
				Wealth Manager
	241
		214
	898
		847

2020 2019

Source: Compeer Limited, data at 31 December 2020

Wealth manager business mix (%)

The chart below is based on a calendar year

					Advisory managed
13	14	13	15		Discretionary
	Non-managed

7372

2020

2019

charles-stanley.co.uk

Charles Stanley Annual report and accounts 2021

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