25th Sep 2013 09:12
LONDON (Alliance News) - Financial advice company Lighthouse Group PLC Wednesday said it swung into a half-year pretax loss after advisers left the company and an increase in operating costs.
Lighthouse said it made a GBP232,000 pretax loss for the six months to June 30, compared with a GBP56,000 pretax profit for the corresponding period the year prior.
The loss followed a 14% drop in revenue to GBP23.4 million after it reduced its adviser numbers by 18% in the aftermath of UK Regulator, the Financial Conduct Authority's retail distribution review, though Lighthouse said its remaining advisers increased their average revenue production by 3%. Recurring revenues increased three percentage points to constitute 28% of total revenue.
The FCA's retail distribution review meant that financial advisers had to achieve higher qualification standards in order to continue giving financial advice, as well as banning the payment of commission to advisers selling financial products by the companies creating the products. Instead, commission is now agreed with and paid by the client, as part of the regulator's move to protect customers from financial advisers who have the incentive to rack up sales of financial products not useful to customers.
In March 2012, Lighthouse warned that "post RDR, remuneration for each item of new business could well decline across the industry, some advisers will fail to secure the required qualifications in time and will be unable to carry on advising, recurring income will carry explicit servicing obligations to the client and clients may more easily cancel investment trail payments."
Lighthouse also said that higher operating costs were a cause of the decreased profit, after they increased by GBP900,000 to GBP7.5 million, primarily because of a GBP600,000 investment in recruitment, training, technology and marketing costs in national advice arm Lighthouse Financial Advice, as well as higher professional indemnity insurance costs, which it said are in line with general market trends.
Lighthouse also said its provisions for liabilities arising from business placed with failed investment fund Arch Cru are adequate, with the FCA set to complete a review on the amount of redress, if any, customers deserve by December 9. UK authorities have been reviewing advice to invest in the failed investment fund, given by financial advisers to customers.
Lighthouse shares were Wednesday quoted at 3.1 pence, down 0.4 pence, or 11.4%.
By Samuel Agini; [email protected]; @samuelagini
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