Aberdeen Group (LSE:ABDN) Q3 2026 Earnings Call

0:00 Good morning and welcome to the Q3 trading update. I will now hand over to Jason Windsor. Please go ahead.

0:10 Good morning everyone and thank you for joining Siobhan and me for our Q3 poll. I'll start with a brief comment on each of the businesses before handing over to Siobhan to take you through the detail and we'll finish with Q&A. In the quarter, We've remained firmly focused on delivering against our strategy and building on the progress we've made throughout the year. Group AUMA was £579 billion at the end of September, which is up 4% year to date from £556 billion, mainly reflecting positive markets. Once again, strong growth in interactive investor continued in the quarter. and many more.

1:22 AUMA was up 5% year-to-date, with net outflows of £0.7 billion in line with Q2. So as we said, getting to net positive is taking longer than we previously anticipated. One positive I'd like to highlight is the increasingly better performance of WRAP, with gross flows of £4.1 billion year-to-date. That's the highest for five years. RAP, as you know, is our critical go-to-market proposition and it is gaining much greater market support. We're confident that with our strength and management team, the changes we are making will successfully position the business to meet the needs of a rapidly evolving IFA market.

2:11 In investments, we've seen good momentum across strategic growth areas. I'd just like to highlight how pleased I was to welcome the Herald team So I've added the MFS assets and that Tritac's big box REIT successfully raised £350 million in a primary offering. Now, as you know, earlier this month, we sold half of our standard life stake, generating around £430 million. This is all consistent with our strategic focus on simplifying the group. We have a long standing relationship with standard life. Our 10.3% shareholding was very large and now, with just above 5%, we retain a significant shareholding and we remain a key asset management partner.

3:00 Just looking ahead into the final quarter, we remain confident in delivering our full year 26 group targets of adjusted operating profit of at least £300 million and net capital generation of around £300 million. With that, I'll now hand over to Siobhan. Thanks Jason and good morning everyone. Starting with Interactive Investor where growth remains very strong. Total customers reached 533,000 up 8% year on year with SIP customers increasing 34% to 131,000. In a seasonally quieter quarter net inflows were 2.5 billion pounds up 32% with year-to-date net inflows of £9.3 billion, 58% higher than the prior year.

3:51 Trading activity remains on average higher than last year following the elevated trading in the first half with daily average retail trades of £28,000 up 6% compared with Q3 last year. Record net flows over the nine-month period, coupled with positive markets, were reflected in AUMA of £112 billion, up 19% year-to-date. Customer cash balances were £8.3 billion. In advisor, net flows remain challenging, with net outflows of £0.7 billion in Q3 unchanged relative to Q2, but slightly weaker year-on-year. Within this, we saw higher gross inflows into WRAP and continued inflows into MPS.

4:39 AUMA across the advisor business of £85 billion was up 5% year to date, reflecting positive markets. We have seen good traction in Aberdeen SIP following its launch in December 2025, with AUM now nearly £1.5 billion. We also completed the insourcing of customer service teams in July, Thank you very much. Real assets growth included positive inflows relating to our partnership with Border to Coast and rail infrastructure projects, while net inflows into alternatives primarily reflected positive commodity ETFs.

5:48 Equities remained a headwind in Q3, with net outflows of £1.9 billion, although we have seen positive momentum and net flows across our GEM income product range. Insurance Partners had net outflows of £2.5 billion in the quarter, which largely reflects Standard Life's heritage business in run-off. Investments AUM was £393 billion, with the reduction in Q3 driven by outflows and adverse markets. This was partly offset by acquisitions of Herald Investment Trust and the MFS closed-end funds. Turning lastly to the Groups. As Jason referenced, earlier this month we reduced our stake in Standard Life, generating around £430 million.

6:33 We intend to deploy these proceeds in accordance with our capital allocation policy. Consistent with this policy, and as indicated in our half-year results, we have notified relevant bondholders that we will redeem £210 million of additional Tier 1 debt at its first call date in December 2026. We are confident in the delivery of the Group's full-year 2026 targets of adjusted operating profit of at least £300 million and net capital generation of circa £300 million. I will now hand over to the operator and Jason and I will be happy to take your questions. Thank you. Ladies and gentlemen, if you would like to ask a question via the conference call, please press star 1 on your telephone keypad.

7:23 Thank you. We will now take our first question from Hannah Livedale of City. Your line is open, please go ahead.

7:33 Hi guys, good morning and thank you for the presentation. I just have three questions, if I may please. Two on capital and then the last one on II. So firstly, could you please talk a bit more about the rationale for the stakes sale? I appreciate that you would have lost the board seat anyway and that the commercial agreement is different to the shareholding. However, the obvious question is still why sell the stake, especially given the merger with Aegon UK and when Standard Life is starting to enter into strategic partnerships with other managers too, it just seems a bit like a risk to me. And the other question on capital is that following the stake sale, you'll be approaching one billion of surplus capital versus the lower end of your target Capital Coverage Range, even after repaying the AT1.

8:22 So how confident are you of deploying that capital to support growth? And is it reasonable to assume that the preference is to deploy the capital into the wealth part of the business? And then just the last question on II, so cash balances have fallen to 7% of AUA, which is the lowest proportion possibly ever, but certainly for years. and I don't obviously want to over extrapolate one quiet Q3 but just wondering whether you've seen any change to customer behaviour regarding cash and whether your thoughts on a normal level of cash has evolved over time. Thank you.

9:00 Okay, good morning Hannah. I'll kick off. Maybe we'll take them in the order that you asked them. So the rationale for the sale, when we looked at it, Standard Life obviously had had a good run in terms of its share price. And having an allocation of what was the best part of a billion pounds to one company just felt like it was an opportunity just to put that more in proportion with the level of the trading relationship, which we do enjoy with them and we do value. We actually thought it was a good chance just to put that more into balance. You shouldn't infer anything from that about our lack of support to them or our relationship on the asset management side.

9:56 As you say and what I said was we do see the Agon opportunity as an opportunity for us and we continue to work with Standard Life in that regard. I'll let you comment a bit more on capital but from a Priority perspective, I think I've said this certainly at the II Roundtable and when we've had other conversations, that if there were available opportunities to deploy capital, particularly in the world of II, we would pursue it. There aren't. And we continue to trade very well. We continue to monitor. We continue to think that through. Thank you for your question, Hannah.

10:56 We're quite comfortable as we said to travel at the top end of the range but we will continue to be disciplined in our capital deployment and as we've said we will pay down debt and then invest to grow in the business. So as you can see today we have notified our bondholders so we're doing the first part of that and we've got more to do in the future as well. so hopefully that covers the question on capital if I can just come to the cash balances in II so they are 8.3 billion I think it's around 7.5% so it is slightly lower we have seen people hold more in gilts at the moment due to rates and we are earning more from a rate perspective so whilst the balances is slightly lower and we did see people holding higher cash in the first half as they took took time to deploy into assets.

11:50 We're quite comfortable with the mix that we've got there.

11:56 Perfect. That's very clear. Thank you. Thank you. We'll now take our next question from Hubert Lunn of Bank of America. Your line is open. Please go ahead.

12:07 Hi, good morning. Thanks for taking my question. I've got three of them. Firstly, on the standard life stake, so you have another 5% that's left What are your plans for that? Do you plan on keeping it or could you monetize that also in the future? A second question also relates to the question around the proceeds from the stake sale. So you've already earmarked half of it to pay off the tier one debt. Would you also consider also paying off some of the or all of the tier two debt? And also, would you consider also doing a share buyback if possible? and lastly, on equities, I saw that there's another almost 2 billion of outflows in the quarter. Despite your commentary being a little bit more positive, are they more constructive on the outlook? Can you just talk about the outflows in the quarter from equities, like what's driven that and how you think about the trajectory for the next quarters? Thank you.

13:06 Okay. I'll just kick off with a couple of comments on standard life. I think Siobhan covered the excess capital point already. I think your direct question, no, we're not considering selling the other 5%. But of course, we could if we had another use of capital that was superior. It is a liquid stake, as we've shown. But there's no consideration of that. And as I said a moment ago, we do feel that that puts us more into balance with the trading relationship that we have and we are continuing to work with Standard Life. Thank you for joining us. Yeah, of course, things like capital return to shareholders would come onto the agenda.

14:15 It's just not something that we're flagging today. Just to reiterate that, we said in both the full year results and the half year, we see our debt at around the kind of... We have a 450 range, so you can see what we've done with our IT1. We have got a Tier 2 bullet, so that's the first application of capital proceeds, but we will continue to apply our capital allocation policy in a disciplined way. If I can just touch on the equities, we have seen outflows in the quarter Thank you very much. translating, as we've spoken about, into pipeline and converting.

15:23 So within the book, we are seeing some positive movements there.

15:30 Thank you. Thank you. And we'll now take our next question from Enrico Boldroni of J.B. Morgan. Your line is open. Please go ahead.

15:42 Thank you for the presentation and for taking my question. I just have one. With inflation that is growing again in the UK, I was just thinking about your pricing structure with AI and effectively you have a flat fee that doesn't benefit from a natural inflation edge as assets perhaps grow. So I was just wondering, how should we think about pricing there and operating margin within the AI business in a cycle where we see a bit of inflation again for maybe another couple of years in the UK? I think, go on.

16:18 Well, I'll say something. We continue to see in IAI that we reset pricing earlier this year. We'd expect that to serve us well for some time. The key thing in IAI for us is the asset growth that we have enjoyed, both from net flows being well over 10% of AUA, and for our market growth is operating leverage is significant. So we can see the cost to asset ratio has fallen quarter after quarter. And we continue to track that as a point of our competitiveness and our profitability. So inflation, of course, over time, we'll keep an eye on it. But I wouldn't anticipate any near term adjustment to our pricing structure.

17:16 Thank you. Thank you. We'll now take our next question from Charles Bendit of Rochdale and Co. Reckburn. Your line is open. Please go ahead.

17:27 Hi there. Thank you for taking my questions. I had three, please. The first one is on the investments revenue margin. Just wondering whether the mix of flows in Q3 with equity outflows and then inflows into real assets, alts and fixed income gives us a lower exit rate for the investments revenue margin at the end of Q3 and whether we should expect any change versus expectations for the full year. And then the second question, thank you very much for the color on equity outflows. Just wondering whether you are able to give us any color on how the three-year performance metric has evolved since the half year and whether it's good enough yet to start turning equity flows around in FY27. and then my third question is around the advisor segment where you have year-to-date outflows but the target was more than 1 billion positive net inflows and then I think you highlighted Jason in your comments some positive momentum on WRAP so when when do you think we can expect advisor to return to net inflows is it redemptions or gross inflows that's the bigger problem here and is there any requirement do you think for more price cuts to put this and more competitive footing.

18:50 Okay, let me kick off in reverse order, maybe then Siobhan can comment on revenue margins and some of the equity outflows. I think on Advisor, I thought I'd removed that target when I announced that Noel was stepping down and Rich was taking his place. We have not been... Thank you very much. we haven't quite got the commercial the way we face into the market right and I think we've addressed that now we've got Rich and new sales team up and running we've got as I said some evidence of progress on wrap in terms of gross flows which is our key to go to market but we've still got obviously redemptions are above trend and we've got Elevate which is supported by many IFAs but has continued to be Thank you very much.

20:28 The improvement that we saw in the half year has continued in Q3 as ever. It's not everywhere. But the key emerging markets equity strategies, which Siobhan mentioned a moment ago, have continued to perform well. And that's an important underpin to our growth in that strategy. Yes, if you look at the three-year track record, it is remaining stable in equities. On the investment margin, revenue margin, we aren't changing our guidance today, so we expect the margin to be in line with the 19% that we've

21:05 previously guided. Thanks very much. Thank you, Charles. Once again, thank you. Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We will now move on to our next question from Ben Butters of RBC. Your line is open. Please go ahead.

21:32 Thank you. Good morning. I've got questions in two areas, if I may, starting with a couple around MPS. You called out net inflows in advisor into MPS and statements. Clearly you took the decision to retain that service when you sold the broader DFM business a few years back. I wondered, are you seeing NPS gain momentum and can you give an indication of what proportion of your overall NPS assets sit on Aberdeen platforms? And then just linking back to the surplus capital theme, could you look to gain further scale in NPS by acquisitions, do you think? I think there is a long tail of subscale providers in that market.

22:13 And then

22:14 Final question just around recent trading. Maybe you could just give a comment on what you've seen in the first two, three weeks of Q4. Has there been any change in behaviour in the run-up to the budget? Thank you.

22:26 I'll just start on the last question and Siobhan, if you mind picking up the two points on NPS. Actually, thankfully not. If you look at the run-in to the last two budgets, we did see considerable speculation and Redemptions. We're not flagging that this time around. There's only a week to go. And so it's sort of helpful it's in October, not November. There's less time to speculate. So actually, we're expecting slightly calmer waters this year, certainly compared to last year. We have seen some positive momentum. It is relatively small in the size of our book but what we have seen is some improvement there so that momentum is coming through in the flows and certainly if we look at MPS businesses, if there were some attractive businesses then we would look at those as well but the MPS business is moving in the right direction and some of the Thank you very much.

23:32 Most of my questions have been asked, but maybe perhaps, you know, we have certainly seen, you know, a sharp rise in

23:59 Interest rates and yields over the past couple of weeks. It's eased up a little bit more recently. But just from a flow perspective in the investment side, have you seen any material changes in trend in terms of either gross inflows or redemptions? Thank you. We have, I mean, as you would expect, the yields have hit the market movements quite substantially. And you can see that in our numbers. In terms of flows, our credit portfolios have been performing reasonably well. So there's been no major change in business in that regard.

24:44 Thank you. Nothing much to add. I think the I sort of alluded to this a moment ago, but away from investments, II has kicked off October well, and I haven't got the advisor numbers for October, but we had a pretty decent September. So there's nothing, as I said, there's nothing that we're flagging right now. Of course, you know, there is still a high degree of volatility hanging out there right now. Thank you. That's all the time we have for questions. I will now hand it back to Jason for closing remarks.

25:28 Okay. Can I just say, were there any other questions? One moment please. There is one from Gregory Simpson.

25:39 Yeah, we've got time. We can take that one please before we close. We'll now take our next question from Gregory of the MP Paribas. Your line is open, please go ahead.

25:53 Yeah, morning, guys. Just to squeeze a few in at the end, just can you maybe kind of comment on what the latest is around the level of international dealing within II, how that's been trending, given it's quite a big factor in terms of your trading fees, that mix. And then secondly, just... Can you just give us an update on the latest thinking about the cost base into year-end, given the market backdrop we've seen for this year, the latest around inflation and other things. Just to check if there are any incremental changes there. Thank you.

26:38 Okay. I was going to take the first one. If you want to take the second one. Trading has been pretty consistently, if I look at the split between the UK and the US, the US actually picked up a little bit during Q2 and Q3 as a percentage. You saw obviously overall trades fall a little bit into Q1. Thank you very much. and just in terms of cost guidance I mean we haven't made any update today so you should re-look at the half year in terms of inflation clearly we are watching that but we also are continuing to be making sure that we are being efficient and looking at where we can reduce costs take those costs out as well so the full year targets remain unchanged and guidance remains unchanged Thank you Thank you. With no further questions from the line, I will now hand it back to Jason for closing remarks. Thank you.

28:06 OK, thank you all very much for joining. Appreciate your time. Hopefully we've been clear as to where we see the business through. Q3 and into Q4 we've reiterated you know our guidance for the year and we continue to be confident in the outlook for 2026 and we see that setting us up for a better 2027 and we look forward to briefing you on that as we take those steps forward but for now thank you very much for joining