Despite an increase in average costs, a unanimous rise in business volumes and a robust increase in fee, commission & premium income meant that investment management profitability grew strongly for the sixth consecutive quarter, according to the latex CBI/PwC Financial Services Survey.
However, the survey, which asked participants how their business volumes fared in the three months to December, found that plans for capital spending in the year ahead have generally weakened; in particular, investment managers plan to authorise less spending on IT relative to the past year, for the first time since June 2009.
Optimism in securities trading rose for the first time in a year, as strong growth in business volumes and incomes and fall in average costs lifted profitability. Furthermore, plans for spending on marketing in the coming year are at their strongest since September 2000.
"Investment managers have enjoyed another good quarter, as volumes of business, profitability and numbers employed have all increased," says Pars Purewal (pictured), UK asset management leader at PwC. "Due to the strong quarter, the sector is now looking to invest in distribution and develop new products and services. Regulatory compliance will also be a major driver of costs during 2011 as investment managers seek to comply with the range of new regulation that will hit the sector.
"Growing retail demand has given securities traders their best quarter of activity and revenue in over a year. Despite concerns about Ireland’s sovereign debt and the possibility of contagion, retail investors appear to be putting their concerns over the economy to one side and taking up equities. Securities traders are cautiously optimistic about the medium term outlook and are starting to increase marketing spend and capital investment plans. But levels of demand, the impact of regulatory reform and the availability of professional staff remain a concern."
