Asset Manager Margins Flat in First Quarter Despite Increases in AUM

National wirehouses recover slightly due to higher advisor productivity.
Operating margins and net margins of publicly traded asset managers remained virtually unchanged during the first quarter of 2012, based on kasina’s analysis of financial statements from fifteen asset managers. On average, firms posted operating margins of 31.0% as compared to 31.2% in Q4 2011 and 31.5% in Q1 2011. Net margins were 23.3% for Q1 2012 in contrast to 23.2% in Q4 2011 and 22.5% in 1Q 2011. Quarter over quarter, total revenues increased by 3.7% while operating expenses increased by 4.0%. Total assets under management for publicly traded firms grew by 4.5%, mostly due to asset appreciation as opposed to net inflows.

ASSET MANAGER PROFIT MARGINS
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Even though operating and net margins have remained robust, many firms reported an increase in expenses during 1Q 2012 due to:

  • High employment taxes due to seasonal bonus expenditure
  • Growing costs incurred due to compliance, new regulatory requirements and increased governmental scrutiny
  • More pressure from broker/dealers over revenue sharing and renegotiated distribution contracts

National wirehouses generated higher margins in the first quarter of 2012, recovering from the dip experienced during the fourth quarter of 2011. On average, distributor operating margins were 16% in Q1 2012 as compared to 13% in Q4 2011, while net margins increased to 11% from 7% during the same period. These figures are reflected in higher rep productivity (total revenue per registered reps), which grew by 4.2% during Q1.

MARGINS & ADVISOR PRODUCTIVITY UP IN SHORT-TERM
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