Good morning, and welcome to the Q3 trading update. I will now hand over to Jason Windsor. Please go ahead.
Good morning, everyone, and thank you for joining Siobhan and me for our Q3 call. I will start with a brief comment on each of the businesses before handing over to Siobhan to take you through the detail, and we will finish with Q&A. In the quarter, we have remained firmly focused on delivering against our strategy and building on the progress we have made throughout the year. Group AUMA was GBP 579 billion at the end of September, which is up 4% year to date from GBP 556 billion, mainly reflecting positive markets. Once again, strong growth in interactive investor continued in the quarter, underlying the ongoing appeal of ii's customer proposition. Testament to this is net flows up 32% and a continued increase in consumer engagement.
ii's record of delivery continues with the recent full launch of ii Advice, ii360, our advanced trading platform, and also our enhanced Premium Service.
In Adviser, AUMA was up 5% year to date, with net outflows of GBP 0.7 billion, in line with Q2. As we said, getting to net positive is taking longer than we previously anticipated. One positive I would like to highlight is the increasingly better performance of Wrap, with gross flows of GBP 4.1 billion year to date. That is the highest for five years. Wrap, as you know, is our critical go-to-market proposition and it is gaining much greater market support. We are confident that with our strength in management team, the changes we are making will successfully position the business to meet the needs of a rapidly evolving IFA market. In investments, we have seen good momentum across strategic growth areas.
I would just like to highlight how pleased I was to welcome the Herald team, to have added the MFS assets, and that Tritax Big Box REIT successfully raised GBP 350 million in a primary offering. As you know, earlier this month, we sold half of our Standard Life stake, generating around GBP 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. Just looking ahead into the final quarter, we remain confident in delivering our full-year 2026 group targets of adjusted operating profit of at least GBP 300 million, and net capital generation of around GBP 300 million. With that, I will 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 SIPP customers increasing 34% to 131,000. In a seasonally quieter quarter, net inflows were GBP 2.5 billion, up 32%, with year to date net inflows of GBP 9.3 billion, 58% higher than the prior year. 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 GBP 112 billion, up 19% year to date. Customer cash balances were GBP 8.3 billion. In Adviser, net flows remain challenging, with net outflows of GBP 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. AUMA across the Adviser business of GBP 85 billion was up 5% year to date, reflecting positive markets. We have seen good traction in Aberdeen SIPP following its launch in December 2025, with AUM now nearly GBP 1.5 billion. We also completed the insourcing of customer service teams in July, giving us greater control of the end-to-end customer experience. We saw continued improvement in our Net Promoter and cSAT scores. In investments within our Institutional & Retail Wealth segment, net inflows excluding liquidity, GBP 1 billion, compared with GBP 0.2 billion in Q3 last year. This included net inflows of GBP 0.9 billion in fixed income, GBP 1.1 billion in real assets, and GBP 0.8 billion in alternatives.
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. Equities remained a headwind in Q3 with net outflows of GBP 1.9 billion, although we have seen positive momentum and net flows across our GEM income product range. Insurance Partners had net outflows of GBP 2.5 billion in the quarter, which largely reflects Standard Life's heritage business in run-off. Investments AUM was GBP 393 billion, with the reduction in Q3 driven by outflows in adverse markets. This was partly offset by acquisitions of Herald Investment Trust and the MFS closed-end funds. Turning lastly to the group. As Jason referenced, earlier this month, we reduced our stake in Standard Life, generating around GBP 430 million. We intend to deploy these proceeds in accordance with our capital allocation policy.
Consistent with this policy, and as indicated at our half-year results, we have notified relevant bondholders that we will redeem GBP 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 GBP 300 million and net capital generation of circa GBP 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 one on your telephone keypad. Thank you. We will now take our first question from Hannah Leivdal of Citi. Your line is open. Please go ahead.
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. Firstly, could you please talk a bit more about the rationale for the stake 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. The other question on capital is that following the stake sale, you will be approaching GBP 1 billion of surplus capital versus the lower end of your target capital coverage range, even after repaying the AT1.
How confident are you of deploying that capital to support growth? Is it reasonable to assume that the preference is to deploy the capital into the wealth part of the business? Then just a last question on ii. Cash balances have fallen to 7% of AUA, which is the lowest proportion, possibly ever, but certainly for years. I do not obviously want to over extrapolate one quiet Q3, but just wondering whether you have seen any change to customer behavior regarding cash and whether your thoughts on a normal level of cash has evolved over time. Thank you.
Okay. Good morning, Hannah. I will kick off. Maybe we will take them in the order that you asked them. The rationale for the sale, when we looked at it, Standard Life obviously had had a good run in terms of its share price. Having an allocation of what was the best part of GBP 1 billion 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 should not infer anything from that about our lack of support to them or our relationship on the asset management side.
As you say, and what I said was we do see the Aegon opportunity as an opportunity for us, and we continue to work with Standard Life in that regard. I will let Siobhan comment a bit more on capital, but from a priority perspective, I think I have said this certainly at the ii Roundtable and when we have had other conversations, that if there were available opportunities to deploy capital, particularly in the world of ii, we would pursue it. There are not. We continue to trade very well. We continue to monitor, we continue to think that through. But that would be a priority, as would investing in the business where we see good returns and good growth in it more generally. As for the overall capital position, Siobhan, do you mind commenting on that?
No. Thank you for your question, Hannah. We are 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. As we have said, we will pay down debt, and then invest to grow in the business. As you can see today, we have notified our bondholders, so we are doing the first part of that, and we have got more to do in the future as well. Hopefully that covers the question on capital. If I can just come to the cash balances in ii. They are GBP 8.3 billion. I think it is 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.
Whilst the balances is slightly lower, and we did see people holding higher cash in the first half as they took time to deploy into assets, we are quite comfortable with the mix that we have got there.
Perfect. That is very clear. Thank you.
Thank you.
Thank you. We will now take our next question from Hubert Lam of Bank of America. Your line is open. Please go ahead.
Hi. Good morning. Thanks for taking my questions. I got three of them. Firstly, on the Standard Life stake, you have another 5% that is 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. You have already earmarked half of it to pay off the Tier 1 debt. Would you also consider also paying off some of the, or all of the Tier 2 debt? Also, would you consider also doing a share buyback if possible? Lastly, on equities, I saw that there is another almost GBP 2 billion of outflows in the quarter.
Despite your commentary being a little bit more positive or a bit more constructive on the outlook, can you just talk about the outflows in the quarter from equities, like what is driven that and how you think about the trajectory for the next quarters? Thank you.
Okay. Look, I'll just kick off with a couple of comments on Standard Life. I think Siobhan covered the excess capital point already. To 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. 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 across multiple projects. From a use of proceeds perspective, we've said all along that we want to lower debt. The last couple of years, we haven't had any debt to reduce. Whilst I just said we would look at alternatives to invest in the business.
Of course, if there aren't any, we'll think about other things that we could do, and once we've got the debt into a position that we're more comfortable with, of course, things like capital return to shareholders would come onto the agenda. 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 GBP 450 million range. So you can see what we've done with our AT1. We have got a Tier 2 bullet. 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. Just to give you a bit more color around that, some of that is due to asset allocation, a little bit on performance. Actually, if I look underneath at the equities, in our emerging markets, and particularly in GEM, we've had GBP 1 billion of gross inflows extra from this time last year come into that range.
So we can see the improvement in investment performance translating, as we've spoken about, into pipeline and converting. So within the book, we are seeing some positive movements there.
Thank you.
Thank you. We'll now take our next question from Enrico Bolzoni of JP Morgan. Your line is open. Please go ahead.
Thank you for the presentation and for taking my question. I just have one. With inflation that is growing again in the U.K., I was just thinking about your pricing structure with ii, and technically, you have a flat fee that doesn't benefit from a natural inflation hedge as assets perhaps grow. I was just wondering, how should we think about pricing there and operating margin within the ii business in a cycle where we see a bit of inflation again for maybe another couple of years in the U.K.?
I think - go on.
Well, I'll say something. Look, we continue to see in ii that we reset pricing earlier this year, and we'd expect that to serve us well for some time. The key thing in ii for us is the asset growth that we have enjoyed, both from net flows being well over 10% of AUA and from 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.
Thank you.
Thank you. We'll now take our next question from Charles Bendit of Rothschild & Co Redburn. Your line is open. Please go ahead.
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. 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 FY 2027. My third question is around the Adviser segment, where
You have year-to-date outflows, but the target was more than GBP 1 billion positive net inflows. Then I think you highlighted, Jason, in your comments, some positive momentum on Wrap. So when do you think we can expect Adviser to return to net inflows? Is it redemptions or gross inflows that's the bigger problem here? Is there any requirement, do you think, for more price cuts to put this platform on a more competitive footing?
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 Adviser, 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 specific on our expectations for that for a couple of calls now. I said openly it's taking us longer and it's been heavier going for us to get back to positive net flows in the Adviser business. Couple of reasons. 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 a harder nut to crack for us to get that back to positive or certainly back to break even. Work continues there, but we do continue to support that, and we do see some signs of improvement. I think I'll just comment on investment performance, which is broadly in line with the half year. We don't give an update, but I think 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 previously guided.
Thanks very much.
Thank you.
Thank you, Charles?
Once again, 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 Bathurst of RBC. Your line is open. Please go ahead.
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 Adviser into MPS in statement. 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 MPS gain momentum, and can you give an indication of what proportion of your overall MPS assets sit on Aberdeen platforms? Then just linking back to the surplus capital theme, could you look to gain further scale in MPS via acquisitions, do you think? Because I think there is a long tail of subscale providers in that market.
Okay
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 discernible change in behavior in the run-up to the budget? Thank you.
I'll just start on the last question, then Siobhan, if you mind picking up the two points on MPS. Actually, thankfully not. If you look at the run into 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.
Pick up on the two on MPS. So, 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 activity we made last year in acquiring some talent in that space has helped move us forward.
Thank you.
Thank you. We will now take our next question from Michael Werner of UBS. Your line is open. Please go ahead.
Thank you very much. Most of my questions have been asked, but perhaps we have certainly seen a sharp rise in interest rates and yields over the past couple of weeks, and it has 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. 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 has been no major change in business in that regard.
Thank you.
Nothing much to add. I think that I sort of alluded to this a moment ago, but away from investments, ii has kicked off October well. I haven't got the Adviser numbers for October, but we had a pretty decent September. As I said, there's nothing that we're flagging right now. Of course, 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.
Okay. Can I just check, were there any other questions?
One moment, please. There is one from Gregory Simpson.
Yeah, we got time. We can take that one, please, before we close.
We will now take our next question from Gregory of BNP Paribas. Your line is open. Please go ahead.
Yeah, morning, guys. Just to squeeze a few in at the end. Can you maybe comment on what the latest is around the level of international dealing within ii, and how that has been trending, given it is quite a big factor in terms of your trading fees, that mix? Secondly, can you just give us an update on the latest thinking about the cost base into year-end, given the market backdrop we have seen for this year, the latest around inflation and other things. Just trying to check if there is any incremental changes there. Thank you.
Okay. I was going to take the first one. She wanted to take the second one. The trading has been pretty consistently, if I look at the split between the U.K. and the U.S., the U.S. actually picked up a little bit during Q2 and Q3 as a percentage. You saw, obviously, overall trades fall a little bit into Q3. That was slightly less so in terms of on the equity side. So actually, if anything, Q3 was a slight pickup in the U.S. relative to the U.K.
Just in terms of cost guidance, 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 on the line, I'll now hand it back to Jason for closing remarks. Thank you.
Okay. Thank you all very much for joining. Appreciate your time. Hopefully, we are being clear as to where we see the business through Q3 and into Q4. We have reiterated 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. We look forward to briefing you on that as we take those steps forward. For now, thank you very much for joining.