Schroders plc (LON:SDR)

Investor update

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Oct 7, 2021

Good morning, everyone. It's really nice that we're all in one place together for a change. Welcome to all those online. You've heard from Richard and I in the past about our strategic initiatives, and one of the key ones of those is around wealth. We obviously did a Schroders in focus on our progress in private assets earlier in the year. We committed to growth of between GBP 5 billion and GBP 8 billion of NNB a year in that, and that acceleration, I think, was well received. Today, we want to dive into much more detail on our wealth businesses. It's an area where we've been investing strongly. We believe there's a lot more to go for. Today, we've got all the leaders of those businesses to come here. We're going to get through a series of quick presentations, and then throw the floor open for Q&As on any aspect of it. Very quickly, I just want to remind you where this sits in a group context. We are below 20% in wealth, but we've been growing the business fast. We've been growing the business fast for two standout reasons. One is high longevity. You've heard from me in the past that longevity is really, really important to us. We want more sticky assets. Driving that stickiness is a big part of accelerating our growth. The average longevity in our wealth business is 10 years. Second, because we're closer to the end consumer, because we're not disintermediated in any way, the margin that we're able to achieve is higher than our group average. So more sticky assets, higher margin, and ultimately, higher growth. Being closer to the consumer, we think is really strategically important over time. You know we've made a series of acquisitions. I won't go through them in detail because you're going to hear more from each of the individual business lines that lay behind that. I've given you the brief timeline of those there, and we can come and talk about the outlook for further moves in Q&A later. We've been growing this business under my watch from GBP 32 billion, through acquisitions, through new business growth, and obviously the tailwind of markets, through to GBP 76 billion. We think there is more to go for. We feel that this is a business where we are able to be very clear about the outlook for new business growth. You're going to hear from Peter Hall in a moment underlining that we believe that we can achieve NNB growth of at least 5% per annum, and that will be an important driver of future growth. With that, I'm going to stop. I'm going to hand over to Peter, who will take you through the overall wealth strategy, and then we'll crack through the underlying areas. I'll come back to do the Q&A with Richard and the rest of the wealth team later at the end. Thank you. Thanks. Thanks very much indeed, Peter, and it is fantastic for us to have this opportunity to talk to you about our wealth business. Our aim in the next hour or so is to explain what sets us apart, what makes us different from the other wealth managers that you will be familiar with, and then how are we going to achieve the growth target that Peter just set out of GBP 115 billion in assets by 2025. In a nutshell, what you are going to hear is that what makes us unique is that we have actually got four distinct franchises, and each of those franchises is focused on a specific client segment. Each is using rather different branding to target that segment most effectively. But each of them, at the same time, is drawing upon the same shared unique strengths of Schroders. What are those franchises? Cazenove Capital, you are probably familiar with. Cazenove is a leading U.K. wealth manager. It is focused on charities, family offices, and high net worth individuals. Schroders Wealth Management is our international business, which focuses on the same client segments in Europe and Asia, with local teams on the ground and offshore booking centers in the Channel Islands, Zurich, Geneva, Singapore, and Hong Kong. Then we have got two affluent businesses. We have got a B2C affluent business, Schroders Personal Wealth, and they offer financial planning advice direct to individuals. Then we have got a B2B business, Benchmark. Benchmark is providing a range of services from technology to investment to succession to U.K. financial advisers. Each and all of those four franchises are leveraging the same unique strengths of the Schroders group, and I have set out here the entirety and the breadth of the strengths that we can build upon. But I just want to highlight one, which is absolutely key in terms of underpinning our growth ambition, and that is technology. Each year, we invest a significant amount in technology, partly to build a scalable platform, and that is key. To illustrate it, last year, we managed in a single year to bring on over 30,000 affluent clients from Schroders Personal Wealth at the same time as over 20 of the largest, most complicated, most multi-jurisdictional families for Sandaire. But investing in technology is also absolutely key in terms of giving us a competitive edge. You will hear later from Mary-Anne about a client app, from Kate about some innovative sustainability reporting, from David about the strength of our B2B technology service offering. Each of those are areas where we are setting ourselves apart through that technological leadership. That is an overview of our franchises. If we now turn to the second question, how can we be confident that we are going to accelerate our growth to the target that Peter set? We will talk in a moment about the five areas of focus. But we arrive at the five areas of strategic focus partly by thinking about what I just set out, where do we have unique competitive advantage? But partly also just what are some of the secular trends in the market, which effectively then give us a tailwind in terms of achieving them. These are the key market trends that I just want to quickly summarize. We see rising wealth creation in the regions by business owners. It is fueled, as you know, to quite an extent by private equity. Family office space, very interesting space, very different space, actually very fragmented. A lot of boutiques still operating there, and typically they will have very good close client relationships, but they will often lack the scale to be profitable, and they will also often lack the global capability to offer the client solution, which increasingly those clients are wanting and needing. We see an opportunity in what has now almost become a multi-decade reduction in the number of advisors within the U.K. Then the fact that of those who remain, it is almost an aging population. The average age is 57. Many of them are getting to the point where they are looking to retire and wanting some future home for their clients where they sell out. If you go wider than wealth management and you think in the broader sphere of personal financial services, we actually see quite a significant convergence, and really a convergence around this sort of holy grail of who is going to be the place which people can go to for the single picture of their affairs across banking and investment and pensions, and with an integrated service behind it. Then finally, we are really excited about the emergence of a segment which we are calling here the moderate greens. That is the market backdrop. That is the context in terms of the areas where we have a unique advantage. These are the five key opportunities that we have to accelerate our growth. For Cazenove Capital, it is pretty natural. It is business owners in the regions. Why is it natural? It is natural because we already look after lots of them really well in London and the Southeast, so we are now extending that by hiring the best advisors in the regions, setting up offices there, and then working through our partnership with Lloyds to get referrals from the business bank ahead of those business owners thinking about their exit, which is critical in terms of the timing of the pitch. For Cazenove and for Schroders Wealth Management, there is an opportunity in the family office space, this fragmented space. Why? Because we have got a unique offering. We are the only place I can think of who can offer the personal feel and the independence of a family-owned business. Obviously, as you are aware, we are still very much in ethos, a family-owned business. Combine that with the global investment expertise, the private asset access, the technology platform, the security of being the global asset manager as again, we are. On the Benchmark side, I mentioned the breadth of our services, and it puts us in the unique position to help advisors through their stages of development and growth, and then ultimately gives them an option when they want to retire in terms of selling out to us. Schroders Personal Wealth, a couple of opportunities. I talked about the reducing number of advisors within the market. Schroders Personal Wealth has an opportunity through its academy to bring more advisors into the market, and you will have heard about a number of these academies being set up. We have a USP. That is a USP that if you think about yourself in that stage in your career, you are going through an academy. If you are thinking long term, you are thinking, "How am I going to build up my client book?" The fact that when you come out the other side, you can then get referrals from Lloyds Bank, that is incredibly powerful. Then, of course, Schroders Personal Wealth is our joint venture with Lloyds. Going back to the point about the holy grail of the single picture of your affairs across banking and investment, the integrated service, that is really something where we feel we are in pole position. Then lastly, personalized sustainable investments. You will hear later from Kate, we have for years looked after the clients who are right at the forefront of this field. First of all, that makes sure we are absolutely current with the latest trends. It also puts us in a great position because we can then take that expertise and we can now make it available to this wider moderate green segment. That is why and how we are going to grow. While we accelerate our growth, what will it mean for our margins? We believe that we will maintain our margins at the same current level. I think Richard has talked about it before, there are certain segments where we do see some headwinds. For example, in Benchmark advisor platform pricing, that is an area where over the next five years we could see some margin compression. Another one would be in Marianne's business. In the largest charities, it can become more institutional, there can be some pressure there. Against that, we have got opportunities. We have an opportunity as we grow our affluent business, which obviously naturally has a higher margin. We have an opportunity over the next five years in terms of the recovery of interest income. Then we have got an opportunity through that technology platform that I mentioned, which really gives us great economies of scale. Finally, what probably really gives me confidence in terms of achieving that growth objective is that we have got a fantastic team. Really it is a team of individuals who in each of those target segments have got a proven track record of delivery. You are now going to hear from four of them. First up is Marianne. Marianne has been at the helm of Cazenove right through that list of successful acquisitions, which Peter mentioned earlier. She is going to talk about the key to the success of those deals, but she is also going to talk about how she is now accelerating the organic growth of the business. Marianne. Well, thank you very much, Peter, and good morning, everybody. It's such a pleasure to talk to you more about Cazenove. It is a firm I know well, as I joined in 2001. Over the next few minutes, I hope to debunk a few myths about Cazenove and get you to know us a little better. It is a firm I'm also proud of because we've managed to create a business that is ambitious, forward-looking, very profitable, while at the same time staying absolutely true to the values of our heritage. If I was to pick one such value, it would be our client centricity, because it is that that creates clients' trust, it engenders longevity, and it's that which allows them to feel like they can refer more clients to us. This first slide just gives you a snapshot of who we are. On the left-hand side, top left, you'll see the four key features that I think clients in our segment look for when appointing a wealth manager. On the right-hand side are the reasons why we feel we are perfectly positioned to meet those needs. There's rather a lot of information on this slide, so what I propose to do is to focus on our growth over the last 5 plus years and why I'm confident that we can meet that objective that Peter set out earlier. I would quite like to spend just a minute on the third bullet point on this slide, which is the quality of our people, and particularly our next generation of advisors. In so doing, I'll try to bring to life who our clients are and why this is so important. Let's start with growth then. You'll see from the chart on the bottom left that since December 2015, our assets under management are up roughly 85%. Partly, yes, that is down to acquisitions, and in part it is down to organic growth. I'll say a word about both. Importantly though, to us, all new clients, whether they come through an acquisition or whether they come through our proactive business development, are important sources of further growth. Because much of our business comes from happy clients and their advisors referring more clients to us. As we've expanded our footprint, so have we seen a compounding of that growth, and we can expect more of that compounding to come. Let's focus first on acquisitions. This is where our parents' financial strength and strategic commitment to wealth are so important, because that allows us to be first in line when other businesses are considering their options. You know full well how fragmented our market is, even at the top end where we tend to specialize. Equally, our track record on acquisitions is down to how selective we are and will continue to be in who we partner with. We look for top quality people who, together with their clients, will feel at home at Cazenove. Businesses that can benefit from our investment expertise and wider range of services, or indeed might bring us a new skill. Lastly, we look for operational leverage. Consequently, all three of those acquisitions that Peter mentioned in his introductory remarks have been accretive. Over 90% of the clients have remained with us. Many have added to their portfolios and referred more clients, and the people are widely integrated within our wider team. That, incidentally, is just as true of the senior advisors that we have hired over recent years. Turning now to organic growth, you will see that year to date it is running at a healthy 4%. That is a marked step up from the 2.5% that we experienced last year. I am absolutely confident that we can expand our footprint further because our market isn't just fragmented, it is also growing. This is a myth about Cazenove that I do need to debunk, which is that while our name is often associated with inherited wealth, in fact, over 55% of our clients have made their wealth in this generation. Of those, some 20% come from the world of finance, where of course, both the Schroders and Cazenove names are so well established, but a further 40% are or were business founders. Which brings me on to that third bullet point on the right, namely the quality of our people and particularly of our next generation of advisors. Because these are clients who want to appoint a firm which is modern, understands enterprise, can look after them today, yes, but equally be by the side of their families for generations to come. Equally, this next generation keep us in the moment, relevant, and always focused on enhancing what we do for clients. On this next slide, I have shown you two such enhancements. So on the left, you will see our move into private assets some 2 and a half years ago, and you will have heard a lot about Schroders' private asset expertise, just in June. I don't intend to spend much time on that other than to say that with an increasing number of great companies staying private for longer and many listed ones returning to private hands, we feel it is absolutely right to widen our investment universe to private assets. We do so by selecting best-in-class managers, which our scale, reputation, and of course, Schroders Capital give us great access to. So on this pyramid, you will see a selection of Schroders Capital and third-party investments ranging from the more liquid at the bottom of the pyramid to the less liquid at the top, depending on clients' wealth and personal circumstances. On the right-hand side is another enhancement that we put in place late last year, which is to report to all our clients, whether they have appointed us for sustainable mandates or not, on the impact of their portfolios on people and planet. So as part of their regular portfolio evaluations, all clients automatically receive some data points on their carbon footprint and their social dividend. What we hope to do through this is to inform and educate all our clients on the choices available to them. So on this particular example, this is a real example of a new client transferring in his previous portfolio to us and wanting to invest more sustainably going forward. And you'll see from this dashboard that actually using a sustainability lens, this portfolio was far from optimal because it generated 4% more carbon emissions, for example, than if he'd invested purely in the MSCI World. So you see, this is a very simple but powerful tool based on very advanced research from Schroders that allows us to deepen our conversations with our clients. It has really captured the imagination of many of them, and particularly of our next generation of clients. Now, I'd like to pause for a minute because the rest of my presentation will focus on two specific growth acceleration opportunities. The first is our regional expansion drive. Our business plan is to leverage that business owner franchise I talked about just now, throughout the U.K., develop it throughout the U.K. Currently, it is still largely concentrated in London and the Southeast. The catalyst for this decision was our association with Lloyds. It represents a huge opportunity given the scale and quality of relationships that Lloyds Commercial Bank and indeed Lloyds Development Capital have established with thriving owner-managed businesses throughout the country. You'll see, for example, this statistic here that Lloyds banks one in five companies in the SME and mid-market sector, 61,000 companies. So a huge opportunity. Over the last two years in the midst of a pandemic, we have hired 21 senior advisors in the regions, established new local presence in Manchester, Birmingham, Bristol and Leeds, brought our regional headcount to 41 and we're not quite done yet. But as you'll see, this initiative is already starting to bear fruit with a trebling of our pipeline from Lloyds to GBP 1.2 billion. Now I'd like to talk about a second growth acceleration opportunity, this time in the ultra-high net worth segment. This is another factor about Cazenove that is perhaps not well known outside our industry professionals. That is that we already have a very significant presence in this market. Today, we look after 285 clients with over GBP 25 million invested with us. So that means their net worth is way ahead of that. Of those, 47 have more than GBP 100 million invested with us. So the Sandaire acquisition was part of a strategic plan to leverage that franchise and grow our share of this market. Why do we think there's such an opportunity here? Well, currently these large families are looked after in two ways. Either by small boutiques, single family offices generally, typically still owned by the families at the origin of the wealth, who are facing, in many cases, scaling and succession issues. Or at the other end of the scale, by very large multinational banks, typically American and Swiss banks, where the relationships are more transactional and institutional in nature. What we have to offer is that same level of personal service and attention as the boutiques, but coupled with the ability to sustain these families through their generations and to match their next generation with ours. The ability to service them from London, Switzerland, Asia, and for any American taxpayers from our SEC-registered business in London through a scalable platform. Last but not least, Schroders' formidable investment expertise, particularly in the field of private assets and sustainable investment. If I was to leave you with just a few thoughts, the first is that Cazenove Capital is a prime example of how wealth can add to the longevity of assets for Schroders. Two, that we are absolutely equipped to meet that growth trajectory, and we will exploit those two growth acceleration opportunities I mentioned just now. And three, that while we will, of course, remain alert to any acquisition opportunities as and when they present themselves, we will not compromise on the quality of business that we partner with. That is all from me. Thank you very much. Back to you, Peter. Thanks very much indeed, Mary-Anne. We are now going to hear from David about Benchmark. David has a fantastic understanding of the adviser business and what their key needs are. I have asked David to talk about the opportunity that we have to increase our penetration of the B2B adviser services market. Just at the start, I have also asked David to give a quick recap on what Benchmark does, because I sometimes feel that it is the area of our business where there may be the least good understanding. David. Thank you very much, Peter, and good morning, everyone. Let us start straight there. Who are we? What do we do? And why do we do it? In simple terms, we are a B2B business services company. Our customers are financial advisers. Picture those financial advisers up and down the country. Most of them are small businesses. They are dealing with cash flow challenges. They are dealing with other complexities in their lives. Within financial services, they are also dealing with regulation, they are dealing with technology, and also administration. Our sole purpose is to make their lives easier. They tell me every day they want to spend as much time with their clients not keying in data. We try and simplify their lives. How do we do that? As you will see on the screen, we do that in four key ways. Firstly, through technology. We have a range of proprietary technology. We help them onboard their clients, manage the clients, through the end-to-end experience, through the advice process. We also help them transact as well. If you think of Transact for AJ Bell in terms of a platform, we provide that and in a proprietary way, and also a client portal, so for their clients to view all of their holdings. The second area is through what we call network services. This is providing an umbrella to provide compliance oversight, training, regulatory support, but also the financial advice supervision, which is critical. The third area is investment. I am going to touch on that in a bit more detail in a moment, but we offer a full range of index-active and sustainable solutions. If you think Brewin's, Brooks Macdonald in terms of the solutions there. Finally, and really importantly, it's around succession solutions. We have many, many different options. We work with each of those advisors as to what they want and what's right for both them and also their clients. That could be from a client book acquisition or an outright purchase, all the way through to providing financial support for succession planning. That could be to pass on to a son, a daughter, or the more junior advisors in the business. Let me bring that to life for you as an example. Back in 2014, one of the principals of our advisor firms, who's with us today, approached us and said, "Look, I've got a really complex business. I've got a lot of technology. I've got a lot of complexity in my business. Can you help me?" At the time, he was looking after 180 clients. You have to remember these stats. 34 million in assets, and he was generating GBP 225,000 of fee income. If you wind the clock forward, he's used our turnkey set of solutions. He's now looking after 120 million of his clients' assets, not 34, and he's generating GBP 1.1 million, not GBP 225,000 of fee income. It's powerful and it's simple, and we call that the Benchmark advantage. What have we been up to since Schroders initially invested us back in 2016? Well, we've been on a rapid period of growth. You'll see there on the left-hand side, in terms of the number of advisors that we now have a relationship with, our assets have grown from under 2 billion to 10 billion, and that doesn't include the assets that we look after for Mark's business, for Schroders Personal Wealth, and he'll be commenting on that in a minute. That's around 10 billion on top of that. We continue to win industry awards, and I was delighted two weeks ago for us that we won the Best Wealth Management Platform award. That's great, and that's a great endorsement, but we've got to continue to stay focused on our customers, which, as I said, are the financial advisors. The real accelerant for me is being part of the Schroders group. The advisors tell me a number of things. One, it gives stability and security. Secondly, if they come and work with us, we're not going to be sold another time and another time and another time over the next few years. Thirdly, we get access to capital, and also the expertise around ESG, which Kate's going to touch on in a moment, but also the broader investment solutions. On that, I said I was going to touch on the investment solution. Again, back in May of this year, you may have seen that we launched something called the Schroder Investment Solutions. What we did was we brought together the best of Benchmark Capital, of Cazenove, and also the broader Schroders group to launch a single model portfolio service. We're on 12 U.K. platforms now, including our own. We've got fabulous investment performance, as is indicated there. Already 4 billion of assets growing rapidly. Since that launch, momentum's really building. We are averaging over GBP 50 million a month that is going into those solutions. Really, really positive. Just a fantastic set of solutions that we can now grow and develop and support our financial advisors. I am now going to turn, as Mary-Anne Daly did a moment ago, and focus on the areas of accelerant. There are, again, two key areas for me. Firstly, significant opportunity to grow the relationships with financial advisors in the U.K. There are 27,500 wealth advisors. As I mentioned, we have got relationships with over 1,200. We have segmented those advisors, and we see five key segments that we feel appeal or attach to our strengths as a business. If I take one of those, the network switchers, these are individual firms and advisors who are currently dissatisfied where they currently are. We are talking to pretty much every single one or advisors inside every one of the networks in the U.K. today looking to switch. They are telling us three key things. One, they are looking for an independent network, which we can provide, and we do that today. It allows them to run the business how they want to run it. Secondly, they want help, as I have mentioned before in terms of my example, in streamlining their business, becoming more efficient, spending more time with their clients. Thirdly, it is about creating value. They do not all want to exit today. They do not all want to realize that value today. Actually, they want to know that when they are ready, we can help them on that journey in creating value and then help them with that exit. Then the second key area of accelerant is around cross-selling and building deeper relationships with the advisors we already have a relationship with. As I mentioned, we have got 1,200 today. We have been pretty good and pretty successful, as you will see on the doughnut on the left-hand side of the screen. 60% use either three or four of our services today. That means we have got 40% to go after and also focusing on the 54% to go those into having four services. On the right-hand side, I have just given you an indication of a bridge of the types of fees. They are blended in basis for you, so it depends on which service they are using. Just to give you an indication for the fees that are generated as we start to sell two, three, and four-plus services. In summary, we have had a fantastic period of growth. Being part of Schroders has been a huge accelerant and a huge attraction for advisors up and down the country. Our pipeline has never been stronger in terms of the advisors that we are talking to today. I have got clear sight of how we are going to grow, both attracting new advisors, but importantly, also cross-selling services. Thank you very much. Thanks very much indeed, David. We are now going to hear from Mark about Schroders Personal Wealth. Mark has a proven track record of delivering accelerated growth, and I have asked him to answer a couple of questions that I thought might be on your mind concerning the business. The first one is, what evidence is there that we have turned the corner. The second one is, if you put yourself in the shoes of a potential client, what is it which will make our proposition different to that of our competitors. Mark. Thank you, Peter. Morning, everyone. Pleasure to be talking to you today, and I very much want to evidence a couple of things. One, that we have turned a corner as a business. Secondly, that we are very clear on how we are going to accelerate our future growth. I want to start by evidencing the turning of the corner. I want to use data to evidence this. If you look at the top left-hand side of the slide, you will see that the number of client introductions or referrals has over doubled compared to last year from Lloyds. It has also accelerated from our existing client base. As you then move to the top right-hand side of the slide, you can see that those increased introductions has led to an increased productivity of our advisors, up over 55% year on year. That increased productivity, as we look bottom left, has then led to more clients purchasing from our business. Indeed, we surpassed our 2020 total in week 19 of this year in the midst of a pandemic. Those three things combined have led to the shift that you can see bottom right where we were net new business and outflow in 2020, and we reversed that to be positive net new business this year. Indeed, a significant milestone was achieved in March of this year. We achieved net new business for the first time in a significant length of time. But I am delighted to say that post March, every month thereafter, the business continues to accelerate its net new business growth. I think it is the combination of those factors, the evidence that we have turned the corner. I want now to turn to look at some of the other factors that I believe will set SPW apart and create the pathway for an accelerated growth in the future. The first one that I want to turn to is to look at the market space itself. It has been talked, and Peter said that there has been a reducing number of advisors in the U.K. Let us bring that to life. If you went back 30 years, there were 221,000 financial advisors to serve a population at that time of 57 million people. The ratio of advisors to client is 1 in 200. Roll forward to today, that number has reduced from 221,000 to just 27,500. But those advisors need to serve a population of 67 million people. The ratio of advisor to client is 1 in 1,900. At the same time, the wealth of the average individual has risen from GBP 72,000 up to GBP 213,000. That is made up of GBP 110,000 in housing equity value and GBP 103,000 of investable assets. It is not just that there has been a reducing number of advisors. The average age of an advisor is 57, and research suggests that 62% of those advisors will retire, not surprisingly, over the next 10 years. What will SPW do and what are we doing to counteract that and to grow into this space alongside of technology, which I will come onto in a second. Our academy has hired over 90 people just this year, and we are accelerating. Our average age of our advisors is now down to 42 against the average of the industry at 57. The average age of an academy recruit is 32, blended equally 50% male, 50% female. We have a distinct advantage in the fact that we have an accelerated academy. These are people that join us who are already level 4 qualified. They hold the academic qualification, but they are not yet an advisor. The reason they want to join us is that we have removed the two significant barriers. The first is that our advisors are employed. The vast majority of our peers are self-employed, so the client that joins us to become an advisor does not have to make that leap to be self-employed. I think second, and most importantly, is that they do not need to find their own client bank. The fact that the introduction of the client is coming towards them. When we put out applications to grow our academy, I am delighted to say that we get tenfold of applications versus the number of people that we have hired so far. That gives me great confidence that we can continue to grow our business, continue to grow the number of clients that we can serve, and drive that NNB margin and volume that we talked of earlier. That is the market. Let us now look at if we bring together Schroders and Lloyds into this JV, what does that mean in terms of client access and data? Let us take a look at Lloyds. Lloyds is a very, very large bank. It holds GBP 474 billion of customer deposits, and that is up 40% from 2019. Indeed, in H1 of this year, the deposit levels were up GBP 23.1 billion. They have got 17.7 million digital users interacting with the bank on an average of four times per month. Over 50% of all U.K. adults have a relationship with some part of the group. What does that mean? What that means is that we have incredible access to clients, incredible access to client data, and the cost of client acquisition that affects many startup new businesses is zero. On the Schroders side, we clearly have an incredibly powerful investment management business behind us that is powered by an incredible technology that David has talked of. You are going to hear from Kate very shortly about the sustainable investment offering that we have. Bringing this to life, the power of Schroders in the first half of this year, Schroders generated GBP 586 million of profit for our client. On an average, that was 6% return in the first six months of this year. So incredible performance. Together, I think, with the modern technology sets us apart. We do not have any legacy because it is a new business, new startup. Let us just take a moment now to think of what does this mean for clients. This is the thing I think that excites me most. To have an integrated view, a single view of a client's banking and their wealth. I am going to bring that to life in a short time. We are starting now to modernize, to bring new propositions to life. Indeed, in March, you would have seen that we launched Zero Protection Commission and an attempt. I believe it is the right of everybody to have access to protection, and there is a GBP 2.4 trillion debt of protection in the U.K. today. It is a relationship starter. It is bringing people towards the group, and we will expand our wealth relationship with all of those clients. Let us bring to life now this integrated view. I want to bring to life individualized, customized personas for clients. It could be a professional services, but let us do something that is very topical. Let us look at somebody that is a healthcare worker, and let us focus on a GP. We will call her Mary Smith. You may all know a GP. Everybody wants to get Mary when she is a student. We all think that she is going to have some wealth into the future, and she becomes a junior doctor. People will supply through the bank mortgages. In association with that, Mary would really appreciate some advice on having a LISA to get to that mortgage and really should be guided towards taking a pension at a very early age. When it really comes to life is when she becomes a GP and wants to go into private practice. What we can see here is that we are able to do buy to let, the business loan, in combination with the wealth advice as she starts to gather wealth. She then becomes a practice owner but can start to think of more advanced solutions in wealth and utilize Cazenove and its expertise as her wealth grows. As importantly, when she comes to crystallize that wealth, we can optimize all savings held in the bank, investments held with ourselves, and the equity within the home to optimize that tax journey. Having the access to client data, I think, is a real differentiator. Last, but by no means least, for Schroders Personal Wealth, when we compare our price value to our peers, we are the leader. Now, if Mary Smith were to give us GBP 150,000 today and invest GBP 20,000 in an ISA for the next 15 years, dependent on which peer that you would take, Mary Smith would be better off by either GBP 22,000 to GBP 49,000 if performance was flat from charges alone. Something that I think she values. We offer great value. I hope that today I've given you some evidence that we've turned the corner, and we are very clear in our plan to accelerate the growth into the future. Thank you very much. Peter, back to you. Thanks very much indeed, Mark. Great. We're now going to hear from Kate in terms of sustainability. Before her current role, Kate was head of our charities business. She has, for years, really been looking after the clients who are the most progressive, the most challenging in this space. I've asked Kate to talk about in this sustainability area where lots of people are making bold claims, not always brilliantly well-founded claims, what is it which absolutely sets us apart? Then given this unique franchise, really, in terms of our client base with the most progressive, the most challenging, the ones right at the forefront, how do we then leverage that to make it available for the moderate greens? Kate. Thank you. Good morning, everyone. I've been really looking forward to today, and I've been thinking about how I can best get across to you the enormous opportunity that we have in front of us. This is an opportunity to drive the transition to a fairer, sustainable economy, to deliver what our clients really want, and to drive business growth. You'll have already seen endless statistics that show the growing flows into ESG and sustainable products. I thought I'd take a different approach and illustrate this huge turnaround in attitude by contrasting two events that I spoke at 18 years apart. The first was in the Savoy back in 2002 to a room full of charity investors. I talked about the Exxon Valdez oil spill and why it was relevant for them as investors to think about the impact of the companies in which they were invested. I illustrated it by showing them pictures of oil-soaked birds, of devastated ecosystems, and it was an absolute disaster. My talk bombed. It was not relevant information. Investors were there to make money, not to do good. Fast forward to last year, to 2020, and this time, I'm standing on the stage at the Royal Institution in front of a packed audience of over 100 purpose-led investors. This was the ESG Investing Olympics, would you believe it? Where 59 wealth managers had responded to an open call to tender for the management of three foundations' assets. These foundations were looking for the best sustainable investment offering in the market. They were blown away by the level of interest that their competition generated, but they were also really concerned about the difference in quality, and that's the problem, isn't it? How do you, how do our clients tell the difference between what is marketing spin and what is authentic, between what is green and what is greenwashing? I am delighted to say that we won the ESG Investing Olympics and were crowned as the best sustainable investment offering in the market, and we are now working with these visionary purpose-led investors to drive forward progress. What has put us in this enviable position, beating 58 of our peers to win the Olympic gold medal? What sets us apart? Unlike most of our peers, Schroders has been doing this for 20 years. This has given us the time to develop our knowledge, to develop our experience and our skills, and an unrivaled platform of proprietary tools. It has also given us the time to build meaningful, collaborative relationships with purpose-led clients. These are things that cannot easily be replicated by competitors and keep us at the forefront of the industry. What do these clients want? They want us to deliver both strong financial performance and positive impact, and our credibility rests on the outcomes that we deliver. Firstly, our performance. Our long and strong performance track record, as shown in the chart, emphasizes to clients that they do not have to give up profit for purpose. Over three years to the end of June, our sustainability growth portfolio has generated a return of 36%, as compared to the wealth management peer group, which has returned just 19%. Secondly, they want to see us demonstrating real, meaningful impact, and that means looking beyond ESG analysis. This is ESG analysis that places British American Tobacco and Glencore in the top five ESG stocks in the FTSE 100, according to one provider. That is not what clients mean by sustainable investment, and it means that we must go further. We must measure the real-world impact of their investments on people and on the planet. We must report these impacts to our clients in a way that they understand. For example, a GBP 100,000 investment in our sustainable growth portfolio, in addition to the financial returns, delivers three times more social benefit than the MSCI World and has 85% lower carbon emissions. That is carbon equivalent to planting and growing 184 trees per year. These tangible impact metrics make people feel more connected to their investments and drive a more engaged client. These engaged clients, of course, are not homogeneous. We are all different, a mosaic of our individual experiences and opinions. I care deeply about reducing inequalities. I know Peter wants to drive climate action, and I bet if I asked every one of you, we would have different priorities and passions. We can reflect these differences in our investments because we measure and manage impact, and we can use our analytics and our technology to tilt portfolios to reflect your views. This personalization matters. It reflects what clients want, it further increases engagement, and it enhances the quality of our conversations. These three things, performance, impact, and personalization, allow us to deliver what our clients want and demonstrate our difference and our credibility. Do not just take it from me. Take it from the 1,600 charities, foundations, and universities that have chosen us as their manager, making us the leading investment manager for U.K. purpose-led investors. Awards like the 2020 Impact Award or the Citywealth Charity Manager of the Year also add credibility to our offering, which is particularly important in a market that is awash with claims of expertise. I have confidence in our market-leading position and believe it offers a real opportunity across our wealth businesses. This underpins the forecast you have already heard from Peter, from Mary-Anne, from David, and Mark, and drives our overall growth ambition. In Cazenove, we are already seeing evidence of this accelerating client demand. Our sustainable assets under management have doubled from 3 billion to 6 billion over the last three and a half years, and now represent 14% of our total assets under management. Assets in our two sustainable multi-asset funds have more than tripled just this year from GBP 250 million to over GBP 750 million in less than 10 months. We are seeing this trend in our existing clients. You can see from the middle chart that when we asked our clients to classify themselves, 42% of them said they would like to invest in a sustainable or an impact-focused portfolio, with an even higher percentage of women and of under 55s. We have invested time to train all of our advisors so that they can deepen those client conversations and improve client longevity, particularly when wealth passes through the generations. You can see sustainable assets are a growing part of our business and give us the opportunity to extend client longevity. It also opens up considerable new business opportunities. Today, over 20% of Cazenove's new business pipeline is for sustainable mandates. This growth extends beyond Cazenove. Benchmark has already seen significant sustainable asset growth, and we are working with Mark and his team to bring these market-leading portfolios to their clients. Sustainable investment is a key growth opportunity for our business. It is what our clients want, and it is how we can accelerate positive change, building a better future for all. Thank you. Thanks very much indeed, Kate. You have now heard about the five opportunities that we are focused on, which will drive the acceleration in the growth. What I want to do now quickly is just almost step back from the detail of those five opportunities and just say top line, what is it which gives me confidence that we will achieve that acceleration? It is three things. The first one is our trajectory. This is now we are talking the whole of the wealth business. A year ago, we were growing at 2.5%. Our current run rate is 4%. You can see we are on the flight path for our target of 5% next year. Secondly, what I hope has really come through loud and clear today is the huge untapped potential that we have, and a couple of illustrations of it. One, in David's case, it's because we have currently a relatively low share of our target market in B2B advisor services. You just heard a different angle on it from Kate, where we are uniquely well-placed to be right in at the start and capturing a share of currently a small but very, very rapidly growing segment. The third one is the advisor hiring. Again, you've heard from it in a number of cases. You heard about our USP through our academy and SPW and the fact that we have already brought in 90 advisors there. You heard another angle on it from Mary-Anne about our ability to go out and to track 16 of the best advisors from our competitors in the U.K. regions. Of course, it's that advisor hiring which fuels our growth ambition. Finally, before we turn it over to Q&A, a quick summary of the takeaways from my perspective. We talked about what makes us unique. We have four distinct franchises focused on individual segments, but leveraging these shared unique strengths of Schroders from investment through technology, through the relationship with Lloyds. We've got big ambition, but we've got a proven track record. We've more than doubled this business in the last five years. We've got a lot of focus in terms of what is going to drive the growth, and that's what gives us the confidence that we're going to achieve the target of 5% organic growth. While we achieve that accelerated growth, we are confident that we can maintain margins at the current level. That's 56 basis points average on revenue margins, 31% in terms of profit margin. If you put it all together and you add to our organic growth, some assumption in terms of market growth and performance and further capturing of opportunities with partnerships and acquisitions, that's what gives us confidence in the total target of GBP 115 billion of assets by 2025. It's now over to you. It's time for Q&A. I'm going to hand back to Peter who is going to host the Q&A for us, and all of us who have presented are going to come back on stage so that we can, we'd all be delighted to answer any questions that you may have. Thanks, Peter. I think there should be a microphone somewhere. Please, before starting. You've heard the phrase investor growth from Richard and I many times. I hope you can see today that we've put together a fantastic set of businesses. As those businesses come together, they've opened up a lot more optionality. I'm really excited, and I'm very confident, actually, about that build-out. Let's get into the detail. Who's holding the mic? Hi, good morning. It's Hubert Lam from Bank of America. I've got a few questions. Firstly, on your 5% net new money growth of GBP 4 billion per year, can you give us the breakdown in terms of the contribution for the GBP 4 billion across the different segments? Which segments do you expect to grow faster than others? Just any breakdown you have in terms of the growth rates for the four different segments would be helpful. Second question is on M&A. I think you talked about M&A throughout the presentation. Can you just give us your priorities and considerations for M&A? Of the GBP 115 billion target that you have, how much of M&A is baked in to that number? Which segments do you see the most opportunity for M&A, and would you consider larger deals if it made sense? Hubert? Third question is on the cost of hiring advisors. Can you talk about the cost of hiring advisors, how has that changed over time? Do you expect it to be more expensive going forward? Will you pay more for advisors going forward? Lastly, if you don't mind, just talking about also how you sell Schroders products within your wealth management division. What percentage currently is Schroders product versus third party, and how do you expect that to grow over time? Brilliant. It used to just be two questions, didn't it? Three. Peter, why don't you start with growth rates and- Yes today. I think what you've heard this morning is that we have growth opportunities in all areas of the business. All of them are currently growing, all of them, we believe, are areas where we can accelerate our growth. I don't want to go into the specifics in terms of putting a target in each particular area. But in aggregate, I'm confident that we can achieve the 5%. One of the additional things that gives me confidence is, of course, the breadth of the opportunities that we've got here. On M&A? On M&A, yes, I think that if you look at the GBP 115 billion, you can obviously do your maths in terms of the 5% a year. The difference there between the GBP 115 billion and the organic growth is partly down to an assumption on market growth. It is partly down to what we believe we can do on M&A. We have got a lot of confidence from our track record in terms of M&A. I do not want to appear arrogant about it, but I think we do really know how to successfully integrate businesses. We are continually on the lookout. Where do we look, I think was your question. It really comes back to those strategic priorities. We are particularly interested in the family office space, where, of course, we have had very successful acquisitions with Sandaire and Thirdrock. We are also particularly interested in the financial planning space and David, for example, talked about our ability there to provide succession opportunities for individual advisors who could be using our other services. Yes, we will contemplate larger deals. If you go back a little bit earlier, the whole division was originally formed through what at the time was a large deal in terms of the combination of Schroders and Cazenove. If the right opportunity comes through at scale, absolutely we will consider it. I think what we are saying is that we are very confident of the GBP 115 billion number and there is upside of that. Richard? I was just going to say, Hubert, we don't want to get in the game of giving growth rates for every single aspect of our business. As a blended segment, very comfortable with 5%. To illustrate that 115, there's a number of different scenarios. With 5% NNB growth, with markets at 4% over that period, you would have GBP 4 billion of acquisitions. If markets were at 3%, you would have to hit 115, you're about GBP 10 billion of acquisitions. Clearly, we don't know the M&A number, but we are very comfortable as a guide hitting broadly GBP 115 billion at the end of 2025. I think it's also a self-correcting mechanism because if the markets are very strong, the price of acquisitions goes up. If the market's weak, we can be much more opportunistic. So the balance of those two gets us to a good place. Cost of advisors. Mary-Anne, do you want to start on that one and David- Yes You might want to come in. I can certainly start with that. There's always, when you're hiring, we want to hire the best people. So the best people always come with a price. Equally, I think most of the people that we have hired have been just as much attracted by our culture. So it's a very cooperative culture. It isn't a hunt, basically eat what you kill culture. So that I think is what has allowed us to hire really talented people, really experienced people from top institutions without having to overpay. Firstly, there's the attraction of coming to a firm like Cazenove, where you know that there's a backing of Schroders behind you. You know that we're not going to be sold again. So when they're bringing clients to us, they know that it's a good home, both for themselves but also for their clients. I think that speaks wonders. The type of people that we've been able to attract is not because of money. What we haven't done is say, "You will get X amount of, more of an uplift," et cetera. They've almost sort of come to us and I think that's so valuable, so important. David, do you want to comment on the buyout world, which is probably more challenging? Yes. As I mentioned in my presentation, I don't know if I specifically mentioned it, but we've done 35 deals. As Peter said, we don't want to be arrogant, but we're pretty good at what we're doing. We've learned a lot over the years about how you integrate. It's not about price, it's about culture. A bit what Mary-Anne was just saying, I think it's about the right firms and driving the right value for them and working with them. I think within our network today, we have well over 100 firms that we sort of work with and are helping them drive that value. I feel very confident, Peter, that we can continue down that track. It's fair to say, though, that with a number of PE firms operating in that space and firms being built up, that the price that people have had to pay has sometimes got quite rich. That is correct. Yeah. That's a different dynamic. Yeah For employed people, I probably should say, as a group level, our staff turnover remains very well below 10%, significantly below 10%. The employee value proposition that Marianne talks to is working, because there's a lot talked about very hot employment markets at the moment. But I'm very pleased to say that although we evidence it's not turning up in our staff turnover numbers, which is important. Peter, I might add, we take on a lot of young graduates through the Schroders Graduate Scheme, and importantly, we retain them through their career. I think that also gives us, because it gives you the culture is then within those people. We provide, because of our growth ambitions as much as our culture, we're able to retain some really good, really talented people. Marianne, whilst you are on, do you want to talk about percentage of Schroders products? Sure. In terms of Schroders product, we do not have a percentage in mind. What we do is we basically have an open architecture approach, and Schroders is part of that, of course, is part of that cadre of fantastic managers that we look at. So if you were to ask me today, we are probably roughly at about 15, I do not know, 12. It will vary between 12% and 15%. But it could be more if we end up having more in private assets, then of course, those assets stay for longer. It is really dependent on what is right for the clients at that particular point in time. So it may be that we sell out of a Schroders fund because of the style of that manager not suiting that moment in time. It is not because the manager is not performing necessarily. It is more because actually we are moving more into value, so we will buy more of one particular Schroders product. We do not have a percentage in mind. Peter, that is the same for the Schroder Investment Solutions as well. So unfettered multi-manager approach, and that is the style that has worked well for us. Great. Thanks, Hubert. We are going to go to our virtual audience for the next question. Okay. The next question is from Nicholas Herman. Nicholas, please unmute yourself. State the name of your organization before asking your question, please. Yes. Hi. It is Nicholas Herman from Citigroup here. Can you hear me okay? Yes. Yeah. Thank you. Great. Thank you for taking my questions and thank you for the presentation today. Very helpful. One clarification question and then a couple of other questions, please. So just on the clarification, does your growth ambition include growth from your upcoming JV to be launched with BOCOM? That is that one. On the other two questions, one on operating margin and one for Marianne on Cazenove. On the operating margin, you generated 30% operating margin last year. That was obviously a difficult year with Covid. With such strong growth, why can't you expand the operating margin more? I am also guessing, when I see a lot of your peers talking about expanding operating margins, not just U.K. peers, but also international peers, private banks, the like. So that is on operating margin. On Cazenove, we are seeing a move towards greater proportion of products being offered digitally, even in the high net worth space. So I am thinking about Julius Baer, Digital Advisory Solutions, UBS and My Way. Do you have anything comparable to that? Be interested to hear that. Thank you. Perfect. The first one is very straightforward. This is completely excluding everything in China, which is additive to that. Richard, do you want to touch on operating margin? Yeah. Operating margin. It's been broadly static over the last five years. It's gone from, I guess, a low in 2019 of 72%. The half year it was 69%. We talked about there's very significant investment we're making in U.K. regional wealth, and that's a lot of cost before revenue, and we'd expect that revenue to flow next year. I do see some leverage opportunities, but at the same time, we want to continue to invest in the future growth of the business. I think marginal improvement in the short term with a sensible rate of investment is probably where we're heading. I think keeping the theme of investing for growth is really important. Most of the growth we're seeing now is for things we weren't doing five years ago, and that sense of continuing to invest and moving one's feet is important. Actually, probably on that, Peter, why don't we talk about digital? Yes. We are and have been investing very significantly in digital. An example in Cazenove and Schroders Wealth Management is a client app that we have launched within the past year. It's gone down extremely well with their clients. If we talk both about Benchmark and Schroders Personal Wealth, we are absolutely investing in further digitization of the key steps within the advisor process, which are, of course, account opening and take-on, and then client reviews and suitability. That's absolutely a key element within our change program. I think also what Kate talked about in terms of being able to engage with clients from a technology perspective with what it is they own is very different from just reporting on performance and risk, which I think is not an app as such, but it is actually proper engagement that's personalized to them. Next question. Hello. Yes. It's George Webb from Paleo Capital. I actually wanted to ask on that specific point. As you alluded to, there's a lot of marketing spiel in ESG. I was particularly interested by that personalization point. Could you maybe just give us a little bit more detail on how that works? Do you ultimately, I guess, believe that that fits into where we started on the greater longevity of clients? If you're able to tilt to whatever the charity or the individual's personal ESG needs, is that something that others can offer or do you think it's a unique offering? I think it's unique at the moment. We've been doing it for quite some time with the very large institutions. Whether it's University of Reading, who are very focused on climate or an individual family who cares about reducing poverty in emerging markets. We've been creating personal investment portfolios for them. I think what is shifting with both the technology and obviously the data and tools that we have is the ability to use that as a platform to create broader access and broader portfolio tilts. Yes, you're absolutely right. What that does is allow a client to connect with their investments in a way that is broader than just meeting their risk and return targets, but is actually driving the things that they care about, which enhances client conversations and thereby longevity. I think it's also fair to say that we do it in Cazenove, something like BlueOrchard, which does it specifically with development agencies around the world. We'll have an Asian female empowerment fund, for example, which sounds like a very niche thing, but is important to a group of individuals who want to invest behind that, and we run that fund. There's other things like quality jobs in the U.S. I think more and more that theme is where the world is going. Next question. We're going back to our virtual audience for the next question. The next question is from David McCann. David, please unmute yourself, state the name of your organization before asking your question, please. Yeah. Good morning. Thanks for taking my questions. Can you hear me okay? Yes, thanks. Yeah, great. Two questions from me. The first one is, you will be aware that period that you are talking about, so H1 2021 to 2025, the U.K. wealth market leaders are known as players are targeting AUM growth of about 80% on an organic basis to GBP 260 billion in their case, and are targeting positive operational gearing. Clearly, your target is for about 50% growth over that time, including acquisitions and a flat operating margin. But I would have thought that being a smaller player with potentially more scope for growth, given the current size and operating across a broader market spectrum, you could potentially grow a little more quickly, especially if this does include acquisitions. I just wondered, I guess the first question is perhaps why is the target not a bit more ambitious? The second question is really just a more technical one. On slide 29, you made some high-level claims around price leadership in Schroders Personal Wealth. Could you maybe provide the actual detailed workings of that? Probably offline would be best. Thanks. David, thank you. Peter, do you want to pick up that charge? Yes. What we've set out at the moment is what we are confident in terms of hitting the 5% a year organic growth from now on. We'll see how we go on these initiatives. We'll give you an update every six months in terms of how they're going. We're optimistic about them. It's possible that they will play out and evidence more upside. But for the moment, I think the right thing to do is to go with the overall target of the 5% growth. On the acquisitions, it's a bit, as Richard says, a bit who knows? There are opportunities out there which could be significantly greater, but it would seem inappropriate to put that in the target. Having done four successful acquisitions, we've worked really hard on making sure that the follow-on growth from those has been very good. I think- Yeah Our style tends to be to underpromise and overdeliver. Yes. Mark, perhaps you could pick up that separately. Let's pick it up offline. Sure, that's fine. Because I think we could get into a number fest. I am conscious of time. Next question. Thanks. It is Tom Mills from Jefferies. I just had a couple of questions left. Both related to Schroders Personal Wealth, actually. I can see how it is attractive to young people if you are offering them an employment in the role versus perhaps what competitors are offering. Does that, though, make it difficult to hold on to people later in their career when perhaps they could capture more of the economics at different places? Then, I guess the point about open banking and the benefit that that gives you, the relationship with Lloyds. Is that benefit not also available to your competitors with open banking? What is the additional benefits that you get to bring to the table as a result of the relationship with Lloyds? Mark, do you want to Great. Yeah, of course. Thank you for your question. As I said, the average age that we attract in our academy is 32, average age 42 versus the sector at 57. What I want alongside that to ensure that we maintain the longevity of our advisors, we have a career progression that phases into four. When we bring somebody on, I think you talked about is it going to be more expensive, I do not know if your question was actually more to do with assets than advisors. We are very controlled. As I said, there is tenfold in that academy. But actually we have a much more solid progression that is based on a set of standards, that we do not necessarily need to go into now. But I am very confident because of that when we compare peer to peer to a typical advisor elsewhere with the security and the career path and the role and function, because do not forget, the clients are being introduced. I think it is those factors that remain compelling to most. That is proven way before my time in the old business and through. I am very positive in that because I think the career progression will help. To your second question, it is actually around how we attract the client rather than can people do this with open banking. It is actually the positive persona to attract. If you think of the number of clients, and we stated, did not we, that over 50% of the people in the U.K. have some form of relationship or used the GP in this scenario. It is how we approach Mary in my example. That is the difference in the origination, because we can see the data as we approach Mary. We are not waiting to be reactive, and that is the key difference here, that we can actually see how many Marys, how many GPs Lloyds as a group have, and then we can create in bespoke. We built six different personas to do exactly that. The idea is we are trying to grow the wealth market here rather than just- Yes take money from our peers. Next question. The next question is from Bruce Hamilton. Bruce Hamilton, please unmute yourself. State the name of your organization before asking your question, please. Hi. Yes. Bruce Hamilton from Morgan Stanley. Thanks very much for the slides and the content. Really interesting. I had a couple of questions on customization. Bespoke customized portfolios, I guess at a personalized level is a big focus for many of the U.S. firms. Looking at the slides and listening to you talk, it sounds like you do that in a number of ways, but can you maybe help us understand a little more around what you're offering? So it sounds like there's fairly standardized model portfolio solutions at a low fee. At what sort of level of assets can you actually deliver a fully bespoke portfolio to a customer in the same way that some of the U.S. firms are trying to do? I guess technology is an important part of that. Secondly, in terms of customization, is the opportunity mostly around sustainability and impact? Or is there a significant driver around tax optimization or something else? Because clearly the sustainable impact piece sounds pretty well covered. Then third and final question, this is slightly different on risk. On some KYC and AML, how has the process evolved over time? Are you doing it all in-house? Do you use third parties? How do you get comfortable around that sort of risk? I guess obviously quite a few European banks have come a cropper on that one. Peter, do you want to start on the bespoke threshold on Marianne and then on the drivers? Yes, absolutely. In terms of a bespoke portfolio where you don't just have a dedicated individual, but they really can personalize it to you, that's at GBP 1 million. More generally, how do we customize portfolios and how will we customize portfolios? One element of it is by goal. You will sit down with your financial planner, and you will agree the personal life goals and therefore your portfolio is designed to deliver them. The second one is really going back to what Kate talks about and where I think that we have a real edge, which is taking the ability to personalize a portfolio for some of those largest, most sophisticated clients, and then using technology to make that available to a much wider group, and then building the emotional connection and the longevity that Kate's talked about. I think that that covers the question. Peter, was there an element of that first question which you think I've missed or no? Shall I pick up the KYC question? Sure. Clearly we have invested very significantly in staying abreast. At the heart of the question is also making sure you have got the right client base. A few years ago, we took the decision to exit our Eastern European client base. There is a combination of making sure you are comfortable what you have got, that fits your values, but also continued investment in making sure we have got the best possible procedures and technology to support us in that KYC journey. That is different in every aspect of our business. We have invested very strongly. That is something that we have to get right and we are. Marianne, do you want to add anything to that in terms of onboarding of clients and Yes. It is internal, how we onboard the clients in terms of the AML, et cetera. We tend to know our clients very well. We do not have, certainly in the U.K., we do not have a high-risk client base. It is, as you would expect, very domestic, although we do have 10% of our Roughly 10%-12% of our clients are international. While, of course, we take all the measures to protect ourselves, we, I think, are a relatively low-risk organization anyway, but we take that incredibly seriously. We prefer to do that ourselves and to really know our clients before we take them on, because our reputation is everything. It is just not worth us making a mistake there. Thank you. Bruce. Any more questions? The next question is from Arnaud Giblat. Arno, please unmute yourself, state the name of your organization before asking your question, please. Hi, it's Arno Giblat from Exane BNP. I've got two questions, please. Firstly, on Embark. Lloyds announced that acquisition a few months ago, a platform with 35 billion of assets under administration, 410,000 clients. I was wondering if you could share some color on how this fits in with your current strategy with Schroders Personal Wealth, given that Lloyds referral seemed quite important to your strategy. Secondly, I was wondering as well in terms of how much of the vertical integration of, for Schroders Personal Wealth, how much referrals are you seeing towards Schroders products? Is it still the 10%-15% range, or are you able to better sell Schroders products within that joint venture? Thank you. Thanks, Arno. Mark, do you want to touch on Embark first? Yeah. I think this is more of a Lloyds response than it would be a Schroders response, because I think what Lloyds have done by taking on Embark is clearly fill what was a strategic void in having a retail platform, because Lloyds only had a corporate platform. The business case for Lloyds is absolutely to think about a D2C offering. That's what I would comment on that. Then with regards to the vertical integration, it's a reference actually to an answer that was priorly given on open architecture. It's very stable. We do the best thing for clients, and actually, the percentage of Schroders products is consistent with your question. It has not moved. So it still remains a minority of the total that we have within the group. I think there is also a philosophical point here that this is not a cheap way of selling Schroders products. This is about trying to offer the best-in-class solution to clients, and that is what will make us successful It is in return. I think what is evidenced is the independence of this and Schroders, be very clear, help us in the selection of the managers. So, it gives me great heart actually that we have maintained that. I want to give everybody assurance that that will remain. I think the other point, Peter, if you want to comment on Embark a little bit, but we do not have a desire to be a self-service platform. No, exactly. I think that, as Peter and Mark says, I think that that is a strategic ambition for Lloyds, but it is not part of our strategy to develop a D2C offering. Great. The next question is from Gurjit Kambo. Gurjit, please unmute yourself, state the name of your organization before asking your question, please. Hi. Good morning. Can you hear me, guys? Yep. Okay. Well, thank you firstly for the presentation to all the speakers. I think it is very helpful. Just a couple of questions. You talk about the pricing obviously is better versus some of the peer group. Can you maybe just elaborate a little bit on how the performance looks? Is there any stats you can give? I know you have given something around the issue, but just around the more broader businesses around performance. The second one is just on the investment, I guess, in IT and digitalization. I think you mentioned that as a positive to the operating profit margin. But is there any sort of near-term investments you need to make on the digital or IT side, which may have, I guess, slight negative impact on margin? Then just thirdly, in terms of the revenue margin, look, I am not looking for details around the different businesses. But if we just sort of think about, is there any significant difference in margin which might impact if one grows faster than the other, that might have a margin impact on the revenue side? Gurjit, thank you. Mary-Anne, do you want to comment first of all on performance? On performance. Yes. I think I have quoted one performance in the slides. There is a performance statistic, which is that we have outperformed ARC over one and three years. So our performance is strong. It is founded on our stock selection, but also our asset allocation has been correct. We have had a lot of exposure to the U.S. and we have had more exposure to some secular themes such as technology, pharmaceuticals, et cetera. So we are very pleased with the performance. Our performance of our segregated portfolios, I think there was a question earlier about personalized portfolios, so where clients are actually investing in individual stocks. That has equally been strong, and that is powered by the research that we have within Schroders. Again, the same secular themes have carried us forward. But what we look for obviously is also to lessen the volatility of our clients' portfolios. This is why I think the ARC sort of benchmark is a good one because it is a risk-adjusted performance. We are very strong versus our peer group there. Peter, Mark, any other comments? Yes, I will comment. I do not know if the question was referenced to SPW. What I would say is that, since Schroders has taken on the mandate, the performance has significantly improved for our clients than that for the prior manager. Yesterday, I signed off the attestation of value for our fund performance, and that will be released on the 15th of October, and you will see a significant uptick since Schroders took that on over the last three years. Great. Thank you. Richard, on margin? On margin, again, on a blended basis, I am really comfortable at guiding to 56 basis points. Clearly, in a short measurement period, if we were to win a very large charity or a very large family, that would come at a slightly lower margin. It is always dependent in a short measurement period. But over the five-year term, all things being equal, I would expect the business to continue to deliver at 56. There is one override. The loss of bank interest margin has cost us two basis points of margin. I would like to think over a five-year period we might see some return to earning more banking interest margin than we have done in the last few years. There is upside on interest margin. Do you want to mention anything on profit and costs coming through, Peter? Is there anything? Well, I think on the sort of digitalization point, each year, we invest quite a significant amount in technology, and we are anticipating over this period that we will need to maintain that significant investment. It is not that we are anticipating to deliver what we want to deliver, that there is going to be a sudden sort of jump in that, but it is just going to be continued high level of investment. Of course, the depreciation of that does have an impact on the profit margin. But that is we believe more than offset by the benefits in terms of productivity on the back of it and the economies of scale that I talked about. Thanks. This is going to be the final question. It is from Roberta De Luca. Roberta, please unmute yourself, state the name of your organization before asking your question, please. Hi. Good morning, everyone, and thank you for the presentation. Roberta De Luca from Goldman Sachs. I just wanted to quickly go back on hiring. Given it was stated a couple of times throughout the presentation, the focus on hiring, obviously, appreciate Marianne's comments around not having to overpay for advisors, but assuming that it obviously still has a slightly higher cost. I am just wondering whether we should expect any short-term pressure on margins from potentially having to go out and hire more advisors. Then a second leg, I guess, to the same topic is, can you give us maybe a sense of the reliance on your growth on your advisors? Maybe, if we can have some color on the weight of flows from your advisors, on the growth, basically, either over the past few years or on your kind of forward-looking targets. Richard. On margins, again, I just want to restate, we are really comfortable with the guidance I have given. I do not see, other than a mix shift in business, and let us be clear, if we are taking on a large, more institutional-like mandate, the profit margin of that mandate is just the same as a smaller, higher revenue margin. So we must not get confused between revenue and profit. That we are here to run the business to make money for our shareholders. But I do not see any real pressure on that 56 basis point guidance I have given. Growth from advisors. Well, I suppose if I start off with the generality and we go back to the five opportunities, there are some of those opportunities which are not dependent on advisor hiring. For example, on the B2B business for Benchmark or the personalized sustainable investment. I think we talked particularly about hiring to support Mark's growth in SPW. For me, the key factor there was when he said that there were 10 applicants for each place. Then we also talked about hiring in Cazenove in terms of the regions. Do you want to talk about that last point, Marianne? Well, I think the majority of the growth currently is coming from our existing advisors. I talked about the importance of growth coming from existing clients and advisors who know us well. By that, I mean professional advisors, lawyers, accountants, consultants. They bring us the max. This is where the bulk of our growth is coming. Of course, I have talked about a specific growth acceleration opportunity in terms of the Lloyds relationship and the hiring of advisors. We are not dependent on those advisors in that sense. It is an acceleration opportunity, and we do want to support it because we have got this massive opportunity from Lloyds. It is very different to saying, we are going out to hiring advisors so that they can bring their existing client base to us. That is not what we are doing. We are staffing up in order to meet the demand from Lloyds. That is a very different dynamic. A lot of our growth currently is coming from our existing client base and their professional advisors. Thanks, Marianne. Can I just check there are no more questions in the room? No more questions online? Excellent. Thank you, everybody. Hopefully, you found it useful. We will continue to run these focus sessions on different areas of our business so that you can get a deeper understanding of it. We try and keep them short and sweet so that we can get deep into one hour. I am really grateful for you attending and look forward to seeing you all again soon. Love to see you in person. So thank you. Thank you.

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