Good morning, and welcome to St. James's Place 2023 half year results live Q&A session. Today's session is hosted by Andrew Croft, Chief Executive Officer, and Craig Gentle, Chief Financial Officer. They are joined by colleagues on the St. James's Place executive team. I'm going to hand over to Andrew Croft.
Yeah. Good morning, everyone, thank you for joining. You will have seen the results this morning and the analyst video that we put out earlier. As the operators just said, as usual, I'm joined here by my full executive team for the Q&A session. I will share and hand out the questions that come in. I think that probably takes us to the first question, please.
First question today comes from Andrew Sinclair with Bank of America. Your line is open.
Thank you, good morning, everyone. Two from me, as usual, please. First was just on the charge cap. Why, why only bonds and pensions? Is this gonna be rolled out to unit trusts and ISAs as well in the future, or what makes bonds and pensions different? Are there any other elements of charges you're considering amending? That's question one. Second question was just on the academy. Really good number of graduates in H1, but the number that are actually in the academy now seems to have slightly reduced year to date, still quite a bit below previous peak levels. Just given the importance of the academy to advisor growth, what needs to happen to really drive those numbers higher in the academy? That's question two.
Third was just on your customers, on your clients. I just really wondered if you can give us any color on roughly what proportion of your clients have a mortgage, just to get an idea of what higher mortgage costs might mean for your customer base. Thank you very much.
Thank you, Andrew. I'll take the charges cap and the customers and mortgages, and I'll hand over to Peter Edwards on the academy. Look, on the charges cap, because we have different product sets, if you like, there are different charges within each of the individual product sets. Part of the charge cap that we've introduced is to introduce more consistency between those individual products. That's hopefully that one. On the customer clients, look, I don't know the exact answer to the number of clients that have mortgages. We sort of need to remember as well, we've got pretty close to one million clients, different age groups, different demographics. I would guess that our younger clients will have mortgages, our older clients will be mortgage-free.
If I can't give you the specific answer there, I'm afraid, Andrew. On the academy piece?
Yeah. Hi, Andrew. I think what's important to remember is that the number of people in the academy fluctuates over time as advisors graduate and new advisors join the academy. This is based on the graduation of individuals. Now, training is completed at a pace which suits the individual. They can graduate at any time throughout the year, rather than at specific points in time. As we continue to improve the quality of training and support that we give people in the academy, this potentially increases the pace at which advisors are able to become competent, sustainable and successful, and therefore can graduate. Whilst it may fluctuate throughout the year, we're very confident that the number of advisors in our academy at any one time is sufficient to support our net plan growth numbers.
Okay. Thank you, Peter. Can we take the next question please, operator?
Our next question comes from David McCann with Numis. Your line is open.
Great, thank you. Yeah, a couple from me. Andrew, I think you mentioned during your part of the prepared remarks that, I think it was GBP 1 billion, that I might be wrong on the actual number, but you certainly referenced a large number of flows were kind of going into Flagstone via the cash management offering, and they obviously aren't reflecting your assets under management. I guess a few questions related to that. I mean, what do you think it takes for investors to actually get the confidence to actually invest in that again? I mean, there's obviously a broader question around that, but it's obviously good that you're capturing it in your ecosystem, but what does it take for that to get invested?
You know, what's perhaps the shorter term, why is that going into, you know, a cash management product rather than, say, a government bond fund or similar low-risk assets? What is it that clients are preferring about the cash offering versus, you know, your fund offering, where obviously you would see the flows and would see the charges? That's the first set of questions. The second one was really around Asia. Good to see you reiterate that you still think you can get to the break-even, cash break-even target for 2025. You know, in the capital market day, you did on this a few years ago now, you said the way you were going to get there was to get to about GBP 5 billion of funds under management.
Really go up to scale to kind of get to that level. Obviously, we're still quite a long way off that, so is this now more about a cost reduction story to get there in a couple of years' time? Where do you think the scale can realistically get to if it's not the GBP 5 billion previously mentioned?
Okay. Thank you, David. On the Flagstone, our start, and I'm just gonna hand over to Pete as well, who will have more sort of evidence of what partners are doing. Look, when will that cash come into investments? That's a really hard one to call, isn't it? I would say that when interest rates sort of, you know, reach their peak and start hopefully on a more downwards trajectory, then equity investing will become more attractive again. That's probably when we'll see that coming in. Pete, just from a sort of partner point of view.
Yeah, certainly. Dave, I think the important thing to remember about the way a partner and client relationship works is, it's something that's built over a sustained period of time. The clients will have different points in their life, dependent on the journey they're on, where they are prepared to move assets from cash into investments or from property into investments. I think the Plexiform gives the partnership a brilliant opportunity to allow clients to put money in a place where they can act at the time that suits them to enter the market. I would think about the way that the partnership gives this full advice set to their clients, and giving the clients the confidence that the long-term relationship can adapt to whatever their needs are, on the particular journey the individual clients is on.
Thank you, Peter. On Asia, I'll just pass that over to Iain Rayner. Ian.
Hi, David. I think we would still point to the May 2021 capital markets day as the guidance we give on Asia. Actually, this year we've opened Dubai, which we think gives us confidence about around that target, and we've done some restructuring, shut Shanghai, and done some partnership restructuring in Asia. There is an element of cost reduction, that's absolutely right. It's still fundamentally a growth story in line and in line with the May 2021 market stay with Dubai now through.
Okay, thank you. Operator, can we have the next question, please?
We now turn to Andrew Baker with Citi. Your line is open.
Great. Thanks for taking my questions. Three for me, please. The first is on gross flows. You highlighted sort of pressure from two sources. one, lower discretionary cash, leading to obviously lower ISA flows, and then two, I guess clients seeking the alternative investments that you just talked about. As you're looking forward, which one of those two sources do you see as greater pressure on gross flow growth going forward? Second, just back on the fee charging changes. Just curious, was this purely an internal SJP decision, or was there any direct influence from the regulator? Do you expect peers to take similar actions here? Thirdly, related to this, how are you thinking about the development of the margin on the mature FUM over time, as more of the pension business sort of moves to the 10-year plus period?
Do you expect mix changes to, I guess, structurally drive the margin lower over time, or are you expecting that margin to be relatively stable? Thank you.
Yeah, thank you, Andrew. I'm gonna hand the margin question over to Craig, as I'm sure you would expect. On the gross flows, you know, if you look at it by product line, if you like, then clearly where the pressure is in the first half of the year is the unit trust and ISA flows. That is the more discretionary investment. If people have limited capacity to invest, that's the area that's gonna be impacted first. Again, just something that's quite interesting.
Well, for me, I found it quite interesting looking at the data, is that actually people doing single contributions at the beginning of the tax year, usually doing their maximum single contribution of GBP 20,000, for instance, is down 32% this year. The opposite side of that is that individuals using their maximum monthly contribution to ISAs has actually gone up by 9%. Reading that into that, you'll see that people, rather than doing GBP 20,000, are going into more monthly contributions. I think again, that is probably the sort of disposable income type question. If you look at pensions, pension flows continue to be resilient. That's people saving for, you know, their long-term retirement, and that sort of consolidation piece going on.
Again, the investment bond flows remain robust and resilient, mainly driven around the inheritance tax. It's a unit trust DFM, Andrew, I think is at discretionary points. Hopefully, that helps. What the market is seeing is consumable flows into cash ISAs. In the past, you know, you wouldn't be earning much on a cash ISA. Today, you can earn a reasonable sum, albeit that is still being eroded by inflation. As I said, we're also seeing increase into our cash holdings. Craig, do you want to talk about the margin? Maybe I'll talk about whether it's internal.
Okay, hi, Andrew. I think you're right in as much as it's a mathematical inevitability that there's more business on the books of insurers and hits that 10-year threshold, that the effects of moving from 100 to 85 will have the effects you describe. It's worth remembering that the scale of funds under management, together with the amount that comes either out of the gestation hopper or in straight through as new business, has quite a significant dampening effect on the way in which that works.
I think the easy answer to your question is yes, over time, you will see that margin full, but it'll be much slower than you might imagine if you just think of it as a single feature within the way in which funds under management will develop in the future. Of course, without stating the obvious, although that margin percentage might change, funds under management obviously grow as a result of both retention and new business.
Thank you, Craig. On your first question, I think you're saying, is this an internal SJP move? Yes, absolutely. It's an internal SJP move. Consumer Duty program was a catalyst to looking at this. As you said, it rewards long-term investment. It makes us more competitive in the pensions and bonds environment. As I think I've already said to Andrew Sinclair's question, it reduces some of the inconsistencies in charges between different product sets. Yes, it's an internal SJP decision. Operators, could we go to the next set of questions, please?
Our next question comes from Andrew Creane with Autonomous. Your line is open.
Good morning, all. two questions: firstly, you said that when the inflation rate comes down, you'll reach the 5% expense growth target. Can you tell us specifically what inflation rate you're thinking of, which would allow you to grow expenses by 85%? Coming back onto this charging question, what comfort can you give us that this is the one and only action you'll be taking on charges, as opposed to thinking this may be a thin end of the wedge?
Look, I'll pick up the second question first. You know, it's impossible to say that there's never ever been a move again on charges. You know, we have to react to what's going on in the marketplace to make sure that we, you know, we will always remain competitive. I can't give you 100% reassurance there, Andrew. On the inflation question, yeah, I'll probably repeat what I said back in February, which is that we do have a very strong appetite and therefore an ambition to move back down to 5% that we set out in our plan.
I did use an expression, something like back in February, when inflation normalizes, and I think I clarified that as saying, when inflation falls to a level that's in line with the government target. The logic for that is that that was the inflationary environment when we set the 2025 plan. Getting back into that sort of range would enable us to start planning in the way that we expected to be able to plan without those inflationary pressures.
Thank you. Can I just come back?
Yeah.
Sorry. Yeah. Could I come back on the first question very quickly?
Sure.
When you say you can't give that guarantee, Of course, you can't give a guarantee over a five, 10-year period, but there's nothing, what I'm after is there anything further in the pipes you're thinking about currently?
Look.
On charges.
We made the announcement. Yeah, we made the announcement this morning, Andrew. You know, if we had other bits and pieces that we were ready to announce, we would be announcing them, wouldn't we?
Considering, okay.
Um-
Okay.
Operators, can we have the next question, please?
We now turn to Nasib Ahmed with UBS. Your line is open.
Morning. Thanks for taking my questions. You say you're still comfortable with the targets that you set in 2021. I take the comment on the cost base, but on the top line growth of 10%, what makes you so comfortable with the 10% new business growth and also the 95% retention target? Do you expect that to come down to 95% or go lower in the current environment? Second couple of, well, two questions on the impact of higher interest rates on the partner loans. Does the rate on the partner loans increase as a result of higher rates, and do you expect greater write-offs? I know you've got five bips over the last 10 years, but do you expect more pressure there?
Does the valuation of the businesses that the partners are buying, change, given that you use the DCF method, are those valuations much lower now in a higher rate environment? Thanks.
Thank you. Look, let me take the 2025 targets and then pass over to Craig on the partner loans. Look, so 2025 is still a fair way away. This time last year, we were well ahead of our 2025 targets. We all know the challenging environment we're in. In terms of retention, it's a very easy one. You know, we're still exceeding our 95% retention, and there's nothing to suggest that that should change. And now we've got a bit of catching up to do on the growth target over the next two and a half years. As I say, we've got GBP 1 billion in that Flagstone, sorry, additional GBP 1 billion in our third-party cash portal.
You know, we remain confident of the need for advice. We remain confident of the size of the market. We remain confident in growing the partnership, and we remain confident in helping the partners grow their businesses. At this point in time, we're very comfortable with the targets. Craig, do you want to pick up the partner loans? On the interest point? Clearly, interest rates have an impact on any lending situation, but one of the things I would emphasize here is that these are business loans. These are planned business loans to well-run organizations. One of the things that is worth having in mind is that we have an average loans to value ratio of somewhere in the region of 30%, which gives you a good sense.
I mean, it's not a, it's not a direct indication of gearing within those businesses, but it gives you a good indication of the, I suppose, a degree of caution in the way some of that lending is structured. I think it's very obvious that anyone in receipt of one of those loans would be very happy to see interest rates go down. It would be easy to overemphasize the impact that that has on businesses that are essentially thriving. You know, the partner network is doing incredibly well. The fact that markets are more stable now than they have been in the past is also a positive. There's nothing really I would draw attention to in that.
There was a second strand to the question, but I'm afraid I didn't quite catch that. Did we get all of that, Ahmed?
It was on the valuation of the businesses when partners are buying businesses off each other. I think you used the DCF method. Are those valuations coming down as well, just because of rates being higher? Or are you, Are there some adjustments as well on goodwill, et cetera?
Yeah, sorry, I Sorry, I slightly missed that one. no, the key thing that really drives the value of one of these businesses, yes, there are the equivalents of discounted cash flow calculations, but the key input here is really driven by market values. you know, there is still a very healthy trade, if you like, between buyers and sellers within our partner network.
Okay. Thank you.
Great.
Perfect. Thank you.
Could we have the next set of questions, please?
Our next question comes from Rhea Shah with Deutsche Bank. Your line is open.
Thank you, and morning. Three questions from me.
Morning.
Just the first one around Dubai. Does this open up to flows in business from all of the Middle East, or is it just Dubai specific? When do you expect to break even over here? Is it the same timeline as the rest of Asia, or is it a bit further away? Second, around the advisors. I think you had a net increase of 73 advisors, and 169 of this were grads. So implicitly, I think around 100 advisors left the business. Is this a normal attrition rate? Are they just retiring advisors, or are they people going to peers and competitors? Thirdly, on Consumer Duty.
Away from any actions you could take in the future on charges, is there anything else you're doing on Consumer Duty that is increasing your cost base?
Okay. Look, I'm going to pass the advisor question to Peter and the Dubai question to Ian. Let me just pick up the Consumer Duty piece first of all. Look, Consumer Duty has been a actual all businesses to emphasize it's not obviously just specific to us or our sector. I think it's affecting something like 54,000 businesses, both large and small. Look, we've had a major program of work here. We've had over 100 people working on it on a daily basis. At times, we've had 400 people working it, working in it, on it at some point during the day. You have to look at absolutely everything. The cost of all that is within our expense target. You shouldn't see any additional expenses there.
You know, we've had to change and alter things, improve things. I just gave you an example of a piece of work under consumer understanding. We've been working with a third party, I think I can probably say who they are, the free advertising for them, The Wisdom Council, helping us, working with subsets of clients, looking at the major sort of literature and points of communication that we do with clients, and understanding how those bits of correspondence land with clients, and how we can make those better and improve the client experience. That's just some of the sort of stuff that's been going on in the organization, but it has been, as it has for the whole sector, been a major undertaking.
That hopefully gives you that one. On advisors, Pete, do you want to just pick up the advice account?
Yes, thank you, Andrew. We have seen no significant change in the retention of people in the partnership. We consistently manage the balance between long-term industry professionals that join St. James's Place, having built a career elsewhere in financial services, and graduates from our academy. We've seen this develop over the years from a dependence, solely on industry recruitments across now to the blended approach we have. We've not felt any significant impact from competitors. Whilst we would never be asleep at the wheel here and take things for granted, the facts are that the St. James's Place partnership is still the best place to grow a face-to-face advice business in the U.K., and we don't see that changing anytime soon. The attrition rate of the partnership, as I say, maintains.
the same percentage as it has for a number of years. That is a combination of factors. People who are taking business out and purchasing, retiring from the business, people who have decided that this isn't necessarily the right future for them. We have no concern whatsoever over pressure there.
Thank you, Pete. The Dubai question, Ian.
Yeah. Hi, Rhea. Two aspects, weren't there? The break-even point, we see Asia and the Middle East as one consolidated thing. You asked you a question about the timeline on break-even is still in line with the guidance we gave on May 2021. It's seen as one entity. In terms of sort of access to wider GCC opportunities, yes, we have a license in the Dubai International Financial Center, which is the Offshore Financial Services Center in Dubai, through the DFSA, and there is some opportunity with it in terms of that license to service clients from around the GCC. We have to stay, obviously, within our license. Yes, it does open up the opportunity around that area being located in the DIFC.
Thank you, Ian. We may need to just reflect on the name through the Asia operations, so hope that's another.
Okay.
Operators, could we have a next set of questions, please?
Our next question comes from Ben Bathurst with RBC. Your line is open.
Morning, I've got two questions, if I may. Starting with a follow-up on the cash portal. I think you mentioned the GBP 1 billion of extra flows onto Flagstone in the first half. Can I just ask for context, what the total level of SJP client cash flows into the Flagstone platform was in absolute terms? Also, what is the total store of SJP client cash on the Flagstone platform? I think that would be useful context. Then secondly, on pensions, more sort of generally, there was a treasury policy paper published last week which proposed that beneficiaries that inherit pensions would begin to be charged income tax on their ongoing withdrawals. I just wondered what the early house view on the potential impact this could have on the attractiveness of pensions, really, as a savings vehicle for your clients in the future. Thank you.
Yeah. Okay, thank you, Ben. I'm gonna pass over to Ian MacKenzie on the pension side.
On the cash, a couple of points here, that, just remember that the Flagstone piece is just where we're helping clients with cash. Clients will have other places they've got cash as well, so it's a, it's sort of a difficult question. I think I'm reluctant to give you a total number, only because, I don't want to give out commercial data for Flagstone. I think that would be a bit difficult for me to do, but you can probably assume it's more than GBP 1 billion. Sorry, I can't be more specific than that. On the consultation, Ian, actually.
Thank you, Andy. Thanks, Ben, for your question. An interesting consultation, as you say, from the government. I mean, view on it at the moment is, okay, it introduces these different aspects of pensions planning, more complexity in how we think about it. When I stand back on this, that means more conversation with advisors, more engagement, more need for clients, particularly wealthier clients, to think how they structure their investments and what their financial plans are looking like. In-house view, really for me, would be net positive, 'cause it actually gives rise to those conversations, opportunities for that. Nothing takes away from the attractiveness of pensions in the long term from what was published in terms of the consultation. There is our initial emerging house view for you.
I guess we're gonna have to wait and see in terms of the legislation. Could we have the next question, please?
Our next question comes from Larissa van Deventer with Barclays. Your line is open.
Thank you very much, good morning. three quick ones from me, please. The first one, expense growth. It was well below the long-term estimated 5% growth in the first half, you're still sticking to the 8% for the second. Just wondering what will drive the higher expenses in the second half? Related to that, what levers you can pull to continue to contain them if inflation remains elevated. On the fee charges, are you able to be specific on the amount of funds under management that is impacted? Thirdly, back to the original question on clients that have a mortgage, understood that you don't track their data specifically, but would you be able to give an indication of how many customers you have that are under the age of 50?
Yeah. Thank you for the questions. I'm just gonna try and repeat them because I think we lost the line a little bit there. I think the first question was: Why was expense growth only 2% when we were talking about higher? I think the answer to that is also to do with the tax rate change. The post-tax cash number with the expenses is lower because of the tax rate you get on expenses. Just looking at Craig.
No, that's absolutely right. Yeah, yeah.
I think the second question was asking around, could we be specific on the FUM impacted by the charges cap? Look, I think we'll take that away, and if we can provide additional disclosure that people will find helpful, we can put it on the website. For now, I don't have a number for me looking to have. I think the third one you asked is: How many clients we have under the age of 50. Someone's just handed me a note. 111,000 clients under the age of 50?
Of the client base-
About 10%? Yes, about 10%. Yeah, 9%, 10%.
Thank you very much.
That actually, sorry, let me just retract that. We'll come back to you on the exact number. That's not what's in my briefing now.
Okay.
Actually. Could we have the next set of questions?
Thank you.
Our next question comes from Enrico Bolzoni with J.P. Morgan. Your line is open.
Hi, good morning. Thanks for taking the questions. One, on Consumer Duty. I'm just thinking that often, one of the aspects of advice which is criticized are the initial fees that advisors charge to their clients. I was just wondering whether you foresee any pressure on this component of revenues, which would impact not just you, but also the departments as well, independent financial advisor out there. Do you think there's gonna be any pressure, and whether this might change the incentive that advisors have to acquire new businesses? The second question is just on consensus on gross flows for 2024. Looks pretty high because it's close to GBP 19 billion. I was just wondering whether you are comfortable with that. My final question is on shareholder interest, clearly is going up.
Can you give us an idea of what do you expect for full year 2024? Thank you.
Sorry, what's the final question? Can you just repeat the final question? Sorry.
Sure. The final question was on the shareholder interest. If you can give some guidance.
I understand.
on what to expect for 2024.
Okay, thank you. Let me pick up the Consumer Duty one first. Look, I think, as I said earlier, it's been a really large program of work, a lot of people working on it. You know, we've looked at every part of our business through the lens of Consumer Duty, and where changes needed to be made, we made those changes. We're not expecting anything else in respect to Consumer Duty. On consensus and shareholder interest, Craig? Yeah, the line was a bit crackly. I think the question is on consensus on flows. Right. For 2024. I think it's a bit early to give guidance on that.
You know, we're in the middle of a period that is probably in terms of headwinds and lack of confidence out there, lasted a little longer than we might have anticipated back in February. I think the only real answer I can give to that is that I think we'll guide closer to the time, where possible. Much can change between now and the end of this half. I think it would be unwise to try and put a marker down on next year.
I mean, we've sort of said that if we think about this year, it's difficult to guide for the second half, but if you assume rates stay where they are, confidence stays where it is, and everything else stays equal, the second half could be the same as the first half. As I would always say, it's remarkable how quickly things can change when there's a catalyst for improvement, but calling when that catalyst might be is not something I'm able to do at this stage. I think the final one was on shareholder interest. It's an interesting question 'cause I think the answer, without sounding as if I'm dodging the question, is it depends what happens to interest rates.
I think you would have to think of your own house view on where you think rates are gonna land for this year. I think most people are agreed that they will think all the time, but it could be that interest rates are as stubborn as inflation has been. My only suggestion is that you take your own view of what you think interest rates might do and use this year as a base modeling period. What I have said is that if rates stay where they are during the course of the second half, our total shareholder interest for the year, and this is net of tax, of course, will be somewhere in the region of GBP 60 million. Okay, thank you.
Just coming back to the previous question on number of clients under the age of 55, it's around 350,000. Could we take the next set of questions, please?
Our next question comes from Gregory Simpson with BNP Paribas. Your line is open.
Hi, good morning. I've got three questions, please. The first is, the broader market, I think, shows a bit of a resurgence in annuity volumes, in the U.K. recently with higher rates. Are they becoming a more prevalent conversation with your own pension clients? I'm just conscious that the previous trend of pensions staying invested in drawdown has been quite favorable for advisors in general. Second question would be, one of your peers, Evelyn Partners, seem to have quite strong growth in professional services. Is there any logic or interest in SJP moving into accountancy, tax advice, legal services, to kind of build up non-market revenues and expand the client reach?
Then thirdly, just to push a bit more on artificial intelligence, is there any kind of cost efficiencies within the business that you think could be addressed through better automation? Also, is there any thoughts on whether AI could eventually disrupt the role of a face-to-face advisor through online platforms?
... Okay, three different questions there. On artificial intelligence, the short answer is there efficiencies? Yes, I'm just gonna hand over to Ian MacKenzie, just to talk to you about some of the things we're doing in the business.
Thanks, Andrew, and thanks, Greg Simpson, for the question. AI, I think in all businesses will be a big part of looking ahead. I think everyone through had a conversation around it. In terms of where we are, we've got a few pilots in play, who we're exploring, and we are seeing work which improves the efficiency of the business. In our partner practices, we have a number of practices piloting what we call our Advice Assistant, which is a genuine AI, not some sort of great flowchart. A genuine AI machine learning model, 14 machine learning models underpinning it. They're using that as part of how they streamline their back office and help construct the advice which they then deliver to the client.
We're getting reports and validated reports, actually, of potentially up to an hour's time saving per case, which is significant in terms of how that goes forwards and everything else. You also touched on the other face-to-face advisor piece and the impact around that. I am absolutely confident that actually, we'll have AI powering face-to-face advice. The winning formula here is that combination of leading technology, driven by data analytics and AI, to help the advisor spend time, what they're actually brilliant at, which is the face-to-face relationship piece, the emotional piece, the dreams and goals, what financial planning are all about. For me, actually, it's a win-win as we harness the AI and data to power that. Hopefully that gives some insight into where we are and what we're actually doing on it.
On annuity, we don't manufacture annuities, I think, as you know, but we do advise on annuities. I'm sure there are more conversations going on with annuities, but we're not seeing any sort of steady pickup or anything in the numbers. On the question about would we be interested in going into professional services? I think the short answer to that is no.
Thank you.
Could we have the next question, please?
Our final question today comes from Connor Massar with Morgan Stanley. Your line is open.
Yeah, thank you. Good morning, Andrew. Good morning, Craig. Just a couple of questions. I mean, first of all, just a clarification. I guess your guidance on Asia is pretty clear that the break even still remains as per the original plan. How do we think about the phase-in of that, especially given the significant pickup in Asian cost for first half? How do we think about second half and next year would be helpful. Secondly, I mean, see a bit of big picture question. I mean, interest rates have gone up materially in U.K. I mean, we are sitting at 5%, and what I hear is we can invest into those bonds at, like, risk-free.
I mean, have you seen agents talking about that, the there is lack of interest from clients, et cetera, just because one can get 5% tax-free from bonds, so why bother about putting in equity markets? Have you seen any such commentary, et cetera, or from the partners, et cetera? Is that... Could that be a bit of a reason of the slowdown in volumes, or is it just macroeconomic backdrop? I mean, I completely appreciate macroeconomic backdrop is no good with inflation, et cetera, but just wanting to get a bit of color. Is higher interest rate a bit of a drag on flows as well? Thank you.
I'll probably pick up the second one first, and then hand to a combination of Craig and Ian on how the expense picture for Asia looks over the next few years, two years, particularly for the second half. Look, I think going right back to where we started, Nasib, I have no doubt that higher interest rates is having an impact on flows. You know, we're seeing that, as I said, with our own flows into Flagstone. I think, from recollection, there was something like GBP 17.8 billion put into Cash ISAs in the month of April. It's something we're seeing across the market. Yeah, I think people are pausing investment, parking it to earn a return on interest.
I think as I said earlier, once we reach the peak of the interest rate cycle and they start coming down, I think that will give people confidence to go back into the markets. You know, they're, they are earning return that is not beating inflation at this particular point in time. You know, I understand sort of where they are. On the breakdown of costs. Yeah, shall I pick that up? Quite right, there was some expense during the first half that was associated with the restructuring and rationalization costs that Ian mentioned a little earlier on the call. That's obviously one-off.
The guidance we've given is that we think the net investment in Asia for the current year will be somewhere in the region of GBP 17 million. Obviously, treating a lump of that as one-off means that it's a slightly lower starting point as you move into 2024. No doubt, as I said in the presentation, that Asia's experienced the same operating environment that the rest of the group has experienced.
The way I would think about some of the restructuring is that it's taking out some of the costs that would not have yielded the result that we're looking for, and reprogrammed it into different ways of working, and Dubai is one such example, that show every sign of delivering what it is we want to see delivered in the Asia business. GBP 17 million, I think, is your answer for the current year.
Yeah, that's right. Thank you. Thanks again. Thanks, Andy.
Is that the, is that the end of the questions or we've got another one?
We have no more registered questions.
Okay. Thank you. Look, thank you, everyone, for your time. As we said, in the CEO statement, it's been a tough economic and challenging backdrop, but we see the business as having sort of performed robustly in the first half of the year. Have a good remainder of the day. Thank you very much.