Alexander Forbes: Counting the costs before cutting them
As the pension fund administrator turns its eye to retail financial advice, IT and personnel costs have rocketed
Alexander Forbes reported a 13% spike in operating expenses when it presented its full year results last week. The key drivers were claims, bad debt, professional fees paid to consultants to help previous CEO Andrew Darfoor put together his Ambition 2022 Strategy, and the termination of an IT contract.
While a lot of these costs were one-offs, shareholders may be justifiably worried about the recurring items. These include IT costs that increased by 25% in the past financial year, and personnel costs which accounted for 59% of the pension fund administrator’s total administration expenses.
The problem with personnel costs is that Alexander Forbes expects them to remain under pressure for the next two years as it deals with capacity issues in its client-facing business. The company traditionally dealt with retirement funds and not individual clients. The Retirement Funds Default Regulations which came into effect in March have facilitated its entry into the retail financial advisory sector. This means Alexander Forbes has had to recruit in-house financial advisers...