It has been a roller-coaster 18 months for national advice firm Frenkel Topping. It has ended up having to manage the negative effect of the very reforms to personal injury payments it predicted would accelerate growth.
Interim results published today show assets under management have crept up since last year, from £752 million at the end of June 2017 to £759 million currently. Revenues are flat at £3.6 million and it has made a lower pre-tax profit than over the same six-month period last year – £300,000 down from £1 million – though it claims this reflects ‘investment in trainee consultants, the graduate academy and marketing’.
Assets on its discretionary fund management mandate hit £312 million, up from £291 million in December.
In all, £450,000 had been invested over the period. Not only has this increased the firm’s costs base, said executive chairman Paul Richardson, but the return from these new investments ‘has been slower to materialise than anticipated’.
As a specialist in advising people who had received personal injury compensation payouts, Frenkel Topping became bullish about changes to the way those payments were calculated, the so-called Ogden rate. The Ogden rate establishes how much insurers must pay out on personal injury claims. It is linked to government bonds, but has not been changed since 2001. In 2017 the government changed the Odgen discount rate from 2.5% to -0.75%.
In reaction to this, Frenkel Topping revised its predictions for asset growth for 2017 from £75 million to £100 million, and revised its growth assumptions for 2018 and 2019 from £100 million to £180 million.
Then executive chairman of Frenkel Topping, Jason Granite, said the changes would ‘dramatically increase damages paid to our future clients’ and the board was ‘excited at the additional growth prospects’.
However, the Ogden changes have not brought the bounty Granite predicted. Richardson said, while the changes in the Ogden rate had resulted in larger amounts paid out in personal injury and clinical negligence cases, larger case sizes had ‘resulted in both the company's sales cycles taking longer and the fee structures being altered’. It also has meant smaller upfront payments to the company on appointment, he said.
Granite left the company in December following a failed attempt by the business to find a buyer. Now Richardson is stepping into a non-executive chairman role.
Richardson said: ‘I joined the Board almost 12 months ago after it had decided that selling the business was not in the best interest of shareholders and after my predecessor had decided to step down. Once on board, the executive team worked together to develop and implement the strategy and culture for growing the business as I have explained in my previous reports, and significant progress has been made with the implementation of those plans.’
One area of investment that could be paying off is in adviser training. Trainee consultants from what it calls the Frenkel Topping Training Academy are now becoming authorised individuals. As a result it expects to see ‘some new revenue generators and asset gatherers deployed in in the second half of the year’.
Its first graduates are approaching the end of their first year, the majority of whom have taken and passed the requisite benchmark qualifications and are all on track to complete the two-year scheme on schedule. It has also offered and had accepted a number of training contracts to new graduates who will start their training scheme in October.