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'We’ll make profit next year’ vows Embark boss as assets pass £11bn

Sipp, SSAS and wrap provider Embark has seen its assets grow to £11.5 billion but the cost of investing in technology and acquisitions meant it stays in the red.

'We’ll make profit next year’ vows Embark boss as assets pass £11bn

Sipp, SSAS and wrap provider Embark Group has seen its assets grow to £11.5 billion but the cost of investing in technology and acquisitions meant it stays in the red.

Embark, which includes Sipp firms Rowanmoor and Hornbuckle, recorded a pre-tax loss of £2.6 million, an improvement on last year's loss of £3.4 million.

It said operating losses were partly a result of administration expenses rising 54% to £33.3 million in the period. This included a £2 million cost on platform technology in 2017.

According to its chairman's statement, the company aims to 'disrupt' the market by building a low-cost 'full investment savings wrap platform in partnership with a leading technology and outsourced service provider'.

The group’s chief executive Phil Smith (pictured) believes the company will become profitable in 2018 and said costs had built up in the group during its ‘foundation’ stage.

Speaking to New Model Adviser®, he said: ‘This is all about investing in the foundations and making sure we have the right infrastructure, which is scalable for accelerated growth, with the right people, the right technology, and that costs money,’ he said.

‘If we were making money [at this stage] we would think we weren’t investing enough in the foundation phase. Where we will start to see a flip over for that is in 2018 onwards. We will be profitable in 2018.’

Embark’s assets rose from £8.1 billion in 2016 to £11.5 billion last year – this consisted of £9.1 billion non-platform assets and £2.4 billion platform assets. Client numbers were up 31% at 113,500.

At the end of 2017, the group launched its own wrap platform on FNZ technology, with clients from the Avalon platform it bought in 2016 moved over to it. This platform targets individuals with between £25,000 and £150,000 to invest.

The group, founded in 2013, also acts as the Sipp provider behind a number of robo-advice propositions including Scalable Capital, Moneyfarm and Nutmeg.

Last year Embark completed the acquisition of Charles Stanley’s Sipp book EBS Management, later renamed EBS Pensions, which has distribution agreements with BestInvest and Charles Stanley.

Despite its acquisitive history, Smith indicated the firm is not focusing on making more deals.

‘The next five-year period is about how we leverage the investments we have made in technology,’ he said. ‘Unless something of large scale, at the right price and at the right time comes along, you are not going to see us buying anyone because we don’t need to.’

Embark’s revenues for 2017 increased to £29.2 million, from £18.3 million in 2016.

Smith added the group wants to focus on four key channels going forward, with longer-term ambitions to go into the international market.

‘We really want to be a balanced business and that means we have good scale and profitability in four segments of the UK: IFA, pensions and wrap market; we want to be in retail banking which is an E-Sipp for us; we want to be in the guided proposition market [robo-advice] which is either an E-Sipp or full custody platform; and, last but not least, we want to be a serious player in the SME workplace savings market.

'Beyond that, over the longer term we will look internationally at D2C [direct to consumer] for mobile individuals.’

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