For the
generations
of today and
tomorrow
Annual Report 2021
Governance Report
76 Chair’s introduction to corporate governance
78 Governance at a glance
80 Board of Directors
85 Principal decisions of the Board in 2021
86 Governance in action
90
Board Corporate Governance and Nominations
Committee report
96 Board Audit Committee report
102 Board Risk Committee report
108 Board Technology and Operations Committee report
112 Remuneration
112 Board Remuneration Committee report
114 Remuneration at a glance
119 Directors’ Remuneration Policy
132 Annual Report on Remuneration
146 Directors’ Report
Financial statements
151 Statement of Directors’ responsibilities
152
Independent auditors’ report
161 Primary financial statements
166 Notes to the financial statements
236 Appendices
240 Parent Company financial statements
Other information
251 Shareholder information
255 Alternative Performance Measures
259 Glossary
Contents
Strategic Report
1
2
2021 business highlights
Leadership Q&A: focused on delivering growth
and driving efficiency
10 Chair’s statement
14 Quilter leadership
16 Chief Executive Officer’s statement
20 Our markets
22 Our strategy
26 Key performance indicators
30 Our business model
35
39 Responsible business
TCFD statement
Section 172 (1) statement
54
55 Non-financial information statement
Financial review
56
66 Risk review
74
Viability statement and going concern
Our business
Quilter is a modern, UK-focused,
full-service wealth manager providing
advice-led investment solutions and
investment platform services.
Our purpose
Our purpose is to help create prosperity for the generations
of today and tomorrow. We strive to do this through supporting
long-term advice-based relationships, delivering good
investment management performance while maintaining
consistently high-quality customer service.
Three years post-Listing and after restructuring the business,
Quilter is at an inflection point. Quilter is now a simpler, modern,
UK-focused, full-service wealth manager. Having built strong
foundations, we are well positioned for our next phase,
resolutely focused on delivering growth and driving efficiency.
2021 business highlights
Strategic highlights:
– Platform Transformation Programme completed
– Quilter International sold for £481 million, completing
Quilter’s multi-year transformation to be a simpler, UK-centric
wealth manager
Operational highlights:
– Maintained high levels of client engagement and operational
resilience as global lockdowns continued
– Optimisation initiatives delivered £61 million in cost reduction
by end-2021
– Re-organised business around two core client segments:
– Initiated Simplification initiatives to deliver a further
Affluent and High Net Worth
c.£45 million of cost savings by end-2024
– Launched next phase of strategy focused on driving growth
and delivering efficiency
– Continued capital management discipline: £197 million
returned via a share buyback in 2021. £375 million share
buyback programme completed in early 2022
Responsible business highlights:
– Relaunched responsible business strategy, focused around
key stakeholders
– Working towards a commitment to become net carbon zero
Financial performance highlights, continuing business only
£111.8bn+13%
Assets under management and administration (“AuMA”)*
7.4p
Adjusted diluted earnings per share*
+42%
2021
2020
£111.8bn
£99.0bn
2021
2020
7.4p
5.2p
£4.0bn +167%
Net flows*
£23m +76%
IFRS profit/(loss) after tax from continuing operations
2021
2020
£1.5bn
£4.0bn
2021
2020
£13m
£138m +28%
Adjusted profit before tax*
5.6p
Recommended total dividend per share
£23m
+22%
2021
2020
£108m
£138m
2021
2020
5.6p
4.6p
Notes:
All 2020 comparatives presented above exclude Quilter International, which was sold
on 30 November 2021.
Alternative Performance Measures (“APMs”)
We assess our financial performance using a variety of measures including APMs,
as explained further on page 255. These measures are indicated with an asterisk: *
Continuing operations.
Including contribution from Quilter International.
Quilter Annual Report 2021
1
Strategic ReportGovernance ReportFinancial statementsOther information 2
Quilter Annual Report 2021
Focused on driving
growth and delivering
efficiency
As we move to our next stage of strategic
delivery, Chief Executive Officer Paul Feeney
together with Executive Committee members
and change makers from across the business
answer key questions to explain how Quilter
will drive growth and deliver efficiency
Quilter Annual Report 2021
3
Strategic ReportGovernance ReportFinancial statementsOther information Focused on driving growth and delivering efficiency
continued
Quilter is now a focused, modern,
full-service wealth manager. The sale
of Quilter International in November
2021 was the final stage in a multi-
year transformation of the business.
With strong foundations in place, we
are now at an inflection point. Our
strategic plan is focused on driving
growth and efficiency.
This will be accelerated by:
1) leveraging the power of our new
platform to increase flows across
both our distribution channels;
2) managing a greater share of flows
in our investment solutions;
3) returning to net growth in advisers
and improving productivity;
4) delivering strong investment
performance and relaunching
WealthSelect, our new ESG-
focused proposition;
5) embedding digital capabilities
across the business; and
6) enhancing business efficiency
through our Simplification
programme.
Read more in Our strategy
page 22
How will you drive
growth and efficiency?
Paul Feeney
Chief Executive Officer
4
Quilter Annual Report 2021
The creation of our two new segments
better reflects how we manage the
business and sharpens our client
focus. It puts the client at the centre
of all we do and enables us to provide
a superior experience for them. For
Quilter, it simplifies our operating
model, providing further scope to
drive operational efficiencies.
While the core proposition may differ
slightly, each of our segments has the
same philosophy: to gather flows from
two strong distribution channels –
through our own advisers and
independent financial advisers, and
manage an increasing proportion of
those flows on our Platform and in our
own investment solutions.
Read more in Our business model
page 30
Steven Levin
Head of Affluent; Chief Executive Officer,
Quilter Investment Platform and Quilter Investors
Stephen Gazard
Chief Executive Officer, Quilter Financial Planning
Andy McGlone
Head of High Net Worth; Chief Executive Officer,
Quilter Cheviot and Quilter Private Client Advisers
Quilter Annual Report 2021
5
Why have you moved
to two new client reporting
segments, Affluent and
High Net Worth?
Strategic ReportGovernance ReportFinancial statementsOther information Focused on driving growth and delivering efficiency
continued
Being a responsible wealth manager
means both investing responsibly for
our clients and acting responsibly as a
business, and is central to our strategy.
We are a leader in the provision of
advice and investment solutions. ESG
tools and metrics are being embedded
within our propositions. We can do
this because we operate right across
the value chain.
We act responsibly by focusing on
reducing our carbon footprint, acting
and investing responsibly on behalf
of our clients, and being a responsible,
inclusive employer: attracting,
developing and retaining great talent,
and embracing diversity.
Read more in our Responsible Business report
page 39
What does being a
responsible wealth
manager mean
to Quilter?
Penny Cole, Tosin James-Odukoya,
and Stewart Perry
Responsible Business Forum leaders
6
Quilter Annual Report 2021
Embedding greater digitalisation
across the business is a key pillar
to our strategy. It will let customers
engage and interact more closely with
Quilter and their investments.
We plan to reinvest part of the
proceeds from the sale of Quilter
International in selected digital-based
opportunities for longer-term revenue
generation. These initiatives include
building a hybrid advice capability –
providing Quilter’s services to a
significant part of the UK population
who do not have access to a financial
adviser, facilitating a ‘mobile first’
approach for platform accessibility,
and adopting workforce productivity
solutions to allow advisers and the
Platform to support more clients,
more efficiently.
Read more in Our strategy
page 22
Minoka Radhakrishnan
Head of Strategy & Corporate Finance
Hanlie Van Staden
Transformation Director
Quilter Annual Report 2021
7
How are you investing
to service the generations
of tomorrow?
Strategic ReportGovernance ReportFinancial statementsOther information Focused on driving growth and delivering efficiency
continued
Our Optimisation plans, initiated
in 2019, were always intended to be a
multi-phase programme with more to
follow once we completed the Platform
Transformation Project.
Optimisation was about making
Quilter more focused, more
streamlined and efficient. Our new
operating model unlocks opportunity
for Simplification, allowing us to
deliver greater operational efficiency
while improving client experience.
This will come through the large-scale
decommissioning of parts of our
inefficient legacy IT estate, greater
automation and straight-through
processing across the business,
and simplifying Quilter’s structure.
The programme will seek to reduce
core expenses by around £45 million
by end-2024.
Read more in Our strategy
page 22
How will you deliver the
next stage of efficiency?
Mark Satchel
Chief Financial Officer
Karin Cook
Chief Operating Officer
8
Quilter Annual Report 2021
We are confident in our ability to
deliver our net flow and operating
margin targets: to broaden and deepen
our relationships with advisers, deliver
best-in-class Platform services,
achieve consistently good outcomes
for clients, and deliver c.£45 million of
cost savings by end-2024. With a large
proportion of our revenues linked to
AuMA and therefore the level of global
markets, short-term performance
will always be subject to market
conditions. We are, however, confident
in our plans to control all factors
within our control and are resolutely
focused on delivering growth and
driving efficiency.
Read more in Risk
page 66
What are the
risks to achieving your
financial targets?
Matt Burton
Chief Risk Officer
Quilter Annual Report 2021
9
Strategic ReportGovernance ReportFinancial statementsOther information Chair’s statement
Glyn Jones
Chair
10
Quilter Annual Report 2021
2021 was another significant year for Quilter but also one for
me personally. In October 2021, we announced that I planned to
step down as Chair and as a Director of Quilter in 2022, once a
successor is appointed. As such, given I expect this to be my last
annual report letter to shareholders as Chair of Quilter, it seems
appropriate to reflect on our longer-term journey as well as our
more recent activity over the last year.
As I look back over my tenure as Chair, it is clear we have
achieved a major transformation. Transforming what was
Old Mutual Wealth from a subsidiary of a quoted FTSE-100
company, with a business mix largely reflecting historic
decisions, to the strategically cohesive UK-centric wealth
manager that Quilter is today has been a major achievement.
This required a significant “managed separation” from our
former parent, building a new Board and putting governance
structures in place that were fit for purpose for a newly quoted
PLC, and then listing the business on the London and
Johannesburg Exchanges in June 2018.
Although a lot of hard work was required to get the Company
to the point of Listing, we then had the task of reshaping and
refocusing the business to ensure that it was best positioned to
realise the potential from secular growth prospects within the UK
wealth management market. This included undertaking three
significant divestitures: Old Mutual Global Investors in 2018,
Quilter Life Assurance in 2019 and Quilter International in 2021.
Together, these disposals have brought about a smaller but
far simpler and more focused UK business. Disposals have
generated gross cash of £1.5 billion of which around £1.0 billion
will have been returned to shareholders since Listing by
mid-2022, with a further £300 million up-streamed to our
former parent pre-Listing. These actions have firmly established
our capital discipline credentials as a quoted company.
But our journey as a listed company has not just been
about selling businesses. The Board has also supported and
encouraged the executive team as they focused on making
the business more operationally efficient and delivered
business-critical projects such as our Platform Transformation
Programme. As Paul Feeney, our Chief Executive Officer,
discusses further, our initial Optimisation plans which took
£50 million of costs out of the business have been increased
with a further £15 million of targeted cost saves and new
Simplification plans to reduce operating costs by a further
£45 million by the end of 2024. Since Listing, our executive team
has also been significantly strengthened and our back-office
functions overhauled to drive best practices.
At our 2021 Capital Markets Day in November 2021, we
announced a reorganisation of the Company into two new
operational segments, Affluent and High Net Worth. This brings
greater clarity and focus to the business as it looks to capitalise
on the opportunities we see ahead. Within each segment, we
pursue a dual distribution strategy – own distribution based on
our own restricted advisers and third-party distribution through
our relationships with independent financial advisers.
Quilter International
As initially described in my 2020 letter to you, the Board
conducted a strategic review of Quilter International which
concluded with a proposal to divest the business. The sale
completed in November 2021 and concluded the reshaping of
our corporate perimeter. Gross proceeds of £481 million were
received from the sale. After allowing for costs associated with
the transaction and retained proceeds of £90 million to fund
business simplification and investment, we intend to return
the remaining c.£350 million to shareholders. £25 million will
be returned through a contribution from Quilter International
to the Quilter 2021 Full Year Dividend and £328 million through
a capital return.
The Board has proposed to undertake the £328 million capital
return through a ‘B’ share scheme accompanied by an Ordinary
Share consolidation. The proposals will require regulatory
engagement and shareholder agreement at a General Meeting
which we plan to hold at the end of our Annual General Meeting
in May 2022. Assuming these proposals are duly approved, the
capital return is expected to conclude early in June 2022.
3.9p
Proposed final dividend
+8%
Shareholder returns and dividend
In 2021 Quilter’s total shareholder return was broadly flat.
While this performance was better than our pure platform
peers, it was below the level achieved by our discretionary fund
management peers and the UK market, with the FTSE-100 and
FTSE-250 both delivering a total return of around 18%. However,
we largely attribute this underperformance to the sale of Quilter
International, which while short-term dilutive to our earnings,
was absolutely the right thing to do from a strategic and financial
perspective. Indeed, while the share price has been broadly flat
over the year, the rating on our shares has increased with lower
near-term earnings, post the sale of Quilter International, offset
by a higher Price Earnings multiple on the smaller but faster
growing business.
The £375 million Quilter Life Assurance share buyback
programme which we announced with our 2019 full-year results
continued over the course of the year. By the end of December
2021, £349 million of this programme had been completed.
Since the year end, we have completed the remaining £26
million of buyback and this programme has now concluded.
In aggregate, 264.1 million Quilter shares have been acquired,
and cancelled, at an average price of 141.97 pence per share,
thereby reducing our total share count by c.14% over the course
of the programme.
The Board is pleased to recommend a Final Dividend of
3.9 pence for the 2021 financial year which, together with
the Interim Dividend of 1.7 pence per share paid in September,
takes the proposed Full Year Dividend to 5.6 pence. The pay-out
ratio for 2021 was 51%. Following the revision to our target
dividend pay-out range to 50%–70% of post-tax, post-interest
Quilter Annual Report 2021
11
Strategic ReportGovernance ReportFinancial statementsOther information Chair’s statement
continued
adjusted profit, the 2021 dividend sits at the lower end of that
new range. Subject to the operating environment remaining
constructive, the Board expects future dividends to continue
the progression up the target range. After excluding the
component of the 2021 dividend that was effectively a return of
capital from the Quilter International proceeds, the underlying
dividend increase was 39%.
The dividend will be paid on 16 May 2022, subject to shareholder
approval at our 2022 Annual General Meeting on 12 May 2022,
to shareholders who are on the register on 8 April 2022.
Board
In terms of Chair succession, Ruth Markland, our Senior
Independent Director, is chairing a newly constituted
Sub-Committee of the Board Corporate Governance and
Nominations Committee to identify and recommend to the
Board an appropriate individual to be appointed as the next
Chair of Quilter. Further announcements will be made as and
when appropriate.
2021 saw two additions to the Board with Tazim Essani and
Chris Samuel being appointed as Non-executive Directors in
March 2021 and July 2021 respectively. Tazim’s experience in
senior executive roles at regulated financial services businesses
has equipped her well to provide strategic guidance and
constructive challenge to Quilter’s leadership team. Chris
is an experienced Non-executive Director and has chaired the
Quilter Financial Planning Board, our financial advice business,
with distinction for the past 18 months. He has considerable
experience in financial services, particularly in the areas of
investment and asset management. This experience has
enabled him to provide challenge, advice and support to
Quilter’s management team on business performance and
operational matters.
In January 2022, Rosie Harris who has been Chair of the Quilter
Board Risk Committee since 2017, announced that she would
not stand for re-election at the 2022 AGM as a recent external
appointment had created practical difficulties for her attending
Quilter meetings. We agreed with Rosie that she would step
down from the Quilter Board effective 30 April 2022. A search
for a successor to Rosie as Chair of the Board Risk Committee
is under way.
We currently meet the Hampton-Alexander requirement for at
least one third of the Board to be female and the Parker Review
recommendation that all boards should have at least one ethnic
minority Director. While we are content with the progress made
in this area, we acknowledge that there is more to be done to
drive greater diversity in our business at both Board and
executive level.
Governance and culture
We recognise the importance of a healthy culture within a
business to ensure successful delivery of strategic ambition.
Your Board takes an active role in shaping Quilter’s culture and
is encouraged by our executive team’s concerted efforts in 2021
to drive greater inclusion and diversity across the organisation.
12
Quilter Annual Report 2021
Managing a business responsibly is key to an organisation’s
long-term success and for Quilter that includes being a
responsible investor. We recognise the role of investors, along
with other parts of the economy, in supporting the transition
to a low carbon economy – vital for the long-term prosperity
of us all. Quilter is taking a proactive approach to embedding
environmental, social and governance (ESG) considerations
across the whole value chain of our business.
Quilter has continued to maintain a high level of engagement
with existing and prospective shareholders this year.
Engagement levels in 2021 have been broadly similar to 2020,
albeit engagement over both years was almost entirely virtual.
In early 2022, our Senior Independent Director, Ruth Markland,
and I hosted a number of our largest shareholders in both the
UK and South Africa covering topics including corporate
governance, executive remuneration and Chair succession.
Conclusion
2021 was a year of significant progress for Quilter, a year in
which we completed the reshaping of our corporate perimeter,
have enhanced our customer propositions, delivered good
profit growth and reorganised our business into two new
segments. We are now at an inflection point where we can focus
on organic growth and achieving strong profit growth from our
simpler, more focused business.
While we started 2022 well, the terrible events unfolding in
Ukraine and the re-emergence of significant geopolitical risk has
created a great deal of uncertainty in the outlook for the year.
Our model will continue to support our stakeholders through
this period of uncertainty.
On behalf of the Board, I would like to thank our management
team and all our colleagues for their effort, focus and
commitment to achieving our goals in what has continued
to be challenging operating conditions involving a combination
of virtual and physical working environments. Thank you also
to our shareholders for your continued support.
On a personal note, it has been a privilege to chair Quilter
through a period of major change. Working with a strong Board
alongside a hugely committed and able executive team led by
Paul Feeney, we have made significant strides.
Whilst it will be sad for me to leave Quilter, I will leave a business
which is now focused on the segments of the market where
it has competitive advantage, is well positioned strategically,
is building excellent momentum, and has clear and ambitious
financial targets and business plans to continue to deliver good
outcomes for stakeholders in the years ahead. I look forward to
handing over the chairmanship of a strong business that is in
great shape and I will certainly continue to maintain a close
interest in Quilter’s future progress.
Glyn Jones
Chair
Governance snapshot: Quilter’s progress since Listing
2018 – Listing
Business shape
– Core-UK wealth manager
– Heritage life book in run-off (Quilter Life Assurance)
– International portfolio bond (Quilter International)
– Institutional single-strategy asset manager (OMGI)
Geographies
– UK, Isle of Man, Ireland, Europe, UAE, Hong Kong,
Singapore, Latin America
2021
Business shape
– Modern UK wealth
manager
Geographies
– UK with small hubs
in UAE, Ireland
Corporate restructuring
Corporate restructuring
– Ongoing
– Siloed operations
– Platform Transformation Programme
– Acquiring advice businesses
– Quilter Investors build-out
– Quilter Cheviot IM cohort departures
– Complete
– One-Quilter
– State-of-the-art Platform
– Repositioned advice business
– Developing next-generation
proposition
– Stable IM base, building flow
momentum
Board composition
Board composition
Gender
Ethnicity
Gender
Ethnicity
Female
Male
37%
63%
White
100%
Female
Male
36%
64%
Asian-Indian
White
Share register
Share register
Johannesburg Stock Exchange
London Stock Exchange
67%
33%
Johannesburg Stock Exchange
London Stock Exchange
9%
91%
57%
43%
£1.0bn
returned to shareholders since
Listing (by mid-2022)
Quilter Annual Report 2021
13
Strategic ReportGovernance ReportFinancial statementsOther information Quilter leadership
5.
4.
8.
7.
Our Executive Committee leads the execution of Quilter’s
strategy to drive growth and deliver efficiency.
Led by our Chief Executive Officer, Paul Feeney, they meet
regularly to ensure the effective implementation of our
business and customer strategies, the financial performance
of the business, and the management of culture and risk.
Passionate about representing the voices of our people
throughout the organisation and creating an environment that
enables everyone to thrive and reach their full potential, Penny
Cole was appointed Human Resources Director in September
2021. She now attends the Executive Committee to give our
people the highest level of focus.
Full biographies can be found online at
plc.quilter.com/about-us/quilter-leadership
14
Quilter Annual Report 2021
1.
2.
3.
6.
1. Paul Feeney
2. Mark Satchel
Chief Executive Officer
Chief Financial Officer
3. Matt Burton
Chief Risk Officer
4. Karin Cook
Chief Operating Officer
5. Steven Levin
6. Andy McGlone
7. Penny Cole1
Head of Affluent;
Chief Executive Officer,
Quilter Investment Platform
& Quilter Investors
Head of High Net Worth;
Chief Executive Officer,
Quilter Cheviot & Quilter
Private Client Advisers
Human Resources Director
8. Stephen Gazard1
Chief Executive Officer,
Quilter Financial Planning
1Penny Cole and Stephen Gazard are not permanent members of the Executive
Committee but attend meetings regularly.
Quilter Annual Report 2021
15
Strategic ReportGovernance ReportFinancial statementsOther information
Chief Executive
Officer’s statement
Paul Feeney
Chief Executive Officer
16
Quilter Annual Report 2021
There were three significant
corporate-defining moments for
Quilter in 2021: completing our
Platform Transformation
Programme, completing the sale
of Quilter International and the
reorganisation of the business.
Execution
2021 was a year where the world began to adapt to a new
normal, living with COVID as a permanent feature of our lives.
This has meant blending homeworking with the traditional office
environment, maintaining a high level of firm-wide
communication and employee engagement while continuing
to engage with our customers through whichever channels
suit them best.
There were three significant corporate-defining moments
for Quilter in 2021:
– completing our Platform Transformation Programme
early in the year,
– completing the sale of Quilter International at the end
of November, and
– the reorganisation of the business into new segments that
we announced at our Capital Markets Day on 3 November.
Together these events mark the culmination of a strategic
journey we have been on since our Listing in June 2018 and
which has made Quilter a UK-focused modern wealth manager.
We now look forward to delivering on the opportunity we see
before us and our 2021 results demonstrate excellent progress
towards those goals.
Transformation
A year ago, I said that there were three strands to our strategic
transformation agenda at Quilter:
– we would leverage the transformational power of our new
UK Platform to drive faster growth and productivity;
– we would make Quilter a simpler business, focused on
customer segments, to deliver even better customer
outcomes and journeys; and
– we would optimise our business by completing the
cost reduction plans we set out in March 2019, to drive
operational leverage.
We have made substantial progress on each of these goals
during 2021. Taking each in turn:
advisers (the IFA channel). Notably, gross flows in the IFA
channel were up significantly year-on-year (+63%) after a
number of years of sequential declines. This growth is already
having a beneficial impact on our operating momentum.
Secondly, making Quilter a simpler business, the sale of Quilter
International has allowed us to simplify our operating model.
We announced plans to reorganise our Company into two new
segments, Affluent and High Net Worth, at our Capital Markets
Day in November 2021. These segments are now focused on
driving growth, improving efficiency and delivering good
customer outcomes across their respective client bases.
Lastly, we delivered £61 million of cost savings from our
Optimisation plans by end-2021 and are on track to deliver
£65 million of total savings from this programme by mid-2022.
These actions are already benefitting our operating margins.
As well as simplifying our operating model, the sale of Quilter
International will also allow us to deliver meaningful cost savings
through eliminating legacy complexity in our IT infrastructure once
the Transitional Service Agreement with the purchaser comes
to an end. We announced a further £45 million of cost savings
at our November Capital Markets Day which we expect to deliver
by the end of 2024 as part of our goal to increase our operating
margin to at least 25% and 30% by 2023 and 2025 respectively.
Operational delivery
We experienced substantial improvement in both gross and
net flows year-on-year. Gross client flows into the business
were around 35% higher at £13.2 billion. Net flows increased
to £4.0 billion versus £1.5 billion in 2020. This reflected stable
persistency in client assets across Quilter Cheviot and the
Quilter Investment Platform. The overall level of flows in respect
of Defined Benefit (“DB”) to Defined Contribution pension
transfers at £581 million were lower than 2020 (£862 million)
and remain a modest amount of our overall business.
Overall AuMA balances increased by 13% over the course of the
year with a closing balance of £111.8 billion at 31 December 2021
compared with £99.0 billion at 31 December 2020 on a continuing
basis. Average AuMA, the principal driver of net management
fee revenue, of £105.3 billion for the year, was 17% ahead of the
2020 level of £90.2 billion on a continuing business basis.
Delivering good customer outcomes through a trusted
advice relationship is at the core of the Quilter business model.
The Quilter Investment Platform is central to our business,
providing the investment ‘wrappers’ and support functions
to meet both our clients’ and their advisers’ needs, while our
investment solutions provide the intellectual capability to
deliver the outcomes our clients seek. Confidence in our
proposition is demonstrated through the continued attraction
of our solutions to independent financial advisers.
We completed the migration of client and adviser relationships
onto our new UK Platform in February 2021; a significant
milestone. We rebranded the UK Platform to the Quilter
Investment Platform in July and decommissioned our legacy
platform at the end of the summer. I am delighted with the high
levels of engagement and adoption we have enjoyed from both
our own advisers (the Quilter channel) and independent
As I noted earlier, I was particularly pleased to see the sharp
increase in flows of £9.0 billion gross (+58%) and £3.5 billion net
(+133%) onto the Quilter Investment Platform during the year.
Notably, we saw a near five-fold increase, to £1.7 billion, in net
inflows from the IFA channel onto our new platform (2020:
£0.4 billion), reflecting the good acceptance our new platform
has received from the IFA community. I expect this momentum
Quilter Annual Report 2021
17
Strategic ReportGovernance ReportFinancial statementsOther information Chief Executive Officer’s statement
continued
to continue to build as we begin to encourage new IFA firms to
start using our new platform given the wider range of products
we can offer, assets we can hold and quality of our service.
This time last year, we indicated that ahead of our new platform
coming on stream, we wished to increasingly focus on the
productivity of our own advisers and ensure greater alignment
with the integrated Quilter proposition. As a result of this,
we finished the year with a total of 1,623 Restricted Financial
Planners net of departures. As targeted, we have also seen
a meaningful step-up in productivity with Quilter advisers
generating £2.3 million of Quilter channel gross flows per adviser
in 2021, up from £1.8 million in 2020. We expect to return to
growth in adviser numbers during 2022 as we complete the
repositioning of our advice business. The pipeline of firms seeking
to join our network remains good in a competitive market.
In our High Net Worth business, I was delighted with a near
four-fold uplift in our net inflows to £1.1 billion. Our team of
client-facing professionals are our key client relationship interface.
This can be through an investment manager, a financial adviser
or both. With the creation of the High Net Worth segment,
62 financial advisers moved from Quilter Financial Planning to
work closely alongside Quilter Cheviot colleagues to create our
High Net Worth segment and we expect to build on this number
over time. We have continued to add to the investment team
and our Investment Manager headcount increased to 170 at the
end of 2021 from 169 in December 2020 after a few expected
retirements during the year.
Our investment solutions continue to deliver good investment
performance for clients. The medium- and long-term
performance at Quilter Cheviot continued to outperform
relevant ARC benchmarks, remaining first or second quartile,
to the end of December 2021. Quilter Investors’ multi-asset
solutions performance was solid, with performance on the
biggest range, Cirilium Active, remaining good over the longer
term with all risk profiles having achieved returns ahead of their
sector average since inception. The three-year performance
metrics also improved meaningfully during the course of 2021.
The Active and the Passive Blend WealthSelect portfolios
continue to deliver strong performance over the longer term
and have shown improved relative performance on a shorter-
term basis. Over both three and five years, 12 out of 16
portfolios are in the top two quartiles.
Business performance
Total adjusted profit before tax, including a contribution of
£50 million from Quilter International for the 11 months until
completion, was £188 million.
On a continuing business basis, adjusted profit before tax
for 2021 of £138 million, up 28% on 2020, a pleasing out-turn.
Higher total net management fee of £500 million (2020:
£446 million) reflected the higher average AuMA experienced
in 2021, offset by a single basis point decline in revenue margins
as a result of the mix shift in Quilter Investors and the strong
performance of the Quilter Investment Platform which generates
a lower revenue margin for us than the overall average. Other
revenue of £118 million was unchanged on 2020 (£118 million)
reflecting the reorganisation of our advice business.
We remain committed to achieving operating margins in excess
of 25% and 30% in 2023 and 2025 respectively and have made
good progress towards those goals in 2021. In 2020 our cost
management initiatives partly protected the P&L from volatility
in the external environment by delivering tactical cost
reductions of c.£40 million through lower variable
compensation costs, reduced marketing and development
spend and other short-term initiatives. As expected, better
market levels and operating conditions have allowed us to
reverse around three quarters of those cost reductions during
2021, and while this contributed to a drag on operating margin
expansion, we still delivered an improvement in the continuing
business operating margin of three percentage points to 22%
(2020: 19%), excluding Quilter International.
£138m +28%
Total adjusted profit before tax, continuing business
A 6% adjusted profit increase to £111 million (2020: £105 million)
within our Affluent segment was more muted than the increase
achieved by the High Net Worth segment, impacted by the
anticipated reversal of the tactical cost savings implemented
in 2020, more normal levels of annual incentive accruals and
the impact of stranded costs following the sale of Quilter
International. Within our High Net Worth segment, adjusted
profit increased 44% to £56 million (2020: £39 million) reflecting
our high-end advice business, Private Client Advisers, moving
into profit as well as strong operating leverage with much
faster income growth than cost growth in the discretionary
fund management business. Head Office costs reduced to
£29 million from £36 million, in line with the guidance we
provided at the Capital Markets Day in November 2021.
Our IFRS profit after tax from continuing operations was
£23 million, compared to a profit of £13 million in 2020. The
difference between this measure and our adjusted profit is largely
due to non-cash amortisation of intangible assets, our Business
Transformation expenses and the impact of policyholder tax
positions on the Group’s results. Business Transformation
expenses will remain in 2022 reflecting the expenditure on our
Optimisation and Simplification programmes and are expected
to reduce substantially over the next three years.
Total Group adjusted diluted earnings per share of 10.4 pence,
of which 3.0 pence is in respect of Quilter International, and
increase of 22% (2020: 8.5 pence, of which 3.3 pence was in
respect of Quilter International).
Adjusted diluted earnings per share from continuing operations
increased to 7.4 pence (2020: 5.2 pence). We have targeted a
mid-teens compound annual growth rate in EPS to 2025 from
the 2020 base. The initial growth of 42% in 2021 off that base
represents an excellent start against that metric, albeit that this
year’s progress has been supported by both a reduced share
count due to the capital return programme and a lower than
usual tax charge. On an IFRS basis, we delivered basic EPS from
continuing operations of 1.4 pence versus of 0.8 pence per
18
Quilter Annual Report 2021
share for the comparable period of 2020 on the same basis.
Period-end shares declined by 128 million as a result of our
share buyback programme which completed in January 2022
and which reduced our overall share count by c.14% over the
course of the programme.
Finally, the provision made in respect of certain DB to DC
pension transfer advice provided by Lighthouse advisers prior
to Quilter’s acquisition of Lighthouse has increased by £7 million
from the end-2020 level predominantly due to the identification
of some instances of unsuitable DB transfer advice being given
by Lighthouse advisers beyond that relating to former British
Steel Pension Scheme members, which may have caused
customers to sustain losses. We continue to work proactively
with the FCA and the skilled person review relating to DB to DC
pension transfers by Lighthouse to ensure good customer
outcomes for the clients involved. Even though the advice to
transfer these pensions predated Lighthouse transitioning to
our systems and controls after our acquisition of Lighthouse,
we will ensure that these clients are treated fairly, consistent
with the FCA’s requirements and our values.
Governance and culture
In October 2021, Glyn Jones informed the Board of his intention
to retire as Chair of Quilter in 2022 once a successor is identified
and appointed. Since taking up the role of Chair prior to our
Listing, Glyn has not only built a Board of many talents but
has provided wise and valuable counsel to both me and my
executive team as we have reshaped Quilter over the last
four years. We would not be where we are without him.
Creating an inclusive and diverse culture where all colleagues
feel they can be themselves has always been a core tenet of
our cultural agenda. We have remained focused on progressing
our Inclusion and Diversity agenda, appointing a new Head of
Inclusion and Diversity and launching our new cultural
engagement programme, ‘We-Rise’, designed to engage
colleagues with the next phase of our strategic journey. We
have also continued to progress our workplace strategy with
the successful re-opening of our refurbished Quilter House in
Southampton our most significant achievement. As we have
gradually reopened access to our offices, we have seen colleagues
embrace the new flexible approach our workplace strategy was
designed to encourage. Whilst we continue to be mindful of
reminding colleagues of the importance of collaborating face
to face at least a few days per week, our “new normal” should
enable us to continue to rationalise our property estate over
the coming years.
Quilter is committed to responsible
investment and earlier this year
we updated our matrix to incorporate
ESG ratings and two specific ESG
solutions.
Quilter is committed to responsible investment and earlier this
year we updated our matrix for our restricted network advisers
to incorporate ESG ratings and introduced two specific ESG
solutions, one of which was our own Climate Assets fund
managed by Quilter Cheviot. As a result, ascertaining clients’
ESG preferences is now a core input into the advice process for
our restricted advisers. Our investment teams incorporate ESG
analysis into their investment processes. We continue to make
good progress with ensuring all model portfolio holdings for
equities and funds within Quilter Cheviot and Quilter Investors
are appropriately evaluated against ESG metrics.
Climate change is undoubtedly one of the most significant
challenges the world faces and tackling it is a responsibility of
everyone. In 2021, we formalised our climate change strategy
with the objective to reduce Quilter’s contribution to climate
change and support the transition to a low carbon economy. To
achieve this ambition, we have developed a framework which is
helping us to reduce our direct carbon footprint, embed climate
considerations in our investment management and stewardship
activity, offer clients climate-focused investment solutions and
align with the Task Force on Climate-related Financial Disclosures.
I am pleased with our progress on incorporating ESG
considerations across our entire value chain: we are embedding
ESG into our standard advice process to help clients invest
according to their ESG preferences, and we are embedding ESG
even more deeply into our standard investment management
processes, both within our multi-asset investment solutions
and our discretionary wealth management.
To provide clients and advisers with greater transparency, we
have included ESG ratings for third-party funds available on our
UK Platform. Upon this solid foundation we will enhance our
approach to responsible investment further in 2022.
Outlook
We are pleased with our 2021 performance but we are facing
difficult times with significant geopolitical tensions at the centre
of all our concerns. Our hearts are with the people of Ukraine
and their struggle puts the market volatility we face into an
appropriate perspective. Up to the end of February, our
year-to-date net inflows were comfortably ahead of the
comparable period in 2021, although the conflict in Ukraine
is likely to have a bearing on equity and bond markets, investor
sentiment and inflation amongst other factors. While it remains
too early to predict the impact or the likely duration of these
events, it is at times like this that our advice-based model is
particularly valued by customers providing support as they
navigate through this period of uncertainty. In 2022, our focus
remains on managing our business towards delivering the
targets we set out at our Capital Markets Day last November.
This includes targeting increasing flows to our Platform,
particularly from third party advisers, product innovation
and growth in our restricted adviser base.
Paul Feeney
Chief Executive Officer
Quilter Annual Report 2021
19
Strategic ReportGovernance ReportFinancial statementsOther information Our markets
Quilter operates within markets offering structural growth
potential: the advice industry, wealth management, and
investment management, serving clients throughout the
accumulation and decumulation phases of their lives. With
differentiated business models at scale, such as Quilter’s, there
is scope to win market share despite the broader industry facing
challenges such as constrained supply of financial advisers, fee
pressure, the cost of regulation and ongoing regulatory and
fiscal changes.
Quilter firmly believes the market dynamics, as detailed below,
reaffirm the opportunity before us as the need for retirement
saving continues through all market cycles. As we organise
ourselves around our client segments, we see opportunity to
grow with our customers and advisers, to enhance efficiency,
enabled by technology, all while embodying our belief in
responsible wealth management.
£1.8tn
Total market value2
Since 2015, the UK wealth market assets have grown
by c.13%, on a compound basis. Regulatory and
digital trends have encouraged clients and advisers
to consolidate investment assets onto platforms and
we expect these trends to continue in the near to
medium term.
Key trends
Large and growing market
Global health pandemic disruption resulting in savings surge
The UK wealth management market is the fifth largest in the
world1 and has delivered over 13% compound annual growth2
in assets since 2015. While financial markets globally have
been volatile in the early months of 2022, with continued
tailwinds, the market is forecast to grow to between £2.2 and
£2.5 trillion of assets by 20242. The ‘baby boomer’ generation
is a key customer demographic as they enter retirement,
however intergenerational wealth transfer will support the
sustainability of the industry. Building relationships with
younger generations will be a key for the future.
UK wealth market forecast2 AuMA (£tn)
2024e
2015
£0.9tn
£2.5tn
1Credit Suisse Global Wealth Databook 2021.
2Fundscape Platform report Q2’21, June 2021. Retail Advised Platform AuA, adding
£144 billion St. James Place AuM. Compeer UK Wealth Management Report, 2021.
Wealth managers and private banks, Boring Money Online Investing June 2021.
The economic and social fallout from the COVID-19 pandemic
disrupted many industries globally. The uncertainty increased
the UK population’s propensity to save, with those remaining
in employment accumulating a significant amount of
predominantly cash savings. The conversion of these assets
into investable assets is expected to be a continued support
for the UK wealth management industry in the near to
medium term.
c.£200bn
Estimated additional UK savings3
3Berenberg Diversified Financials research, November 2021.
20
Quilter Annual Report 2021
Strong demand for advice delivered cost efficiently
Anytime-anywhere visibility of savings
The demand for trusted financial advice has never been
stronger, driven by UK Pension Freedom, continually changing
taxes, allowances and reforms, together with the market
volatility and uncertainty following the COVID-19 pandemic.
The shortage of advisers in the UK makes it difficult for those
needing advice to access an adviser, often referred to as the
‘advice gap’. This creates an opportunity for Quilter to bridge
that gap by offering trusted face to face advice as well as
digitally-enabled solutions which can help advisers more
cost effectively service clients where it has previously
been uneconomic.
Technology is present in all aspects of our lives and wealth
management is no different. Clients expect digital access
to their investment portfolios and a seamless experience
through whichever channel they wish to be served.
Digital innovation across the industry can improve customer
experience and outcomes while offering opportunities
for businesses such as Quilter to support more clients,
more efficiently.
Relevant investment solutions with consistently good
customer outcomes
The rise of ESG
Investment management is highly competitive. In a world of
lower asset returns and continuing market volatility, advisers
are seeking to find the best value for their clients while
delivering good investment outcomes through the cycle.
Manufacturers of investment solutions, such as Quilter, who
can provide products aligned to the advice process and which
achieve consistently good investment performance can
expect to attract strong flows.
ESG is the defining topic of our time and will be for the
next decade and beyond. Evolving legislative and regulatory
requirements, including the UK Government’s Green Finance
Strategy, mean ESG will become woven into the investment
world’s fabric.
In April 2021, Quilter surveyed 1,000 UK consumers (aged
over 35 with at least £60,000 to invest) and found 78% make
‘ethical’ purchasing decisions at least some of the time, with
64% of customers with a financial adviser saying they had
become more interested in responsible investment in the
last two years. Consumer demand for responsible investment
shows no sign of abating.
Quilter Annual Report 2021
21
Strategic ReportGovernance ReportFinancial statementsOther information 22
Quilter Annual Report 2021
Our strategy
Three years on from our Listing and after transforming the
business into a simpler, modern, full-service wealth manager,
we have strong foundations on which to build the next phase
of our strategy. This can be captured in the phrase ‘Growth
and Efficiency’.
Guided by our outlook of the wealth management industry,
our strategy is focused on growing with our clients and advisers,
enhancing the efficiency of our operations, increasing
digitalisation across the business and embedding ESG in all
we do. This will enable us to increase flows from our two main
distribution channels, manage more of those flows in our
investment solutions and become more efficient as we do it,
delivering top-line growth and operating leverage.
Underpinning our priorities is an understanding that
embodying a diverse and inclusive culture, where colleagues
embrace our cultural values of being pioneering, dependable
and stronger together will not only help us achieve our goals
but also benefit all of our stakeholders.
Our four
strategic pillars
for delivering
growth and
driving efficiency
1. Grow with our clients
and advisers
2. Enhance efficiency
3. Embed digital
4. Be the responsible
wealth manager
Read about how we track our strategic progress
in Our key performance indicators
page 26
Principal risks and uncertainties
page 69
Quilter Annual Report 2021
23
Strategic ReportGovernance ReportFinancial statementsOther information Our strategy
continued
Our strategy
1. Grow with our clients
and advisers
2. Enhance efficiency
3. Embed digital
4. Be the responsible
wealth manager
Strategic objective:
Aligning our expertise and resources around the needs of our
advisers and two client segments. Evolving our proposition to
deliver a relevant service offering and good customer outcomes.
Strategic objective:
Maximising synergies across the business, increasing
operational efficiency and reducing costs and complexity.
Simplification programme to achieve c.£45 million in cost
savings by end-2024.
KPIs:
– Number of clients
– Net flows as percentage of opening AuMA
– Number of Restricted Financial Planners
– Number of discretionary investment managers
KPIs:
– Operating margin
– Adjusted profit before tax
– IFRS profit/(loss)
– Total shareholder return
Other performance indicators:
– Asset persistency
2021 performance:
– 3% increase in total client numbers and households served.
– 36% year-on-year increase in gross sales and 167% increase
in net inflows as multi-year transformation initiatives drove
momentum in a return to business growth.
– Strong performance from the new Platform and Quilter
Cheviot during the year coupled with stable retention.
– Net decline in RFPs as initiatives to refocus and reposition
advice business led to a modest number of departures.
– Strong improvement in gross flows per adviser.
– 104 new advisers graduated from the Quilter Financial
Adviser School.
– Net addition of one investment manager after a small
number of expected retirements during the year.
2021 performance:
– Three percentage point improvement in the operating
margin, making good progress towards our 2023 and 2025
targets of at least 25% and 30%+, respectively.
– Delivered £11 million savings in the year from Optimisation
programme when compared to the original 2018 cost base,
with full-year run-rate of £15 million and £61 million total
run-rate across the programme to date.
– Sold Quilter International enabling reorganisation of the
business around two core client segments: Affluent and
High Net Worth.
– Set out plans to deliver c.£45 million cost savings by
end-2024, commencing 2022, as part of second phase
of cost savings which we call ‘Simplification’.
Focus in 2022:
– Grow adviser numbers and continue to drive productivity.
– Integrate Quilter Private Client Advisers’ advice force into
High Net Worth proposition.
– Build upon 2021’s Platform growth, attracting new advisers
and clients with broader propositions.
– Relaunch WealthSelect.
– Work towards delivering High Net Worth discretionary
portfolio service on Quilter Platform, broadening
distribution of investment solutions.
Focus in 2022:
– Mobilising Simplification efficiency initiatives including
decommissioning part of legacy IT infrastructure,
embedding greater automation and straight-through
processing across the business, and simplifying
Quilter’s structure.
– Continue to support employee engagement through
the transition period.
24
Quilter Annual Report 2021
Strategic objective:
Strategic objective:
Enhancing and modernising our digital service experience
Acting and investing responsibly, being a leading responsible
to engage clients of today and tomorrow.
wealth manager. Being a responsible employer, attracting,
developing and retaining great talent, embracing inclusivity.
KPIs:
– Number of unique visits to Quilter websites
– Number of online portal customer registrations
– Customer app log-ins – to follow in 2022
KPIs:
– UN PRI rating
– Female representation in senior leadership
– Ethnic minority representation in senior leadership
– Hybrid/telephone-advised customer numbers – to follow
– Scope 1 and 2 greenhouse gas emissions
in 2022
– Number of young people supported by the Quilter Foundation
Read our Responsible Business report for more detail
page 39
2021 performance:
2021 performance:
– Successfully completed Platform Transformation
Programme, laying foundations for further digital
– Refreshed responsible wealth manager framework,
strategy and governance, focused around key stakeholders.
enhancements of the client and back-office experience.
– Commenced delivery of responsible investment
– Launched e-delivery of client reporting in High Net Worth
considerations into the advice process and investment
segment.
propositions.
– The number of visits to our websites and online portal
– Launched Quilter Cheviot ‘Positive Change’ strategy.
registrations are a solid base from which to build as we
– Established target to reduce Scope 1 and Scope 2
drive forward our single domain website strategy and
greenhouse gas emissions by 80% by 2030.
encourage engagement with our online customer portals.
– Developed first climate disclosures aligned to TCFD.
– Formulated five pillar inclusion and diversity strategy.
– The Quilter Foundation renewed its partnership with
financial education charity MyBnk, committing £500,000
to its programmes over the next three years.
Focus in 2022:
Focus in 2022:
– Building hybrid advice offering in the Affluent segment.
– Launching a refresh of our Affluent managed portfolio
– Launching mobile app of Affluent Online Customer centre.
service, WealthSelect, which will include responsible and
– Enhancing client and adviser portals in High Net Worth
sustainable investment options, as well as further
– Delivering single domain website strategy to facilitate online
– Roll out of inclusion and diversity strategy.
developing our suite of responsible investment strategies.
– Developing a Climate Action Plan for our operations and
investments to support the Paris Agreement objectives.
segment.
customer journeys.
Our strategy
KPIs:
– Number of clients
– Net flows as percentage of opening AuMA
– Number of Restricted Financial Planners
– Number of discretionary investment managers
Other performance indicators:
– Asset persistency
savings by end-2024.
KPIs:
– Operating margin
– Adjusted profit before tax
– IFRS profit/(loss)
– Total shareholder return
1. Grow with our clients
and advisers
2. Enhance efficiency
3. Embed digital
4. Be the responsible
wealth manager
Strategic objective:
Strategic objective:
Aligning our expertise and resources around the needs of our
Maximising synergies across the business, increasing
advisers and two client segments. Evolving our proposition to
operational efficiency and reducing costs and complexity.
deliver a relevant service offering and good customer outcomes.
Simplification programme to achieve c.£45 million in cost
Strategic objective:
Enhancing and modernising our digital service experience
to engage clients of today and tomorrow.
Strategic objective:
Acting and investing responsibly, being a leading responsible
wealth manager. Being a responsible employer, attracting,
developing and retaining great talent, embracing inclusivity.
KPIs:
– Number of unique visits to Quilter websites
– Number of online portal customer registrations
– Customer app log-ins – to follow in 2022
– Hybrid/telephone-advised customer numbers – to follow
in 2022
KPIs:
– UN PRI rating
– Female representation in senior leadership
– Ethnic minority representation in senior leadership
– Scope 1 and 2 greenhouse gas emissions
– Number of young people supported by the Quilter Foundation
2021 performance:
2021 performance:
– 3% increase in total client numbers and households served.
– Three percentage point improvement in the operating
– 36% year-on-year increase in gross sales and 167% increase
margin, making good progress towards our 2023 and 2025
in net inflows as multi-year transformation initiatives drove
targets of at least 25% and 30%+, respectively.
momentum in a return to business growth.
– Delivered £11 million savings in the year from Optimisation
2021 performance:
– Successfully completed Platform Transformation
Programme, laying foundations for further digital
enhancements of the client and back-office experience.
– Launched e-delivery of client reporting in High Net Worth
– Strong performance from the new Platform and Quilter
programme when compared to the original 2018 cost base,
segment.
Cheviot during the year coupled with stable retention.
with full-year run-rate of £15 million and £61 million total
– Net decline in RFPs as initiatives to refocus and reposition
run-rate across the programme to date.
advice business led to a modest number of departures.
– Sold Quilter International enabling reorganisation of the
– Strong improvement in gross flows per adviser.
business around two core client segments: Affluent and
– 104 new advisers graduated from the Quilter Financial
High Net Worth.
Adviser School.
– Set out plans to deliver c.£45 million cost savings by
– Net addition of one investment manager after a small
end-2024, commencing 2022, as part of second phase
number of expected retirements during the year.
of cost savings which we call ‘Simplification’.
– The number of visits to our websites and online portal
registrations are a solid base from which to build as we
drive forward our single domain website strategy and
encourage engagement with our online customer portals.
Focus in 2022:
Focus in 2022:
– Grow adviser numbers and continue to drive productivity.
– Mobilising Simplification efficiency initiatives including
– Integrate Quilter Private Client Advisers’ advice force into
decommissioning part of legacy IT infrastructure,
High Net Worth proposition.
embedding greater automation and straight-through
Focus in 2022:
– Building hybrid advice offering in the Affluent segment.
– Launching mobile app of Affluent Online Customer centre.
– Enhancing client and adviser portals in High Net Worth
– Build upon 2021’s Platform growth, attracting new advisers
processing across the business, and simplifying
segment.
and clients with broader propositions.
– Relaunch WealthSelect.
Quilter’s structure.
– Delivering single domain website strategy to facilitate online
– Continue to support employee engagement through
customer journeys.
– Work towards delivering High Net Worth discretionary
the transition period.
portfolio service on Quilter Platform, broadening
distribution of investment solutions.
Read our Responsible Business report for more detail
page 39
2021 performance:
– Refreshed responsible wealth manager framework,
strategy and governance, focused around key stakeholders.
– Commenced delivery of responsible investment
considerations into the advice process and investment
propositions.
– Launched Quilter Cheviot ‘Positive Change’ strategy.
– Established target to reduce Scope 1 and Scope 2
greenhouse gas emissions by 80% by 2030.
– Developed first climate disclosures aligned to TCFD.
– Formulated five pillar inclusion and diversity strategy.
– The Quilter Foundation renewed its partnership with
financial education charity MyBnk, committing £500,000
to its programmes over the next three years.
Focus in 2022:
– Launching a refresh of our Affluent managed portfolio
service, WealthSelect, which will include responsible and
sustainable investment options, as well as further
developing our suite of responsible investment strategies.
– Roll out of inclusion and diversity strategy.
– Developing a Climate Action Plan for our operations and
investments to support the Paris Agreement objectives.
Quilter Annual Report 2021
25
Strategic ReportGovernance ReportFinancial statementsOther information Key performance indicators
Quilter has identified the key
performance indicators (“KPIs”) it believes
are useful in assessing the Group’s
performance against its strategic priorities.
They encompass both financial and
non-financial measures, as set out below.
Updates to KPIs in 2021
Alongside the launch for our new
strategic objectives, focused on
delivering growth and driving efficiency,
we refreshed and expanded our KPIs
to better monitor progress towards
our strategic objectives.
Historical data for financial-based
KPIs have been rebased to exclude
contributions from Quilter International,
which was sold on 30 November 2021.
Client numbers
Net flows as
percentage of
opening AuMA*
Number of Restricted
Number of
Financial Planners
discretionary
(“RFPs”)
investment managers
Operating margin*
Definition
Affluent client numbers are identified
as individuals, or corporate or trust
entities actively engaged with the
Quilter Investment Platform. High Net
Worth clients are based on the number
of households or client units served
by Quilter Cheviot.
Definition
Total net flows as a percentage of
opening AuMA. This measure evaluates
the level of flows during the period in
relation to the asset base, discretely
from market movements.
Definition
Definition
Definition
Number of advisers licensed to advise
Number of individuals who provide
Represents adjusted profit before
clients across Pension, Investment and
discretionary investment management
tax divided by total net fee revenue.
Protection solutions, but only
services to clients of Quilter Cheviot
Operating margin is a profitability
permitted to recommend products and
in line with individual circumstances
measure that reflects the percentage
solutions from providers on the Quilter
and investment objectives.
of adjusted profit before tax generated
Financial Planning Restricted Panel.
from total net fee revenues.
Link to strategic
priority
Link to
strategic priority
1
1
2021 performance:
– The Affluent segment attracted
2021 performance:
– Net flows/opening AuMA increased
Link to
remuneration
Link to
strategic priority
Link to
strategic priority
strategic priority
remuneration
Link to
Link to
2
2021 performance:
2021 performance:
2021 performance:
– During 2021, we placed focus on
– Net growth in discretionary
– The Group’s operating margin
the productivity of our own advisers
investment managers was flat year
improved by 3% during the year
on year due to a small number of
expected retirements.
as a result of the increase in revenue
due to higher average Group AuMA,
partially offset by higher expenses
driven by increases in FSCS levies
and higher variable compensation.
1
1
to ensure greater alignment with
the integrated Quilter proposition.
Of the total 1,623 Restricted
Financial Planners as at the end
of 31 December 2021, 1,563 were
in the Affluent Segment, and 60
in the High Net Worth segment.
– 100 Restricted Financial Planners
were recruited in 2021, but the net
effect of repositioning initiatives
resulted in December 2021’s total
number closing lower than
December 2020 outturn.
strong growth in clients of 4% driven
by the new Platform’s ability to meet
a broader range of client needs.
– The number of households served
by the High Net Worth segment
experienced muted total growth
as UK lockdowns hindered abilities
to meet new clients. The Quilter
channel saw pleasing growth of 12%.
two percentage points in 2021.
– Substantial improvement in net flows
year-on-year.
– Strong performance from the new
Quilter Investment Platform with
£3.5 billion of net inflows (£1.5 billion
in 2020).
– Improvement in gross flows in Quilter
Cheviot, particularly from existing
clients as market confidence
improved.
– Improved asset retention.
Outlook for 2022:
– Grow the number of clients served
as we meet the needs of our advisers
and clients, and evolve our
proposition to deliver good service
and customer outcomes.
Outlook for 2022:
– Target net flow growth of at least 6%
of opening AuMA over the medium
term, with a higher percentage
growth rate expected from the
Quilter Investment Platform.
Outlook for 2022:
Outlook for 2022:
Outlook for 2022:
– With repositioning initiatives
– Progress towards our target c.200
– Optimisation plans and business
complete, focused on return to
net growth in the number of RFPs,
supporting further improvement
in RFP productivity.
discretionary investment managers
simplification initiatives remain on
as we broaden and deepen our
track to deliver planned cost savings
integrated proposition across the UK.
which, together with revenue growth,
will underpin targetted operating
margin improvements at least 25%
by 2023 and 30%+ by 2025.
Client numbers
Net flows as a percentage
of opening AuMA
Number of Restricted
Financial Planners
Number of discretionary
investment managers
Operating margin
2021
2020
458,203
36,117
442,496 35,913
2021
2020
2%
4%
2021
2020
1,563 60
1,765 77
2021
2020
170
169
2021
2020
22%
19%
Strategic pillars key:
1. Grow with our clients and advisers
2. Enhance efficiency
3. Embed digital
4. Be the responsible wealth manager
*See page 255 for alternative performance measures.
26
Quilter Annual Report 2021
Affluent.
High Net Worth.
Definition
Definition
Affluent client numbers are identified
Total net flows as a percentage of
as individuals, or corporate or trust
opening AuMA. This measure evaluates
entities actively engaged with the
the level of flows during the period in
Quilter Investment Platform. High Net
relation to the asset base, discretely
Worth clients are based on the number
from market movements.
of households or client units served
by Quilter Cheviot.
Link to
strategic priority
Link to strategic
Link to
remuneration
1
priority
1
2021 performance:
2021 performance:
– The Affluent segment attracted
– Net flows/opening AuMA increased
strong growth in clients of 4% driven
two percentage points in 2021.
by the new Platform’s ability to meet
– Substantial improvement in net flows
a broader range of client needs.
year-on-year.
– The number of households served
– Strong performance from the new
by the High Net Worth segment
experienced muted total growth
Quilter Investment Platform with
£3.5 billion of net inflows (£1.5 billion
as UK lockdowns hindered abilities
in 2020).
to meet new clients. The Quilter
– Improvement in gross flows in Quilter
channel saw pleasing growth of 12%.
Cheviot, particularly from existing
clients as market confidence
improved.
– Improved asset retention.
Outlook for 2022:
Outlook for 2022:
– Grow the number of clients served
– Target net flow growth of at least 6%
as we meet the needs of our advisers
of opening AuMA over the medium
and clients, and evolve our
proposition to deliver good service
and customer outcomes.
term, with a higher percentage
growth rate expected from the
Quilter Investment Platform.
Client numbers
Net flows as
percentage of
opening AuMA*
Number of Restricted
Financial Planners
(“RFPs”)
Number of
discretionary
investment managers
Operating margin*
Definition
Number of advisers licensed to advise
clients across Pension, Investment and
Protection solutions, but only
permitted to recommend products and
solutions from providers on the Quilter
Financial Planning Restricted Panel.
Definition
Number of individuals who provide
discretionary investment management
services to clients of Quilter Cheviot
in line with individual circumstances
and investment objectives.
Definition
Represents adjusted profit before
tax divided by total net fee revenue.
Operating margin is a profitability
measure that reflects the percentage
of adjusted profit before tax generated
from total net fee revenues.
Link to
strategic priority
Link to
strategic priority
Link to
strategic priority
Link to
remuneration
1
1
2
2021 performance:
– During 2021, we placed focus on
2021 performance:
– Net growth in discretionary
2021 performance:
– The Group’s operating margin
investment managers was flat year
on year due to a small number of
expected retirements.
improved by 3% during the year
as a result of the increase in revenue
due to higher average Group AuMA,
partially offset by higher expenses
driven by increases in FSCS levies
and higher variable compensation.
the productivity of our own advisers
to ensure greater alignment with
the integrated Quilter proposition.
Of the total 1,623 Restricted
Financial Planners as at the end
of 31 December 2021, 1,563 were
in the Affluent Segment, and 60
in the High Net Worth segment.
– 100 Restricted Financial Planners
were recruited in 2021, but the net
effect of repositioning initiatives
resulted in December 2021’s total
number closing lower than
December 2020 outturn.
Outlook for 2022:
– With repositioning initiatives
Outlook for 2022:
– Progress towards our target c.200
Outlook for 2022:
– Optimisation plans and business
complete, focused on return to
net growth in the number of RFPs,
supporting further improvement
in RFP productivity.
discretionary investment managers
as we broaden and deepen our
integrated proposition across the UK.
simplification initiatives remain on
track to deliver planned cost savings
which, together with revenue growth,
will underpin targetted operating
margin improvements at least 25%
by 2023 and 30%+ by 2025.
Client numbers
Net flows as a percentage
of opening AuMA
Number of Restricted
Financial Planners
Number of discretionary
investment managers
Operating margin
2021
2020
458,203
36,117
442,496 35,913
2021
2020
2%
4%
2021
2020
1,563 60
1,765 77
2021
2020
170
169
2021
2020
22%
19%
Affluent.
High Net Worth.
Quilter Annual Report 2021
27
Strategic ReportGovernance ReportFinancial statementsOther information Key performance indicators
continued
Adjusted profit
before tax*
IFRS profit/(loss)
Total shareholder
return (“TSR”)
Definition
Represents the underlying operating
profit of the Group. It adjusts IFRS
profits for items such as goodwill
impairment and amortisation of
intangibles, business transformation
costs, financing costs on external
borrowings, and policyholder tax
adjustments, excluding non-core
operations, as detailed in Note 7
in the financial statements.
Definition
IFRS profit after tax from continuing
operations, prepared in accordance
with IFRS. For remuneration purposes,
IFRS profit before tax on a continuing
basis is adjusted to exclude
amortisation of intangible assets,
policyholder tax adjustments, business
disposal impacts and other one-off
items (refer to Note 7(c) and page 134
of the Remuneration report.
Definition
The difference between the opening
and closing share price over the period,
plus any dividends paid during that
period. Performance shown for Quilter
as traded on the London Stock Exchange.
Link to
strategic priority
Link to
strategic priority
Link to
remuneration
Link to
strategic priority
Link to
remuneration
strategic priority
strategic priority
2
2021 performance:
– Adjusted profit before tax was
£138 million, up 28% from 2020,
driven by higher net fee revenue
supported by improved net flows
and positive market movements
despite a mix-driven decline in
revenue margins in Quilter Investors
and Quilter Investment Platform.
– Optimisation savings were offset by
cost headwinds from the unwind of
tactical cost saves, higher regulatory
costs and regulatory levies.
Outlook for 2022:
– Progress towards our target to more
than double adjusted profit before
tax by 2025 from the 2020 base.
2
2
2021 performance:
– The Group’s IFRS profit after tax
from continuing operations was
£23 million, compared to a profit
of £13 million for 2020. The increase
in profit is attributable to favourable
equity market movements
throughout the year resulted
in higher AuMA.
2021 performance:
– Total shareholder return was broadly
flat on 2020’s outturn, below the level
achieved by the FTSE-100 and
FTSE-250 indices (18%, respectively).
– Performance was largely attributed to
the sale of Quilter International and
its short-term dilution to earnings.
– While Quilter’s share price was
broadly flat over the year, this was
offset by a higher Price/Earnings
multiple on the smaller but faster
growing business.
Outlook for 2022:
– IFRS profit after tax from continuing
operations can vary significantly
year-on-year depending on the
change in policyholder tax. Excluding
policyholder tax, IFRS profit is likely
to increase as spend on Optimisation
and PTP declines with the delivery
of the Optimisation programme and
the new UK Platform, respectively.
Adjusted profit before tax
IFRS profit/(loss)
Total shareholder return
Number of unique visits
to Quilter websites
Number of online portal
customer registrations
2021
2020
£138m
£108m
2021
2021
2020
£23m
£23m
2020
£13m
£68m
2021
2020
(0.1%)
(0.9%)
2021
2020
5,721,206
XXX
2021
2021
195k 7k
IFRS profit on a continuing basis (excluding
amortisation, policyholder tax adjustments,
business disposal impacts and one-off items).
IFRS profit after tax from continuing operations.
28
Quilter Annual Report 2021
Number of unique
visits to Quilter
websites
Definition
Number of online
portal customer
registrations
Definition
to use our online portals, for the
Quilter Investment Platform and
Quilter Cheviot.
Number of visits to any of the Quilter
Number of customers registered
plc or Quilter-brand websites.
Link to
3
Link to
3
2021 performance:
2021 performance:
– As a new KPI, the number recorded
– As a new KPI, the number recorded
forms a solid base from which to
grow as we focus on digital
communications and branding.
forms a solid base from which
to grow as we focus on evolving
our digital communications and
encourage engagement with our
online customer portals.
Outlook for 2022:
Outlook for 2022:
– Increase the number of unique visits
– Grow the number of online portal
to the Quilter websites as we deliver
our single-domain website strategy,
simplifying and enhancing digital
communication channels.
customer registrations as we
improve our digital communication
channels and work towards
launching the Quilter app.
Adjusted profit
before tax*
IFRS profit/(loss)
Total shareholder
return (“TSR”)
Definition
Represents the underlying operating
profit of the Group. It adjusts IFRS
profits for items such as goodwill
impairment and amortisation of
Definition
Definition
IFRS profit after tax from continuing
operations, prepared in accordance
The difference between the opening
and closing share price over the period,
with IFRS. For remuneration purposes,
plus any dividends paid during that
IFRS profit before tax on a continuing
period. Performance shown for Quilter
intangibles, business transformation
basis is adjusted to exclude
as traded on the London Stock Exchange.
costs, financing costs on external
borrowings, and policyholder tax
adjustments, excluding non-core
operations, as detailed in Note 7
in the financial statements.
amortisation of intangible assets,
policyholder tax adjustments, business
disposal impacts and other one-off
items (refer to Note 7(c) and page 134
of the Remuneration report.
strategic priority
strategic priority
remuneration
strategic priority
remuneration
Link to
Link to
Link to
2
Link to
2
Link to
2
2021 performance:
2021 performance:
2021 performance:
– Adjusted profit before tax was
– The Group’s IFRS profit after tax
– Total shareholder return was broadly
from continuing operations was
£23 million, compared to a profit
flat on 2020’s outturn, below the level
achieved by the FTSE-100 and
of £13 million for 2020. The increase
FTSE-250 indices (18%, respectively).
in profit is attributable to favourable
– Performance was largely attributed to
£138 million, up 28% from 2020,
driven by higher net fee revenue
supported by improved net flows
and positive market movements
despite a mix-driven decline in
– Optimisation savings were offset by
cost headwinds from the unwind of
tactical cost saves, higher regulatory
costs and regulatory levies.
revenue margins in Quilter Investors
throughout the year resulted
and Quilter Investment Platform.
in higher AuMA.
equity market movements
Outlook for 2022:
Outlook for 2022:
– Progress towards our target to more
– IFRS profit after tax from continuing
than double adjusted profit before
tax by 2025 from the 2020 base.
the sale of Quilter International and
its short-term dilution to earnings.
– While Quilter’s share price was
broadly flat over the year, this was
offset by a higher Price/Earnings
multiple on the smaller but faster
growing business.
operations can vary significantly
year-on-year depending on the
change in policyholder tax. Excluding
policyholder tax, IFRS profit is likely
to increase as spend on Optimisation
and PTP declines with the delivery
of the Optimisation programme and
the new UK Platform, respectively.
2021
2021
2020
£23m
£23m
2020
£13m
IFRS profit on a continuing basis (excluding
amortisation, policyholder tax adjustments,
business disposal impacts and one-off items).
IFRS profit after tax from continuing operations.
Number of unique
visits to Quilter
websites
Number of online
portal customer
registrations
Definition
Number of visits to any of the Quilter
plc or Quilter-brand websites.
Definition
Number of customers registered
to use our online portals, for the
Quilter Investment Platform and
Quilter Cheviot.
Link to
strategic priority
Link to
strategic priority
3
3
2021 performance:
– As a new KPI, the number recorded
forms a solid base from which to
grow as we focus on digital
communications and branding.
2021 performance:
– As a new KPI, the number recorded
forms a solid base from which
to grow as we focus on evolving
our digital communications and
encourage engagement with our
online customer portals.
KPIs linked to strategic objective 4:
Be the responsible wealth manager
Detail on our progress on the following
KPIs can be found in the Responsible
Business section of this report, on
page 41.
– UN PRI rating.
– Female representation in senior
leadership.
– Ethnic minority representation
in senior leadership.
– Scope 1 and 2 greenhouse
gas emissions.
– Number of young people supported
by the Quilter Foundation.
Outlook for 2022:
– Increase the number of unique visits
to the Quilter websites as we deliver
our single-domain website strategy,
simplifying and enhancing digital
communication channels.
Outlook for 2022:
– Grow the number of online portal
customer registrations as we
improve our digital communication
channels and work towards
launching the Quilter app.
Adjusted profit before tax
IFRS profit/(loss)
Total shareholder return
Number of unique visits
to Quilter websites
Number of online portal
customer registrations
2021
2020
£138m
£108m
£68m
2021
2020
(0.1%)
(0.9%)
2021
2020
5,721,206
XXX
2021
2021
195k 7k
Quilter Investment Platform.
Quilter Cheviot.
Quilter Annual Report 2021
29
Strategic ReportGovernance ReportFinancial statementsOther information Our business model
Clearly
differentiated
to help drive
value creation
30
Quilter Annual Report 2021
A differentiated model with clear benefits to all stakeholders
Quilter is a full-service wealth manager, well positioned in an
industry benefiting from structural growth. We have an open
and unbundled model, with client choice at the heart of the
offering. Our business model supports both our advisers and
their clients as well as third-party independent financial advisers
and their clients, as their financial requirements evolve
throughout their lives.
Few of our peers have both their own adviser force while also
supporting independent financial advisers. Even fewer have the
breadth of our distribution reach. We have one of the largest
platforms in the Retail Advised market, meaning we can offer
the benefits of our scale to clients at sustainable, fair prices. Our
investment solutions are closely aligned to the advice process
and offer good customer outcomes through the cycle.
The benefits of our model
– Our dual advice channels (our own advisers and independent
financial advisers (IFAs)) give us greater breath and strategic
control of distribution as the independent financial adviser
market consolidates.
– Our own platform gives us scale and operating leverage
across the business.
– Our own Investment solutions enables us to capture
an additional source of revenue.
Our drivers of value creation
1. Colleagues
Quilter is a people-driven business, with value created not only
from our own employees and advisers but also third parties
namely the independent advisers who are supported by our
services. Our culture helps us achieve our purpose while
operating in a responsible manner.
2. Technology and expertise
Our highly skilled, passionate colleagues, experts in the fields
of financial planning and investments, combined with our
technological capabilities, provide high-quality service and
strong customer engagement.
3. Risk management and operational resilience
Our risk management, governance and controls help achieve
good customer outcomes and provide a strong foundation
to continue to provide high levels of service in challenging
environments.
4. Financial resources
We use our financial resources to invest for growth, as well
as to facilitate inorganic opportunities, where appropriate.
Quilter Annual Report 2021
31
Strategic ReportGovernance ReportFinancial statementsOther information Our business model
continued
A simpler business, organised around our clients
At our Capital Markets Day in November 2021 we announced
a new client-centric segmentation which reflects the way the
business is managed and puts the customer at the heart
of everything we do.
We serve two
customer segments…
Our new business segmentation comprises:
– Affluent which encompasses Quilter Financial Planning,
the Quilter Investment Platform, and our investment
solutions business, Quilter Investors; and
– High Net Worth, which includes our discretionary fund
manager, Quilter Cheviot and Quilter Private Client Advisers.
Customer profile
A wealth management customer, no matter their investable
assets, needs three things:
– financial advice;
– a platform on which to hold their assets; and
– investment solutions to deliver returns aligned to their
risk appetite and ESG values.
The way we service our clients and the operating model
we use is the same for both segments. We have two client
segments because the core proposition differs slightly for
each. Affluent serves a greater number of clients and is a
single-expert proposition: clients have a single point of
contact – either one of our advisers or their own third-party
IFA – plus a more unitised investment portfolio approach.
High Net Worth clients value a more bespoke discretionary-
managed proposition. High Net Worth has a dual expert
approach: an adviser – either one of our private client
advisers or a client’s own IFA – plus an investment manager.
Both our segments have the same philosophy: gather flows
from two strong distribution channels, and increasingly
manage those flows in our own investment solutions.
Quilter provides each of those. As well as having our own advice
force, we also support independent financial advisers.
High Net Worth
c.£250,000+ of
investible assets
Affluent
c.£50,000+ of
investible assets
Steven Levin
Affluent Segment
Andy McGlone
High Net Worth Segment
32
Quilter Annual Report 2021
Benefits and synergies
created by the Affluent
segment
– Full spectrum of adviser
support
– Scale benefits from shared
Platform
– Single investment team and
dual-channel distribution
focusing resources and
driving flows
Benefits and synergies
created by the High Net
Worth segment
– New Quilter channel to drive
net flows while maintaining
strong relationships with
independent advisers
– Full-range client offering:
investment management,
advice or both
…through two strong
distribution channels…
…and a single
operating model.
Financial advice
We earn revenues from the advice provided
by our advisers. A client typically pays a
one-off initial advice fee, then an ongoing
annual advice fee representing a percentage
of their investment.
Platform and wrappers
Investment platforms are
depositaries for managing and
holding investments, with assets held
in collective investment accounts or
appropriate tax efficient wrappers
such as ISAs or pensions. We earn
revenues from the assets held. A
client pays a fee on a quarterly basis,
representing a percentage of their
investments under administration.
Investment solutions
Quilter offers a full-breadth of
investment management services,
ranging from bespoke portfolios at
Quilter Cheviot to unitised, risk-based
multi-asset solutions at Quilter
Investors. A client pays an annual
management charge based on their
assets under management.
Our two distribution channels allow
for a client to come to us through a
Quilter adviser, an independent
adviser, or invest directly.
Quilter channel
IFA channel
Quilter Platforms
Our platforms are available
to Quilter advisers and
independent advisers, as well
as directly via a dedicated
customer portal.
Quilter
proprietary
solutions
Third-party
solutions
Quilter Annual Report 2021
33
Strategic ReportGovernance ReportFinancial statementsOther information Our business model
continued
The value we create
for our stakeholders
Combining the resources available to us with our
strengths through our unique business model
means we meet the needs of our advisers and clients.
It also enables us to deliver value for our broader
stakeholders.
Advisers
Customers
Our technical and cultural experience
in advice management means we can
help advisers to manage and grow
their business.
We help create secure financial futures.
Our purchasing power and cross-
segment expertise enable us to provide
high-quality advice, products and
services at competitive prices.
Colleagues
Communities
We create an inclusive workplace that
enables colleagues to thrive.
We are helping improve financial
capability and tackling wellbeing and
employment barriers in our communities,
while reducing the environmental
impact of our business.
Regulators
Shareholders
Our unbundled model, focused on client
choice and good customer outcomes,
delivers on our regulators’ expectations
by providing financial solutions to
customers in a responsible, risk-
managed manner.
We have significant earnings
growth potential from scale benefits
and operating leverage, generating
long-term sustainable returns.
34
Quilter Annual Report 2021
Section 172 (1) statement
Delivering for our stakeholders: Section 172 (1) statement
The Companies Act 2006 (the “Act”) and the UK Corporate
Governance Code 2018 require the Annual Report to provide
information that enables our stakeholders to assess how the
Directors of Quilter have performed their duties under section
172 of the Act. The Act provides that Quilter Directors must act
in a way that they consider in good faith, would be most likely to
promote the success of Quilter for the benefit of shareholders
as a whole. In doing so, Quilter Directors must have regard,
amongst other things, to the factors set out below:
– the likely consequences of any decision in the long term;
– the interests of Quilter’s colleagues;
– the need to foster the Company’s business relationships;
– the impact of Quilter’s operations on the community and
the environment;
– the desirability of the Company maintaining a reputation
for high standards of business conduct; and
– the need to act fairly for all our members.
Building Quilter to deliver long-term success
for all our stakeholders
The Board is clear that engaging, consulting and making
decisions balancing the needs, interests and expectations of
our key stakeholders is critical to Quilter achieving its purpose
of helping create prosperity for the generations of today and
tomorrow. On occasions these competing stakeholder views
can be contradictory and it is the Board’s role to navigate these
complexities to achieve long-term success. The Board has a
comprehensive stakeholder engagement programme and
seeks to act in the best interests of the Group, and to be fair
and balanced in its approach. In addition to direct engagement
with our stakeholders, papers submitted to our Boards and
Board Committees across the Group identify for their
consideration where stakeholders could be impacted by the
proposals. At all times, the Boards remain focused on ensuring
good customer outcomes. Some of the ways the Quilter Board
engages with our stakeholders, including some examples of
how our Board has considered stakeholders when it made
key strategic decisions in 2021, can be read on page 85.
The Board has identified six key stakeholder groups whose
interests and needs it regularly considers.
Quilter’s stakeholders
Advisers
The advisers who provide advice under the Quilter brand, the third-party advice firms
who operate within our regulatory framework, and third-party independent advisers
who use our products and our investment platform.
Colleagues
All of our 3,056 full-time, part-time and contract staff who work to support Quilter’s
customers and advisers.
Communities
The societies in which we operate and where our products and services are taken up.
Customers
Those who use our products and services to meet their long-term financial needs.
Investors
Regulators
Those who have invested in Quilter shares and those who recommend investment in
Quilter and its peers, including equity and debt investors, analysts and rating agencies.
Our core UK regulators, the Prudential Regulation Authority and the Financial Conduct
Authority, and various international regulators such as the Central Bank of Ireland.
Quilter Annual Report 2021
35
Strategic ReportGovernance ReportFinancial statementsOther information Section 172 (1) statement
continued
Advisers
Colleagues
Advisers expect Quilter to:
– Have an investment platform that facilitates the provision
of a high-quality service to advisers and their customers
and a wide range of investment products to meet
customers’ needs.
Our colleagues expect Quilter to:
– Create a values-led culture that is open, welcoming
and inclusive.
– Invest in the development of its people and its technology
so that its people can deliver great service to its customers.
– Have compelling investment propositions that meet the
– Offer an attractive reward structure and a compelling
needs and expectations of customers.
colleague proposition.
– Provide a high-quality control environment that enables
– Listen to ideas, suggestions and concerns, and take action
Advisers to be productive within a framework of effective
controls and tools that support their business.
– Support them in providing high-quality, trusted advice to
their customers in compliance with all regulatory and best
practice standards of conduct.
How does the Board engage with advisers?
– The Chief Executive Officer regularly briefs the Quilter
Board on key issues impacting all advisers.
– The Customer Reports scrutinised by the Quilter Board
and the Board Risk Committee provide key insights on how
effectively and safely Quilter is supporting advisers in
serving customers.
– Paul Matthews, who serves on the Quilter Financial
Planning Board, engages regularly with advisers to
understand their perspectives and priorities and reports
to the Board on his interactions.
– The Board Risk Committee and the Board regularly receive
updates on the quality of the service provided to advisers
following the implementation of the Group’s new
investment platform.
– During 2021, at the Board’s request, management started
a programme of communications and interactions with
Quilter Financial Planning’s advisers to deepen the cultural
alignment between Quilter and Quilter Financial Planning’s
advisers. The data and feedback from these initiatives will
continue to be reported to the Board.
What was the result of that engagement?
– Given the challenges of implementing a new investment
platform during the pandemic, the Board encouraged
management to prioritise the maintenance of a good
quality service to existing advisers over the desire to
introduce new advisers to the new investment platform.
– As a result of the feedback on adviser sentiment provided
to the Board from the Chief Executive, the Board endorsed
management’s proposed programme of activities to
deepen further the Group’s relationships with its own
advisers, including making it easier for advisers to do
business with Quilter.
as appropriate.
How does the Board engage with colleagues?
– By designating Tazim Essani as an additional Non-executive
Director, alongside Paul Matthews, with responsibility
for ensuring the views of our workforce are conveyed
to the Board.
– By the designated Non-executive Directors for workforce
engagement attending meetings of the Quilter Employee
Forum and other informal meetings with employees and
the broader workforce and reporting to the Quilter Board
on the insights they gain from those interactions.
– Meeting regularly with individuals identified as future
senior leaders.
– Receiving regular reports from the HR Director on the
Group’s People and Culture.
– Executive Directors engaging directly with colleagues across
the business.
What was the result of this engagement?
– Following the People and Culture presentation to the
Board in May 2021, the Board noted that there had been
a small decline in employee engagement, as measured
by the regular colleague Peakon surveys. This was a result
of the significant volume of change in the business and
the challenges created by an extended period of remote
working. As a result, the Board requested that management
share its plans for reinvigorating employee engagement.
The Board was briefed on the “We Rise” employee
communications programme, designed to support
employees through a period of significant change by
ensuring colleagues fully understand what the Quilter
strategy means for them and how they contribute to
Quilter’s success.
– The Board fully supports management’s plans to improve
the diversity and inclusion of the organisation, and the
launch of an Action Plan built on five strategic pillars.
– In January 2022 the Board received a briefing from an
external speaker on diversity and inclusion to ensure it
is able to effectively oversee the Group’s efforts to drive
its diversity and inclusion agenda.
– Further details of employee engagement can be found
on pages 88 and 89.
36
Quilter Annual Report 2021
Communities
Customers
Our communities and suppliers expect Quilter to:
– Contribute to the communities in which Quilter is located
Customers expect Quilter to:
– Provide excellent customer service and access to products
and services that meet their needs and expectations, within
their risk appetite and with the flexibility to reflect their
ESG preferences.
– Provide personalised customer propositions.
How does the Board engage with customers?
– The Board receives a regular Customer Report which
includes feedback on the perceived quality of Quilter
products and services to ensure the business is continually
learning from the feedback received from customers and
their advisers.
– All Board papers include, where appropriate, analysis
of the impact on customers of business proposals.
– The Board and the Board Risk Committee receive regular
updates from the Chief Risk Officer on the progress of
customer remediation in relation to historic advice on DB
to DC pension transfers to ensure affected customers are
receiving fair recompense.
– The Board Remuneration Committee receives reports
on how well the business has served its customers as part
of the executive score card that drives the remuneration
of our senior executive team.
What was the result of that engagement?
– The impact on customers was specifically relevant to the
following major Board decisions:
– to reorganise the business into two customer focused
business segments;
– to prioritise maintaining the quality of service provided
by our new investment platform to customers over the
acquisition of new customers;
– the approach taken to the provision of compensation
to customers impacted by historic DB to DC pension
transfer advice; and
– the sale of Quilter International. Further details on the sale
of Quilter International can be found on pages 86 and 87.
and where our products and services are used.
– Seek to mitigate the environmental impact of its operations
and to create products and services which facilitate our
customers’ desire to invest responsibly.
– Treat suppliers fairly and professionally.
How does the Board engage with its communities ?
– By providing oversight of the Quilter Responsible Business
agenda, which affects customers, communities and the
environment. This responsibility is delegated to the Board
Corporate Governance and Nominations Committee who
receive regular updates on progress.
– By endorsing and providing regular oversight of Quilter’s
strategy to become the responsible wealth manager.
What was the result of this engagement?
– Colleagues contributed to community volunteering
and raised £100,000 to support the work of the Quilter
Foundation. This included financial literacy, our young
carers campaign and a Local Community Fund.
– Eight charities benefited from grants, enabling support
for 12,606 young people.
– Supported the Disaster Emergencies Committee (DEC)
Afghanistan Crisis Appeal.
– Published a climate change statement that formally
supports the objectives of the Paris Agreement, whilst
committing to formalise climate targets in 2022.
How does the Board engage with its suppliers?
– Building on the positive feedback from 2020, we held our
second supplier summit in September 2021. The summit
provided a great opportunity for a number of our critical
and important suppliers to hear direct from our executive
team on the Quilter strategy, for which they play an
important part in its success, our values and our priorities,
including our ambitions in relation to ESG and responsible
investing. Climate change and emissions reduction is an
area we will engage with our suppliers on during 2022.
What was the result of this engagement?
– Ongoing dialogue has helped ensure the supply chain
has remained resilient, with no attributable degradation
in service to our customers observed.
12,606
young people supported
8
charities benefiting
from grants made
Quilter Annual Report 2021
37
Strategic ReportGovernance ReportFinancial statementsOther information Section 172 (1) statement
continued
Investors
Regulators
Our investors expect Quilter to:
– Adopt and deliver a strategy that creates long-term
shareholder value, delivering sustainable and growing
capital returns to shareholders.
– Have a resilient business model that generates long-term
sustainable returns for shareholders and reliable returns
for debt investors.
– Maintain a robust corporate governance framework.
– Maintain financial strength.
– Balance the need to manage its environmental and
societal impact.
Our regulators expect Quilter and its subsidiaries to:
– Run Quilter’s operations in a prudent manner, being
appropriately capitalised and with sufficient liquidity
to enable it to discharge its obligations.
– Manage its conduct risks and internal controls.
– Operate in the best interests of its customers and meet
the expected outcomes of customers.
– Operate in an open and transparent manner with its
regulators, its customers and the financial markets both
as an investment manager and a listed company in its
own right.
How does the Board engage with its investors:
– Maintaining regular and constructive dialogue with investors.
– Providing updates on the Group’s trading and financial
performance and conducting 186 meetings with
shareholders, debt holders and prospective investors.
– Holding a Capital Markets Day in November 2021.
– Ensuring private shareholders receive excellent support
from our registrars.
– Holding an Annual General Meeting that is as accessible
as possible.
– Consulting with our shareholders on their preferred
route for the distribution of the proceeds of the sale
of Quilter International.
– Extensively consulting with major shareholders on the
proposed new Directors’ Remuneration Policy.
What was the result of this engagement?
– As set out at its 2021 Capital Markets Day, Quilter’s strategy,
organisational structure and financial targets are all
focused on delivering growth and efficiency.
– Following the completion of the sale of the Quilter
International business on 30 November 2021, the Board
is recommending a capital return of £328 million to
shareholders and will retain £90 million to fund the Group’s
Simplification programme.
– Further details of the sale of the Quilter International
business can be found in the governance case study
on pages 86 and 87.
£328m
proposed return of capital
to shareholders in 2022
£90m
funding for the Group’s
Simplification programme and
selected revenue investments
38
Quilter Annual Report 2021
How does the Board engage with the Group’s regulators?
– Transparent and open regulatory relationships are
fundamentally important and Quilter engages regularly
with its main regulators to ensure business is conducted
in line with their expectations and the evolving regulatory
framework.
– The Board Risk Committee receives quarterly reports on
the status of material regulatory relationships and matters
under discussion.
– Routinely shares Board and relevant Committee meeting
papers with our main regulators.
– There is a programme of meetings between our main UK
regulators and the Chief Executive Officer, Chief Financial
Officer, Chief Risk Officer, Group Chair and Chairs of our
Board Committees. Key matters discussed in 2021 include
future strategy and plans for the Group, customer
outcomes, diversity, governance and operational resilience,
including the Group’s continued response to COVID-19.
What was the result of this engagement?
– Consideration of the views and expectations of our
regulators were core to the Board’s decision making during
2021, specifically in relation to:
– the sale of Quilter International and the return of the net
proceeds to shareholders; and
– the implementation of the Group’s new investment
platform to ensure customers continue to receive a
high-quality service despite the transition.
– The Board Corporate Governance and Nominations
Committee carefully considered the discussion paper
issued by the FCA, the PRA and the Bank of England in
relation to diversity and inclusion in the financial services
sector and endorsed the Group’s efforts to gather a
broader range of data on the diversity of the Group’s
workforce, executive and Board so future activities to
enhance diversity are based on robust information.
– Quilter worked closely with its regulators in relation to
the conduct of past business reviews and the provision
of compensation to customers who received unsuitable
advice which led to them sustaining losses in relation to DB
to DC pension transfers from Lighthouse advisers prior to
Lighthouse transitioning to Quilter’s systems and controls
after its acquisition by Quilter.
Responsible business
Investing
for the
generations
of tomorrow
Quilter Annual Report 2021
39
Strategic ReportGovernance ReportFinancial statementsOther information Responsible business
continued
Becoming the responsible wealth manager
Our purpose is to create prosperity for the generations of
today and tomorrow. It’s this which drives our ambition to be
a responsible wealth manager, an ambition which sits as one
of the four pillars of our business strategy. Our purpose is
a symbol of our commitment to act and invest responsibly,
for our customers, colleagues and society more broadly.
Ultimately, we are committed to providing our customers with
the information, choice and confidence to invest for a sustainable
future. We believe we are well positioned to do this as a
full-service wealth manager which offers investments, advice
and platform services.
Acting and investing responsibly
Acting and investing responsibly are fundamental to how
we deliver value for our customers, colleagues and society
more broadly.
– Acting responsibly refers to the way we operate and do
business. It is about our culture, values, business conduct
and how we manage our relationships with our stakeholders.
– Investing responsibly refers specifically to our products and
services. It is about how we integrate responsible investment
considerations throughout our financial advice, investment
platform and investment management.
We refer to these terms through this section of the report to
highlight both contribute to delivering value for our stakeholders.
Our evolving responsible wealth manager framework
Building on our first responsible business strategy introduced
in 2018 (the Shared Prosperity Plan) we evolved our approach
in 2021 by introducing the Responsible Wealth Manager
framework. Our framework outlines four priorities:
1. Enable customers to experience financial wellbeing.
2. Drive inclusive growth for our colleagues.
3. Take climate action for our environment.
4. Create positive social impact in our communities.
Outlined on the next page are the key performance indicators
for 2021. In 2022 we will review key performance indicators
and targets for each of the priority areas, including how we will
align our business operations and investments with the Paris
Agreement and efforts to reach global net zero greenhouse
gas emissions by 2050.
Financial wellbeing
Goal – competitive
products and service
making it easier and more
accessible for customers
to achieve financial
wellbeing.
Climate action
Goal – reduced climate
impact from our investments
and business operations,
enabling the transition to
a net zero world
by 2050.
st res p o
e
v
n
I
s i b l y a nd embe
d E
n
S
G
f
a
c
t
o
r
s
Prosperity for
the generations
of today and
tomorrow
Act respon s i b l y
Inclusive growth
Goal – a modern, inclusive
and caring culture that
embraces diversity and
enables Quilter to keep
and attract the
best talent.
Social impact
Goal – stronger and more
resilient communities in
which the next generation
can thrive, through the
support of The Quilter
Foundation.
40
Quilter Annual Report 2021
Governance
Ultimate responsibility for environmental and social matters –
captured in the responsible wealth manager framework – resides
with the Quilter plc Board, who have delegated oversight to the
Board Corporate Governance and Nominations Committee.
direction and monitoring of the responsible wealth manager
strategy and is chaired by the CEO. Day-to-day responsibility
for the development and delivery of the responsible wealth
manager strategy is delegated to the Responsible Wealth
Manager Working Group.
Responsibility for the responsible wealth manager strategy is
delegated to the Quilter CEO, who is supported by the Executive
Committee in discharging his responsibilities. The CEO and
Executive Committee are supported by the Responsible
Investment Steering Group, which provides executive oversight,
Review of our responsible wealth manager strategy and
performance is conducted at least annually by the Quilter
Executive Committee, and regularly throughout the year
by the Responsible Investment Steering Committee.
Key performance indicators
To measure our responsible wealth manager performance, we consider a range of non-financial metrics most relevant for our
stakeholders. Outlined below are the key performance indicators for 2021, which are under review and due to be updated in 2022.
Further reporting and performance data relevant to our responsible wealth manager strategy and our stakeholders can be found
on pages 42 to 54.
Advisers
Customers
Colleagues
Communities
Environment
Customer asset retention (%)
Female representation in Senior
Leadership Community (%)
Scope 1 and 2 greenhouse
gas emissions (tCO2e)
2021
2020
2019
2018
93%
91%
88%
91%
2021
2020
2019
2018
36%
35%
32%
33%
2021
2020
2019
2018
2,520
2,705
4,042
3,672
Number of restricted financial
planners (“RFPs”)
Ethnic minority group
representation in Senior Leadership
Community (%)
Total number of young people
supported by the Quilter Foundation
2021
2020
2019
2018
1,623
1,842
1,799
1,621
2021
2020
2019
2018
2%
5%
32%
33%
2021
2020
2019
2018
6,529
12,606
11,496
13,098
Responsible wealth manager pillar
Responsible wealth manager pillar
Responsible wealth manager pillar
Quilter Annual Report 2021
41
Strategic ReportGovernance ReportFinancial statementsOther information
Responsible business
continued
Advisers
Customers
Responsible wealth
manager pillar
Financial wellbeing
Key performance indicators
Customer asset retention
Number of restricted financial planners (“RFPs”)
93%
(2020: 92%)
1,623
(2020: 1,842)
We aim to help customers achieve
their goals and experience financial
wellbeing, now and in the future.
We will achieve this by providing
competitive products and service that
makes financial advice and investing
easier and more accessible.
Highlights 2021
Concluded safe migration of customer
assets to our new platform
Improved processes in recording,
monitoring and evaluation of
customers in vulnerable circumstances
Commenced integration of responsible
investment considerations into the
financial advice process for customers
Launched ‘Positive Change’ investment
strategy with ESG considerations as a
key driver of investment decisions
Acting responsibly
Customer service and engagement
Through the extended pandemic customer service teams
have continued to work in a hybrid/remote manner, ensuring
service continuity and support for customers and their
advisers. Quilter Investment Platform’s platform migration
concluded in the first quarter, providing significant
enhancements to customers in terms of increased platform
functionality, flexibility and choice. The business invested
heavily in the design and testing of its communications to
ensure that customers felt fully informed and reassured
during the transition of their investments. Some service
challenges did arise following the migration, exacerbated
by increased business volumes and a peak of COVID-19
infections amongst service centre staff, but action plans
were swiftly mobilised to restore service levels.
The business as a whole has invested effort and resources
to more comprehensively collect and act up on customer
feedback. Quilter’s Trust Pilot score as at January 2022 was
3.9/5.0 with an average score across all reviews received
in 2021 of 4.58/5.00. Satisfaction and Net Promoter Scores
across our platform business dipped slightly during the mid
year, a general trend reflected by servicing firms more widely.
This recovered in the second half of the year with feedback
from customers’ call centre interactions ending in a strong
position at the end of the year. The option of providing video
feedback is now available to platform customers, offering a
fresh way to learn and improve the way we respond to our
customers’ reactions. In our high net worth advice business,
insights from customers are fed into the end-to-end advice
journey improvement plan and Financial Planners have
direct access to insights in order to take prompt action
where customer expectations have not been fully met.
Quilter Cheviot completed a wide sample of customer
insights in 2021, receiving above peer group recognition
for Net Promoter Score.
42
Quilter Annual Report 2021
In 2022 the business is working with ‘Investor In Customers’, a
strategic customer experience organisation that supports firms
to understand how well they meet their customers’ needs, build
moments of delight and develop trust and customer loyalty.
Coupled with this, across the business, greater focus has been
placed on the collection and interpretation of customer
experience-related measures which are reported weekly,
monthly and quarterly to customer governance forums.
A culture of long-term relationships and client engagement
remained key throughout the year. Quilter Cheviot launched
a hub and engagement programme to support ‘women in
investing’, helping to identify and debate the issues and barriers
that female investors may encounter, and assisting advisers
to feel better equipped to engage prospective female clients.
Meet the Portfolio Manager live virtual events attracted strong
customer participation, and Quilter Cheviot’s 250 anniversary
in-person client events began prior to further social restrictions
being enforced to recognise, engage and deepen relationships.
Insight and research helps to keep Quilter in touch with customer
needs and helps us to continually build out our propositions.
In 2021 a number of focused research programmes were
conducted, including customers’ perceptions of receiving
remote financial advice, attitudes towards sustainable investing,
how the extended lockdown has impacted ability to save and
invest and the sentiments of the baby boomer generation
towards intergenerational wealth planning.
Proposition
With the platform migration complete, strategic initiatives
focused on deepening the value of Quilter’s integrated
proposition and experience for customers. Specific initiatives
included improvements in the identification and servicing of
‘vulnerable customers’, broadening the flagship ‘WealthSelect’
proposition with greater customer personalisation options and
adding Quilter Cheviot capability to the Collective Retirement
Account. In line with the FCA’s Retirement Outcomes Review
(PS19/21), we introduced investment pathways for non-advised
customers that are not comfortable to make their own
investment decisions via our pension drawdown product,
the Collective Retirement Account (“CRA”).
The Quilter Investors core range of multi-asset portfolios
delivered positive returns within their respective risk bands
throughout the year. The Quilter Investors 2021 Assessment
of Value Report also outlines how our funds continue to provide
value, with the majority delivering against their investment
objectives over five years. Significant progress was made on
the expansion of our flagship WealthSelect managed portfolio
service, with the project due to complete in the first half of 2022.
The enhancements will allow advisers to deliver a more
personalised service to a wide range of customers, including the
ability to accommodate various levels of responsible investment
preferences through the introduction of 32 new responsible
and sustainable portfolios.
The transition of Quilter Private Client Advisers to Quilter Cheviot
completed successfully in the first half of 2021, marking a major
strategic improvement to our proposition and experience for
high net worth clients. Meanwhile, Quilter Cheviot portfolios
are benchmarked against Asset Risk Consultants (“ARC”) Private
Client Indices (“PCI”), which is a peer group comparison tool
designed to help clients understand the performance
generated by our investment managers. Our portfolios
continued to perform well against the ARC PCI. Quilter Cheviot
also enhanced its Managed Portfolio Service (“MPS”) with the
introduction of eight new funds providing a lower cost option
for clients whilst expanding investment opportunities for
available for those invested in the MPS.
Supporting vulnerable customers
During 2021 our strong focus on vulnerable customers
continued, with the FCA’s Financial Lives report stating that post
COVID, the number of vulnerable adults in the UK has risen to
53% of UK adult population . There were a number of initiatives
across the board to improve identification and servicing of
vulnerable customers, both in light of the pandemic and the
FCA publishing its Finalised Guidance for firms on the treatment
of vulnerable customers. A programme of work took place to
identify potential gaps emerging, including via customer research,
which resulted in further improvement to recording, monitoring
and evaluation of vulnerable customers – which will ultimately
lead to enhanced management information and even greater
consideration of customers in vulnerable circumstances in the
future. Quilter continues to engage with industry bodies, such
as The Investment and Savings Alliance, so as to ensure learnings
from the industry are shared for the benefit of consumers.
Consumer advocacy
During 2021, we led public calls for the UK government to
protect clients and consumers more widely against the threat of
online financial scams. This included campaigning for the Online
Safety Bill to be expanded to include fraud and economic crime,
which the government has since confirmed it will do.
We also led calls for the government to make changes to the
draft Finance Bill to reduce the risk of heightened pension
transfer scam activity surrounding the increase in the normal
minimum pension age. Following this campaigning, the
government confirmed in November 2021 that it had
retrospectively closed the transfer window in order to reduce
the risk of scams.
Supporting financial advisers
Launched during in 2020 during the early stages of the
COVID-19 pandemic, we continued to offer the financial adviser
community access to the ‘There for You Hub’, providing advisers
with free access to resources and tools to support client
conversations. We also continued to provide free mental health
and wellbeing support through the extension of our colleague
wellbeing initiative – ‘Thrive’.
Quilter Annual Report 2021
43
Strategic ReportGovernance ReportFinancial statementsOther information Responsible business
continued
Customer policies
Product governance
Our Product Governance Policy sets minimum standards for
the Group and its subsidiaries in manufacturing and distributing
financial products appropriately to meet customer needs.
The policy is implemented to support compliance with various
regulatory frameworks, including the UK implementation of the
Markets in Financial Instruments Directive (MiFID II) and the
underlying regulation on markets in financial instruments
(MiFIR), and the Insurance Distribution Directive (IDD). The
Product Governance Policy is subject to an annual attestation
process managed by the Quilter Risk Function.
Ultimate ownership for Product Governance resides with the
Quilter plc Board. The relevant Business Oversight Board has
responsibility for setting product strategy and ensuring product
governance is effective. The Boards delegate execution of
product strategy and operational responsibility to the
business CEOs.
Marketing and communications
Our Product Governance Policy outlines minimum marketing
and communications requirements for Quilter Group functions
and subsidiaries. Marketing material issued by businesses must
be clear, fair and not misleading. Materials should be sufficient
to ensure customers can make informed financial decisions
in relation to the product or service, including the clear
communication and explanation of charging structures for
related products. All communications must consider our
customers’ information needs and comply with applicable
regulations, including the Financial Conduct Authority’s (“FCA”
Treating Customers Fairly (“TCF”) requirements.
Data privacy and IT security
The collection and use of customers’ and advisers’ personal
data is governed by our Privacy Policy and overseen by a Group
Data Protection Officer (“GDPO”) with the support of a formal
committee, the Quilter Privacy Forum. The Board Technology
and Operations Committee, chaired by independent Non-
executive Director, Moira Kilcoyne, oversees Quilter’s IT strategy,
including our approach to information and data security. At an
executive management level, the Group Chief Operating Officer
is responsible for IT strategy and is supported by the Chief
Information Security Officer (“CISO”) and team, with input also
from the GDPO and Data Guardians embedded in our businesses.
All colleagues and full-time contractors are required to complete
mandatory annual training on data privacy and IT security.
A culture focused on long-term
relationships and client engagement
remained key to delivering good
outcomes throughout 2021.
Investing responsibly
Advice
Quilter Financial Planning made good progress in integrating
responsible investment considerations into its advice process,
as demand for responsible investment growth amongst clients
continued to gain pace. Two new responsible investment
dedicated investment solutions (including Quilter Cheviot’s
Climate Assets Fund) have been added to the Quilter Financial
Planning Matrix alongside visibility of Square Mile ESG ratings
for all funds. Training for advisers on Responsible Investing
in the advice process was conducted in early 2021.
Platform
We continued to provide Morningstar ESG risk ratings for funds
on our platform, providing advisers and customers an insight
into how companies manage financially material ESG risks.
Furthermore, advisers and customers can access a growing
number of dedicated responsible investment funds.
When selecting the underlying investment solutions for our
Investment Pathways for non-advised customers, we consider
whether the underlying groups have signed up to initiatives
such as the UN Principles for Responsible Investment and the
UK Stewardship Code. Additionally, we monitor those solutions
that do apply explicit ESG criteria and take this into consideration
as part of the regular reviews of our pathway solutions.
Investments
We continued to evolve our responsible investment processes
within Quilter Cheviot and Quilter Investors to deliver positive
customer outcomes and products and strategies that meet
their requirements. Our focus has been on strengthening the
integration of Environmental, Social and Governance (ESG)
factors within our investment processes and building on our
active ownership work through our stewardship activity
including voting and engaging with our underlying investments,
be they companies or funds.
Quilter was one of the first signatories to the Financial Reporting
Council (“FRC”) enhanced UK Stewardship Code and we
continued to add to our existing range of dedicated responsible
investment solutions with the launch of the Positive Change
range, building on the Climate Assets Fund and Strategy.
We will launch further strategies including a new responsible
and sustainable managed portfolio service in 2022. From 2022
we will be incorporating customers’ responsible investment
preferences within the advice process.
See page 50-52 for more detail on our approach to responsible
investment.
44
Quilter Annual Report 2021
Colleagues
Responsible wealth
manager pillar
Inclusive growth
Key performance indicators
Female representation in Senior Leadership Community
36%
(2020: 35%)
Ethnic minority group representation in Senior
Leadership Community
5%
(2020: 2%)
We aim to build a modern and inclusive
culture that embraces diversity,
attracts and retains the best talent
and enables our colleagues to thrive.
Highlights 2021
Launched the Quilter Career
Framework
Rolled out two new talent development
programmes for experienced leaders
and aspiring managers
Created new five pillar inclusion and
diversity strategy focused on near-
term action and improvement
Enhanced diversity data transparency
and disclosures
Acting responsibly
Talent management and development
The success of our business relies on recruiting and retaining
the very best talent. As part of our Group-wide annual talent
and succession process, future skill needs of the organisation
are identified in order to highlight any skill gaps within the
organisation and plan for how to address these (e.g. through
training, recruitment etc.) Skill requirements are anticipated
by considering skills required to deliver on our strategic
priorities, and assess the extent to which these skills exist
within the business.
The Quilter Career Framework (“CF”) was launched in 2021,
to organise all the roles that exist across Quilter, into a single
and consistent structure. The CF sets out the skills and
capabilities, across all Quilter-defined Job Families and Job
Levels, which are needed to deliver our business strategy.
In 2021 we partnered with Future Talent, a leading education
and learning platform, to create two new leadership
development programmes: the Transformational Leadership
Programme for experienced leaders and managers looking
to step into senior leadership roles; and the Aspiring Manager
Transformational Leadership programme, aimed at first-time
line managers or those aspiring to take on a management
position. We had 63 and 60 colleagues enrolled on these
programmes, respectively.
All colleagues can access training and development, including
degree programmes and relevant professional qualifications
where relevant to their role and development needs. All
colleagues also have access to our Degreed learning platform,
which enables colleagues to upskill and learn on demand,
when it suits them. In 2021, 3,155 colleagues engaged with
Degreed, a 40% increase compared with 2020, whilst 308,000
learning items were completed, a 620% increase compared
with the previous year.
Quilter Annual Report 2021
45
Strategic ReportGovernance ReportFinancial statementsOther information Responsible business
continued
Colleague engagement
We continuously seek the views of our colleagues through
the Workday Peakon Employee Voice tool. Through this tool
we survey colleagues on a weekly basis, which provides senior
leaders and managers real-time insights and feedback from
colleagues. Our overall engagement score of 7.0 out of 10
was 0.4 lower than in the previous year and behind the
‘True Benchmark’ of 7.6 out of 10. Furthermore, our score
for colleagues ‘recommending Quilter as a good place to work’
was 7.2 out of 10, a 0.4 decrease compared with 2020 and
behind the industry benchmark.
The Employee Forum represents colleagues across Quilter and
meets with senior leaders on a monthly basis to discuss key
issues that impact the interests of our people. The views of the
Employee Forum, together with views and feedback from our
weekly surveys, are taken into account and support
management decisions making.
The impact of business restructuring and investment in
technology, such as the automation of some roles in our Quilter
Investment Platform business, have negatively impacted
employee sentiment as we progress through change. To address
this feedback, our People Transformation Programme, We Rise,
has been implemented to engage and support our people
through organisational change and development. In addition,
continued COVID-19 restrictions and remote working have
impacted some segments of our employee population more
than others, particularly our younger people.
We encourage colleague involvement in Quilter’s success
through our Save as You Earn (“SAYE”) share scheme, providing
all permanent colleagues the opportunity to benefit from
Quilter’s performance.
Our culture
Health and wellbeing
Through our Thrive programme, we continue to provide all
colleagues with access to tools and expert guidance on how
to manage and improve mental, physical and financial health,
including free online counselling services through Spill,
a specialist provider of online mental health support.
We also seek to improve awareness and understanding of mental
health issues across our industry, and continue to support the
‘Time to Change’ campaign to end mental health discrimination,
led by Mind and Rethink Mental Illness. All colleagues can
benefit from Quilter’s private healthcare scheme, which
provides cover for treatment of a wide range of healthcare
issues, including hospital treatment, serious illnesses and
mental health.
As a provider of financial advice, we also recognise the
connection between money and mental health. We offer a range
of financial education and advice support for all colleagues,
covering issues such as managing money, addressing debts
or planning for the future (including retirement).
Our inclusion and diversity strategy
focuses on five pillars: inclusive
leadership, transparency and
disclosure, culture contribution,
practice and process transformation,
and investing in future generations.
Inclusion and diversity
We promote equal opportunities and ensure that no job
applicant or colleague is subject to discrimination or less
favourable treatment on the grounds of gender, marital status,
nationality, ethnicity, age, sexual orientation, responsibilities for
dependents, or physical or mental disability. We are committed
to continuing the employment of, and for arranging training for,
employees who have become disabled while employed by
Quilter. We select candidates for interview, career development
and promotion based on their skills, qualifications, experience
and potential.
Paul Matthews and Tazim Essani are the designated Non-executive
Directors for employee engagement, which includes inclusion
and diversity. At the management level, the Chief Executive
Officer is the executive sponsor for inclusion and diversity,
and chairs the Inclusion and Diversity Steering Committee.
Our inclusion and diversity strategy focuses on five key pillars:
inclusive leadership; transparency and disclosure; culture
contribution; practice and process transformation; and investing
in future generations. We focused on improving colleague
diversity data to help us better understand our colleague
community and the key areas for improvement. Whilst we have
100% response rate for gender, we improved the response rate
on ethnicity from 81% to 83%. A full break down of ethnic group
representation can be found on page 47 (opposite).
We are committed to increasing female representation in our
Senior Leadership Community, within a range of 38-43% by the
end of 2023. As at 31 December 2021, we achieved 36% female
representation. We continue to pursue our target to increase
ethnic diversity in our Senior Leadership Community to 5%
by the end of 2023. As at 31 December 2021, we reached 5%
ethnic minority group representation in the Senior Leadership
Community, up from 2% in 2020. Our focus on diversity and
inclusion has supported a higher completion rate for diversity
data which has contributed to the reported increase and we
remain committed to increasing representation of ethnically
diverse colleagues across all levels of our organisation,
particularly within our Senior Leadership Community.
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Quilter Annual Report 2021
The median gender pay gap in 2021 was 29%, compared with
30% in the previous year. Overall, the slight shift in both the mean
and median pay gaps is positive and in keeping with the general
trend of recent years. The median ethnicity pay gap remained
static year-on-year at 4%. However, our gender and ethnicity
bonus gaps worsened in 2021. The median gender bonus gap
increased to 53% from 39% in 2020, whilst the median ethnicity
bonus gap also increased to 38%, from 15% in the previous year.
Gender diversity
Executive management
2021
2020
Senior Leadership Community
The worsening of our bonus gaps are mostly influenced by the
vesting of long-term incentive awards and deferred incentive
awards which vested in March 2021, both of which are linked to
legacy bonus pools and the demographics of the organisation
in previous years. Inevitably this has increased the gaps given
that 2020 incentives paid in March 2021, which are captured in
the same reporting period, were significantly lower than prior
years due to the impact of the COVID-19 pandemic on the
business. Going forward, we will continue to closely monitor
our pay gaps and the effect of management action in reducing
them over time.
We remained an active supporter of public initiatives promoting
inclusion and diversity, such as LGBT Great, a collaboration
aiming to be a catalyst for LGBT+ inclusion within the investment
industry and championed by our Chief Operating Officer, Karin
Cook. In 2021 we also became a signatory of the Halo Code,
a commitment to protect colleagues who come to work with
natural hair and protective hairstyles associated with their
racial, ethnic and cultural identities.
HR policies
Our people policies support our aim to create an inclusive
culture that embraces diversity and enables our people to
thrive. They also reflect relevant employment laws, including
the Universal Declaration of Human Rights and ILO Declaration
on Fundamental Principles and Rights at Work.
All employees and suppliers providing on site services in the UK
are paid no less than the real Living Wage (2021: £11.05 per hour
for London and £9.90 per hour outside of London) calculated
annually by the Living Wage Foundation, and this is a voluntarily
initiative.
A grievance procedure is in place to provide a clear and secure
route for employees to raise a complaint or problem about
any issue relating to their work, working environment, pay and
benefits, working hours or is concerned about any other issue
affecting their employment.
In line with our whistleblowing policy, colleagues are required
to report knowledge or suspicion of malpractice or actions
that endanger Quilter Group’s employees or assets. The
whistleblowing policy provides employees who raise concerns
in good faith with protection from detriment to their future
employment opportunities. Concerns can be reported to
line managers, Risk and Compliance or via the independent
confidential ethics hotline which is available year round.
All reports are fully investigated and escalated to senior
management and George Reid, independent Non-executive
Director and designated Group Whistleblowing Champion.
5 (83%)
1 (17%)
5 (83%)
1(17%)
62 (64%)
89 (65%)
35 (36%)
47 (35%)
2021
2020
All colleagues
2021
2020
1,719 (55%)
2,317 (54%)
1,380 (45%)
1,964 (46%)
Latest UK Census (2011) benchmark
2011
2020
Male Female
49%
51%
5 (83%)
1(17%)
Gender pay gap and representation
Gender pay data
Mean hourly pay gap
Median hourly pay gap
Mean bonus gap
Median bonus gap
Female colleagues receiving a bonus
Male colleagues receiving a bonus
Ethnicity pay gap and representation
Ethnicity pay data
Mean hourly pay gap
Median hourly pay gap
Mean bonus gap
Median bonus gap
Colleagues from an ethnic minority group
receiving a bonus
White colleagues receiving a bonus
Ethnic group representation
2021
33%
29%
72%
53%
92%
91%
2021
15%
4%
44%
38%
87%
92%
Ethnic group representation
Asian1
%
Black2
%
Mixed3
%
White4
%
Other5
%
Executive management
0%
0%
0% 100%
0%
2020
34%
30%
65%
39%
86%
84%
2020
13%
4%
33%
15%
79%
86%
N/A6
%
0%
Senior Leadership
Community
All colleagues
Latest UK Census (2011)
benchmark
1%
5%
1%
2%
2% 93%
1% 88%
0%
1%
2%
2%
7.5% 3.3% 2.2% 86%
1%
–
1Colleagues who identified as belonging to one of the following ethnic groups:
Bangladeshi, Chinese, Indian, Pakistani or Asian other.
2Colleagues who identified as belonging to one of the following ethnic groups: Black
African, Black Caribbean, Black other.
3Colleagues who identified as belonging to one of the following ethnic groups: Mixed
White/Asian, Mixed White/Black African, Mixed White/Black Caribbean, Mixed other.
4Colleagues who identified as belonging to one of the following ethnic groups: White
British. White Irish, White Gypsy/Traveller, White other.
5Colleagues who identified as belonging to one of the following ethnic groups: Arab,
Any other.
6 Colleagues who responded but opted not to disclose their ethnic group.
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Responsible business
continued
Communities
Environment
Responsible wealth
manager pillar
Climate action
Social impact
Key performance indicators
Scope 1 & 2 greenhouse gas emissions (tCO2e)
2,520
(2020: 2,717)
We aim to reduce the environmental
impact of our business and investments,
support climate action and play a
positive role in society.
Highlights 2021
Set target to reduce Scope 1 & 2
greenhouse gas emissions by 80%
by 2030, from a 2020 baseline
Enhanced governance and
management of climate-related risks
Developed first stand-alone climate
disclosure aligned with the Task
Force on Climate-related Financial
Disclosures (“TCFD”)
recommendations
Committed £500,000 to improve
financial literacy through financial
education for young people
Number of young people supported by the Quilter
Foundation
12,606
(2020: 11,496)
Climate change
Climate change is one of the most significant global
challenges that we, our customers, and our future customers
face both today, and in the decades to come. The scientific
consensus is clear: human activity is driving climate change
and immediate action is required. To avoid the worst impacts
of climate change, the Intergovernmental Panel on Climate
Change has identified the need to keep global temperature
increases well below 2 degrees Celsius, above pre-industrial
levels, with a focus on 1.5 degrees Celsius.
We believe the world is in a transitional state as a result of
climate change, and our business is committed to adapting
and responding to meet the challenges and opportunities
presented. In 2021, we have focused our efforts on
developing a comprehensive approach to Climate Action
aligned with sector best practice. Our activities are focused
on reducing our impact and advancing sustainable
investment to support transition to a low carbon economy.
Our Climate Action Plan
Climate action is a key pillar of activity within our ambition to
become a leader in Responsible Wealth Management. We are
developing a Climate Action plan, which will outline how we
align our operations, value chain and investments across the
Quilter Group with science-based targets. We are following
guidance for financial institutions from the Science Based
Targets initiative (“SBTi”) and the Investor Agenda to shape
our strategy, as well as identifying other opportunities where
we can influence positive change.
In addition to developing our Climate Action plan, we are
taking steps to manage our exposure to climate-related risks
and opportunities across our services, to monitor our impact
on the environment, and to strengthen our resilience to future
climate change. In 2021, we undertook a programme of work
to enhance how we integrate ESG factors, including climate-
related considerations, within our investment processes. We
also embedded the consideration of identified climate-related
risks into our Enterprise Risk Management Framework and
conducted our first climate-related scenario analysis exercise
in 2021, designed to explore the potential outcomes of
climate change on our business and our customers.
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Quilter Annual Report 2021
Climate action in our operations
To understand the impact we have on the environment, we
measure our Scope 1 and Scope 2 greenhouse gas emissions.
In 2021, we enhanced our ability to estimate our operational
Scope 3 emissions (excluding investments) which cover the
impact of our purchased goods and services, employee
commuting and the estimated energy use of employees
working from home. We measure and disclose our emissions
in line with the GHG Reporting Protocol, as shown opposite.
We have set near-term reduction targets aligned with the
Science Based Targets initiative emissions reduction criteria.
We have a target to reduce our Scope 1 and Scope 2 greenhouse
gas emissions by 80% by 2030, from a 2020 baseline. Our
existing workplace strategy has and will continue to help to
drive down the majority of our Scope 1 and 2 emissions in line
with our near-term targets. This considers our office footprint,
renewable energy transition and enhanced energy efficiency
within our buildings.
Our estimated Scope 3 emissions from purchased goods and
services account for most of our operational emissions and are
outside of our direct control. In 2022, we will develop plans to
engage with our suppliers to enhance data quality and use our
influence to encourage emissions reductions aligned with a
science-based trajectory. We will also consider how our
climate-related target should be integrated into the
procurement process going forward.
Scope 3 emissions from employee commuting and working
from home are also key considerations. In 2022 we will create
plans to engage colleagues on our emissions reduction journey,
which will consider information on reducing their personal
carbon footprint and aligned benefits, such as electric vehicle
(“EV”) lease schemes.
Our operational impact in 2021
Our total Scope 1 and Scope 2 emissions continued to
follow the downward trend of recent years, falling 7% in 2021
compared with 2020. The decrease in emissions was driven
mainly by reduced energy use and energy efficiency in our
offices. However, the reduction is more subdued than
anticipated due to a significant increase in our Scope 1
emissions, driven by a refrigerant leak associated with air
conditioning units at our largest office, accounting for 509 tCO2e.
As part of our Workplace Strategy, these air conditioning units
will be replaced in 2022, which we expect will significantly reduce
the risk and impact of further refrigerant leaks going forward.
Since 2018, we have prioritised the procurement of energy for
all our offices from renewable sources. All of the buildings we
control now run on renewable energy tariffs.
Greenhouse gas emissions and energy use data
Greenhouse gas emissions as at 31 December
Scope 1 emissions
Scope 2 (location-based) emissions
Scope 2 (market-based) emissions
Total Scope 1 & 2 emissions
Scope 3 emissions (excluding investments)
Total operational emissions
2021
tCO2e
898
1,622
1,120
2,520
25,513
28,034
Operational carbon intensity (tCO2e per FTE)
7.38
2020
tCO2e
307
2,410
1,819
2,717
23,904
26,621
6.08
Streamlined Energy and Carbon Reporting (SECR)
2021 kWh
2020 kWh
Global energy use
UK energy use
9,716,029 12,159,853
9,395,654 11,794,568
All emissions data calculated according to the GHG Reporting Protocol – Corporate
Standard. The GHG protocol categorises emissions according to ‘Scope’, as follows:
– Scope 1 (Direct GHG) These are emissions from sources that are owned or controlled
by an organisation. This includes fuel combustion on site e.g. gas boilers, fleet
vehicles and air-conditioning leaks.
– Scope 2 (Energy – Indirect GHG) These are emissions from the consumption of
purchased electricity, steam, or other sources of energy (e.g. chilled water) generated
upstream from the organisation. For purchased electricity, organisations are
required to report Scope 2 emissions according to a ‘location-based’ method and
a ‘market-based’ method (see below):
– Scope 2 – Location-Based This reflects the average emissions intensity of grids on
which energy consumption occurs (using mostly grid-average emission factor data).
– Scope 2 – Market-Based This reflects emissions from electricity that organisations
have purposefully chosen and therefore includes where they may have renewable
energy contracts in place or generate their own energy.
– Scope 3 (value chain – indirect) These are all indirect emissions (not included in Scope 2)
that occur in a company’s value chain, including both upstream and downstream
emissions (e.g. business travel, waste).
Greenhouse gas emissions
Scope 1
Scope 2
Scope 3 (excluding investments)
3%
6%
91%
Scope 1 and Scope 2 emissions
followed downward trend of recent
years, decreasing 7% in 2021
compared with the previous year.
Quilter Annual Report 2021
49
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Responsible business
continued
Climate action in our investments
The Science Based Targets initiative (“SBTi”) provides detailed
guidance and requirements around setting compliant climate
impact reduction targets for investments and our Climate
Action plan will put us on a new trajectory to align our
investments with these requirements. We have already
incorporated Environmental, Social and Governance (“ESG”)
factors, including those related to climate change, into our
investment decision making processes and stewardship
activities. Our Climate Action plan will detail our current status
regarding SBTi Coverage and Temperature Ratings of in-scope
investments, our near-term goals to enhance this in line with
SBTi requirements, and the action we will take to do so.
We are assessing how we can align our investment strategies
and products to drive a reduction in emissions across the real
economy and reviewing our policies to ensure our practices
align with these. As an industry, we still have some challenges
to overcome, and we are identifying collaborative opportunities
across sector-led initiatives to ensure we are part of a unified
approach to reach global net zero.
The impact of our investment activities
We use Weighted Average Carbon Intensity (“WACI”) metrics
to measure the impacts of our portfolios and strategies on
the climate, within our investment management businesses.
The WACI is the key metric recommended for disclosure by the
TCFD. The metric represents a strategy’s or portfolio’s exposure
to carbon-intensive companies. It provides information on the
level of Scope 1 and Scope 2 carbon emissions within an
investment portfolio (or model) against the revenue produced
by the portfolio (or model) and is expressed in tons of carbon
dioxide (“tCO2e”) per $ million of revenue.
WACI, alongside other metrics and qualitative information
used within our ESG-dashboards, is also used to monitor our
exposure to climate-related market risk within the portfolios
that we manage.
More detail is provided in our TCFD Statement on page 54
and standalone 2021 TCFD report, which can be found online:
plc.quilter.com/investor-relations/annual-report
Stewardship plays an important
role in our approach to managing
ESG-related risks and opportunities
responsibly.
Investing responsibly
Being an active owner
Stewardship plays an important role in our approach to
managing ESG-related risks and opportunities responsibly.
We believe that for the majority of our strategies an approach
of engagement rather than divestment is the most appropriate
action to take. Engagement is an important tool within our
responsible investment approach. By engagement, we mean
speaking directly to companies, funds and investment trusts
about the issues that concern us and understanding their
general approach to material ESG issues. This can be at Board
or executive level. Engagements can be reactive or proactive
in nature.
As an example, taking an approach of simply divesting from
holdings with a higher carbon intensity could result in these
subsequently being held by investors who do not place any
importance on transitioning to a lower-carbon economy. In such
a scenario, those investments will not have an incentive to change
their behaviour, and this could impede a transition to a lower-
carbon economy. Additionally, there is the paradox that some
companies that have high carbon intensity are focused on
developing solutions for a lower-carbon world.
The UK Stewardship Code 2020 sets out the expectations of
how investors manage money on behalf of customers, as well
as 12 principles for asset managers. The Code is overseen by
the Financial Reporting Council (“FRC”) which is the independent
regulator which supervises financial reporting, accounting and
audit, and corporate governance in the UK. We were delighted
to be in the first wave of signatories for the new Code in 2021.
In 2021 we increased our involvement in collaborative
engagements. These are undertaken with other investors
and can be a powerful tool to drive change. Examples of these
include leading a collaborative engagement with executive
recruitment firms on board diversity in the UK and an
engagement on conflict minerals within the semi-conductor
supply chain.
More detail can be found online in our Stewardship report:
plc.quilter.com/responsible-business/reports-policies-and-statements/
Within our direct equity holdings, we extended our voting
universe in mid-2021 to incorporate discretionary holdings
within the US and European markets in addition to the existing
UK universe. This means that we now vote on nearly all of our
assets where we hold voting rights. The exception is generally
where share-blocking is in place.
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Quilter Annual Report 2021
ESG integration
The consideration of Environmental, Social and Governance
factors has been integrated within our investment processes.
This is the explicit and systematic inclusion of ESG issues in
investment analysis and decisions – to better manage risks and
improve returns. This approach combines qualitative and
quantitative analysis as well as engagement with companies and
the third-party funds that we invest in. Proprietary quantitative
ESG dashboards have been developed to meet the specific
requirements of the end user using multiple data sources.
These have helped inform the qualitative assessments of
investments and engagement remains an important
component of our approach.
Exclusions
In 2021 Quilter continued to apply ethical exclusions to investment
portfolios when instructed by the client within its discretionary
portfolio service managed by Quilter Cheviot. We also
maintained our firm-wide exclusion on controversial weapons.
We do not knowingly invest in securities (equity or debt) of listed
companies involved in the manufacture, development or trade
in anti-personnel mines or cluster munitions.
For indirect holdings via active third-party funds, we also expect
that managers avoid cluster munitions and anti-personnel
mines. As such we have undertaken an engagement process
with our managers asking for an attestation letter.
Responsible and sustainable investment solutions
We provide, and are in the process of expanding, sustainable
investment solutions intended to help our customers invest in
line with their values. The Quilter Cheviot Climate Assets Fund,
launched over ten years ago, excludes fossil fuels and invests
mainly in listed equity on a sustainable thematic basis. Building
on this, Quilter Cheviot launched the Positive Change Strategy,
which is a funds based approach, which considers ESG
considerations as a key driver of investment selection and
excludes pure coal companies.
In H1 2022, we intend to launch two new sets of managed
portfolios run by Quilter Investors and made available on our
platform. The ‘Responsible’ range will invest with third-party
managers we identify as leaders in ESG integration, whilst the
‘Sustainable’ range will invest a substantial portion of its assets
in funds that target explicit sustainable outcomes.
Our thematic priorities
We have identified a number of sustainable thematic priorities
that we believe are particularly material. These incorporate
climate change, people & human rights, and water.
Climate change
This can include clean energy and technology (and conversely
thermal coal and fossil fuels) as well as reforestation/deforestation
(palm oil and palm plantations) and emerging natural climate
solutions. This includes understanding companies’ net zero
ambitions as well as decarbonisation plans.
UN Sustainable Development Goal (SDG) alignment:
People & human rights
Covers issues such as human rights in employment in areas
such as decent work and pay, human rights in the supply chain,
and health and safety. This also encompasses diversity and
inclusion, incorporating issues such as gender equality but
also broader diversity themes.
SDG Alignment:
Water
This incorporates such areas as access to clean water for
communities, clean oceans and water pollution (including
recycling). In addition, this also encompasses water stress
and intensity (particularly caused or impacted by corporates),
water usage and responsible consumption/production.
SDG Alignment:
These themes influence work undertaken within Quilter
Cheviot and Quilter Investors as well as our priorities as
Quilter more broadly.
For example, as part of the climate change theme we joined
the IIGCC (Institutional Investors’ Group on Climate Change),
commenced a thematic engagement with our highest emitting
direct equity holdings, voted on climate-related resolutions
at AGMs and have incorporated carbon metrics into our
quantitative assessments of investments.
Education and training
A large number of our research and investment professionals
undertook the CFA ESG qualification as well as various courses
and session on ESG integration training and Responsible
Investment more generally.
Industry engagement and advocacy
We have contributed to a number of FCA consultations
on responsible and sustainable investment issues. While we
have broadly been in support of the content, we have offered
suggestions of refinements in each case and have sought
opinion across Quilter to ensure that different customer types
are represented within the feedback process.
Quilter Annual Report 2021
51
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continued
Acting responsibly
Community investment and the Quilter Foundation
Creating a positive impact in our communities is a core part
of our purpose and ambition to be the responsible wealth
manager. We give back to our communities in a variety of ways,
including through our charity – the Quilter Foundation – and
by enabling colleagues to support causes close to their heart
through our matched funding programme and paid
volunteering allowance.
The Quilter Foundation is the focal point of Quilter’s community
investment agenda, and its mission is to empower the next
generation through three thematic priorities: financial education,
employment and wellbeing. During the year the Quilter
Foundation enabled our charity partners to provide vital support
to 12,606 young people in our communities. Since launching in
2018 the foundation has made grants totalling £2.6 million to
carefully selected charity partners, with our support reaching
over 31,000 young people.
Improving financial literacy
According to the Money and Pensions Service (‘MAPS’), Before
the COVID-19 pandemic 11.5 million UK adults had less than
£100 in savings to fall back on in the case of an emergency,
whilst 22 million did not know enough to plan for their
retirement. Nearly 9 million of us are in serious debt (MAPS).
Whilst there are a number of factors outside an individual’s
control that could contribute to poor financial wellbeing, we
believe financial literacy is critical to help people feel confident
about money, manage changes to their financial circumstances
and ultimately build a secure financial future. As our money
habits are formed around the age of seven, every child in the
UK should be supported to develop the skills and behaviours
necessary to navigate critical financial decisions in later life,
starting at primary school.
Since 2015 we have funded initiatives that seek to provide
young people between the ages of 7 and 25 with a meaningful
financial education. In 2021 our funding of the leading financial
education charity, MyBnk, helped them to delivered financial
education to 6,336 young people near our main office locations
in Hampshire and London. Over the last three years, our
funding enabled MyBnk to reach 23,532 young people. We
committed a further £500,000 to support key MyBnk
programmes over the next three years, with a renewed focus
on prioritising young people in disadvantaged circumstances,
including care leavers at the most risk of homelessness.
52
Quilter Annual Report 2021
We continued to play a leading role in the financial education
space as a co-founding supporter of the Centre for Financial
Capability, which is an evolution of the Kickstart Money initiative
supported by a ground-breaking coalition of 20 financial
services firms. In July 2021, the Centre for Financial Capability
sponsored a report by the All-Party Parliamentary Group on
Financial Education for Young People, backed by its 150
parliamentary members. The report called for high-quality and
effective financial education for every primary child by 2030.
Empowering young people into employment
Secure and fulfilling employment underpins long-term financial
security and overall life satisfaction. In 2019 we committed
£450,000 to three leading employment charities – Safe New
Futures, School of Hard Knocks and Street League – working in
Southampton, London and Birmingham, communities in which
we have a major physical presence. The funding enables our
charity partners to deliver employment and skills development
programmes to young people aged 16-25 at risk of long-term
unemployment, enabling them to build confidence and key
employment skills and provide connections to the insights and
experiences of Quilter mentors and volunteers. Ultimately,
the aim is to empower young people to move into employment,
education or training. In 2021, our funding helped 160 young
people, with 93 moving into employment, education or training,
whilst 116 reported an increase in confidence due to their
participation in the programme. A total of 303 young people
have been supported since the funding started in 2019, with
174 moving into employment, education or training and 223
reporting increased confidence.
Helping young carers improve their wellbeing
One in four people in the UK will experience a mental health
condition and certain groups of young people are at higher
risk of poor mental health and wellbeing than others, including
young carers who provide vital support to family and loved
ones with long-term physical and mental health issues. In 2018
we initiated a £1 million grant and fundraising campaign with
Carers Trust, The Mix and Crossroads Care to help improve
the mental health and wellbeing of young carers across the
UK and Isle of Man. In 2021, our funding directly supported
839 young carers, with positive outcomes including young
carers reporting increased confidence in the future, reduced
isolation and resilience.
Additionally, The Mix – an online self-help portal specifically for
young people – worked collaboratively with Carers Trust to build
a ‘Young Carers Hub’ with tailored content and access to
support. The Mix estimates over 168,000 visits by young carers
in 2021, with over 5,000 directly supported through content,
discussions boards and The Mix helpline. The three-year
campaign ended in September 2021 having directly supported
over 2,000 young carers. As our headline campaign partner, we
provided Carers Trust with an additional £135,000 to sustain the
progress made over the three years, which includes funding for
increased political campaigning and policy engagement on
behalf of young carers.
Responding to disasters and emergencies
Through our relationship with the National Emergencies Trust
(“NET”) and the Disasters Emergency Committee (“DEC”) we are
positioned to respond rapidly to domestic and international
emergencies. In response to the humanitarian crisis in
Afghanistan towards the end of 2021, the Quilter Foundation
donated £50,000 to the DEC’s Afghanistan Crisis Appeal,
supporting the DEC to provide vital support to millions
facing starvation.
Responsible business practices
Our Code of Conduct
Our Code of Conduct sets out the duties and expectations
of all colleagues and includes acting with integrity and respect,
treating customers fairly, managing conflicts of interest, good
market conduct, information, data and communications, use
of Company assets, prevention of financial crime and working
with regulators and governments. Colleagues are required
to undertake annual mandatory training to ensure they fully
understand the requirements of the Code of Conduct.
Financial crime, anti-bribery and corruption
As a financial services company we recognise the potential risk
of being a target for financial crime, including money laundering,
terrorist financing, tax evasion and fraud. We also acknowledge
the potential risk of bribery and corruption which could result
in financial loss, regulatory fines and/or censure and damage
to reputation. We have zero tolerance for financial crime,
bribery or corruption and have robust control environment in
place including the following policies: 1) Anti-Money Laundering
and Counter Terrorist Financing Policy, 2) Anti-bribery and
Corruption Policy, 3) Fraud Prevention Policy. All colleagues
are required to complete mandatory training on these topics
annually to ensure that understand their role in preventing
financial crime, bribery and corruption.
Human rights and modern slavery
We recognise our responsibility to not only respect the rights
and freedoms of those that work for Quilter but also of those
in our supply chain. Our human rights policy has been shaped
by internationally recognised principles, laws and conventions
such as the International Bill of Human Rights, The International
Labour Organization conventions, the UN Guiding Principles
on Business and Human Rights, the UN Global Compact, The
Modern Slavery Act 2015, The Human Rights Act 1998 and the
Equality Act 2010. Our human resource and supplier policies
and processes prohibit Quilter from doing business with parties
involved in modern slavery, forced labour, compulsory labour
and child labour. These policies also promote equal opportunity
and eschew any form of discrimination or unfair treatment on
the grounds of protected characteristics, or because of any
other personal factor. We respect the right of employees to
associate for the purposes of collective bargaining and
colleagues are free to join a union of their choice.
Working with suppliers
Our Third-Party Risk Management policy sets out requirements
with respect to our procurement, outsourcing and supplier
management activities. Our Supplier Code of Conduct applies
to all suppliers and their sub-contractors that provide goods
and services to Quilter. It sets out the minimum standards we
expect our suppliers to adhere to when doing business with
Quilter in addition to the contractual terms agreed. The Code
covers legal compliance, ethical standards, conflicts of interest,
anti-bribery and corruption, brands, trademarks and intellectual
property, information and data protection, labour standards,
living wage, discrimination, health and safety, and environmental
management. We also expect our suppliers to promote these
standards in their own supply chain where practical.
Tax
We are committed to full compliance with our tax obligations,
paying the right amount of tax at the right time. We have zero
tolerance for tax evasion and we do not promote tax avoidance
or aggressive tax planning arrangements to our customers or
to other parties. Our Tax Risk Policy sets out high-level
requirements to ensure that tax calculations and filings comply
with all applicable tax law and are prepared on a timely basis.
Political lobbying
Quilter is a politically neutral organisation and does not engage
in party political campaigning or make party political donations.
We will not employ any current politician to conduct public
affairs activities in any capacity. Furthermore, we will not make
any award or payment in money or in kind to any current
politician for the provision of public affairs activities.
Quilter did not employ any former politician to conduct public
affairs activities on our behalf in 2021. If Quilter wishes to employ
any former UK Government Minister or senior official within two
years of leaving office, the appointment must be approved by
the Advisory Committee on Business Appointments (ACOBA),
and the employee must not lobby the government for two years
after leaving office, as stated in the Ministerial Code.
Quilter does, however, seek to influence government policy
which could impact our customers, with particular focus on
consumer rights and protection. An example of this is our
ongoing campaign for better protection for customers at risk of
online investment scams (see page 43 for more information on
this). Quilter is also a member of several industry trade bodies
in the UK, including the Investment Association (IA), Personal
Investment and Financial Advice Association (PIMFA), the
Association of British Insurers (ABI) and The Savings and
Investment Association (TISA).
Quilter Annual Report 2021
53
Strategic ReportGovernance ReportFinancial statementsOther information Responsible business
continued
Task Force on Climate-related Financial Disclosures statement
For reporting periods starting 1 January 2021, the FCA requires listed companies, such as Quilter plc, to include a statement
of compliance with the TCFD’s recommendations and recommended disclosures within their Annual Report. Where the relevant
disclosures are provided in a separate report, listed companies must provide a description of where that document can be found.
Whilst material and significant climate-related information can be found in this report, we have chosen to produce disclosures
consistent with the TCFD’s recommendations and recommended disclosures in a separate standalone report, intended to
supplement our annual report. This allows us to produce more detailed supplemental climate-related information, in a form
tailored and accessible to a wide range of stakeholders.
Our ‘2021 TCFD report’ can be found online at: plc.quilter.com/investor-relations/annual-report. This is our first TCFD-aligned report
and we have made progress in understanding and measuring our exposure to climate-related risks and opportunities, but we are
still at an early stage. We expect to build on and develop these disclosures in future years.
See below for a summary of the TCFD recommended requirements, our disclosures and where in the standalone 2021 TCFD report
they can be found:
Theme
TCFD Recommended disclosure
Our disclosure
Governance
– Describe the board’s oversight of climate-related
– We have presented the governance structure for
risks and opportunities.
– Describe management’s role in assessing and
managing climate-related risks and opportunities.
Board oversight and management of climate-related
risks and opportunities.
– We have described recent relevant recent activities
performed by the Board and senior management.
Read more
in TCFD
report
Page 8
Strategy
– Describe the climate-related risks and
– The climate-related risks we have identified are
Page 12
opportunities the organization has identified over
the short, medium, and long term.
– Describe the impact of climate-related risks and
opportunities on the organization’s businesses,
strategy, and financial planning.
– Describe the resilience of the organization’s
strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario.
market, reputational and legal, policy and regulatory,
and physical risks such as extreme weather events.
– Our climate-related opportunities include increased
demand for sustainable products and services.
– We have described how the identified risks have
informed our strategy, business activities and services.
– Our first Quilter-wide climate-related scenario analysis
exercise, which explored our long-term resilience to
three potential climate scenarios, is described.
Risk
management
– Describe the organization’s processes for
identifying and assessing climate-related risks.
– Describe the organization’s processes for
managing climate-related risks.
– Describe how processes for identifying, assessing,
and managing climate-related risks are integrated
into the organization’s overall risk management.
Page 22
– We have described how climate-related risks have
been integrated into our overall risk management
framework, including information on how climate-
related risks are determined in relation to other
identified risks.
– Our approach to managing climate-related risks within
our investments is described in more detail, covering
our approach to ESG-integration, stewardship
activities and engagement.
Metrics and
targets
– Disclose the metrics used by the organization to
assess climate-related risks and opportunities In
line with its strategy and risk management process.
– We use greenhouse gas emission metrics to assess,
monitor, and manage our exposure to reputational
climate-related risks.
Page 31
– Disclose Scope 1, Scope 2, and, if appropriate,
Scope 3 greenhouse gas (“GHG”) emissions,
and the related risks.
– Describe the targets used by the organization to
manage climate-related risks and opportunities
and performance against targets.
– We have disclosed our Scope 1 and Scope 2
greenhouse gas emissions and estimated our Scope 3
(excluding investments) greenhouse gas emissions.
– We have a target to reduce our Scope 1 and Scope 2
greenhouse gas emissions by 80% by 2030, from a
2020 baseline.
– We are working with an external partner to develop
Science Based Targets for emissions reductions in our
wider value chain and investments.
54
Quilter Annual Report 2021
Non-financial information statement
The Responsible Business report from page 39 to 54 constitutes Quilter’s Non-Financial Information Statement, which complies
with sections 414CA and 414CB of The Companies Act. The table below sets out where to find details on specific matters relevant
to these requirements within this section and elsewhere in our Annual Report:
Anti-bribery and corruption
Business model
Employees
Environmental matters
Human rights
Non-financial KPIs
Principal risks
Social matters
Page 53
Page 30-33
Page 45-47
Page 48-52; and 54
Page 53
Page 41
Page 69-72
Page 42-44; 45-47; and 50-53
Quilter Annual Report 2021
55
Strategic ReportGovernance ReportFinancial statementsOther information Financial review
Mark Satchel
Chief Financial Officer
56
Quilter Annual Report 2021
Review of financial performance
Key financial highlights
Quilter highlights from continuing operations1
2021
2020
In this section, review of financial performance, unless indicated
otherwise, all results are presented excluding Quilter
International in both the current year and prior year comparative.
Overview
The Group’s financial performance for the year was strong,
attributed to the recovery in the equity markets over the period,
good net inflows and continued focus on expense control. The
FTSE-100 index recorded its best year since 2016 as UK stocks
recovered from the pandemic shock of 2020 and ended the
period up 14% on closing 2020 levels. The MSCI World index
(GBP) was up 21% on the 2020 closing index value. The Group’s
AuMA ended the year at £111.8 billion, a 13% increase from the
opening position at the start of 2021, resulting from £8.8 billion
of positive market movements and net inflows of £4.0 billion,
predominantly driven by Quilter Investment Platform.
Alternative Performance Measures (“APMs”)
We assess our financial performance using a variety of
measures including APMs, as explained further on pages 255
to 258. In the headings and tables presented, these measures
are indicated with an asterisk: *.
Net inflows were £4.0 billion for the year (2020: £1.5 billion),
delivering strong gross flows and net inflows across both
segments. The Group experienced higher gross flows and
net inflows in 2021 primarily due to the full launch of the new
Quilter Investment Platform in February 2021 and increased
adviser activity thereafter. Net flows as a percentage of opening
AuMA was 4% (2020: 2%), representing pleasing progress
towards our 6% target.
– The Affluent segment recorded net inflows of £2.9 billion,
up 142% on the prior year (2020: £1.2 billion) due to record
net inflows in Quilter Investment Platform of £3.5 billion
(2020: £1.5 billion), partially offset by net reductions of £0.6
billion in assets managed by Quilter Investors on third-party
platforms in relation to legacy and closed books of business.
Gross flows were significantly ahead of prior year with
increased adviser activity following the final platform
migration in February 2021 which supported the increase in
sales. Quilter Investment Platform’s gross outflows during the
year were higher than 2020 due to a return to more normal
levels of inter-platform switches as COVID-19 uncertainty
subsided. Within the Quilter distribution channel, improved
activity levels and investor sentiment drove the increase in
net inflows from £1.3 billion in 2020 to £2.0 billion. Net inflows
to Quilter Investors was £0.5 billion for the year, up 67%
(2020: £0.3 billion), driven by a decrease in gross outflows
from Cirilium Active of £0.8 billion due to improved fund
performance, offset by reduced gross flows to Cirilium
Passive, Cirilium Blend and the Income range.
Assets and flows
AuMA* (£bn)2
Of which Affluent
Of which High Net Worth
Gross flows* (£bn)2
Of which Affluent
Of which High Net Worth
Net inflows* (£bn)2
Of which Affluent
Of which High Net Worth
Net inflows/opening AuMA*2
Gross flows per adviser* (£m)2,3
Asset retention*2
Profit and loss
IFRS profit/(loss) before tax from continuing
operations attributable to equity holders* (£m)2
IFRS profit after tax from continuing
operations (£m)
Adjusted profit before tax* (£m)2
Operating margin*2
Revenue margin* (bps)2
Return on equity*2
Adjusted diluted EPS* from continuing
operations (pence)2
Basic earnings per share from continuing
operations (pence)
Non-financial
Restricted Financial Planners (“RFPs”)
in Affluent segment4
Discretionary Investment Managers in High
Net Worth segment4
Quilter Private Client RFPs in High Net Worth
segment4
111.8
83.1
28.7
13.2
10.5
2.7
4.0
2.9
1.1
4%
2.3
91%
99.0
73.7
25.3
9.9
7.7
2.2
1.5
1.2
0.3
2%
1.8
91%
12
(27)
23
138
22%
48
8.3%
7.4
1.4
13
108
19%
49
5.5%
5.2
0.8
1,563
1,765
170
60
169
77
1Continuing operations represent Quilter Group, excluding the results of Quilter
International. Adjusted profit before tax for Quilter International in 2021 was
£50 million (2020: £60 million). Adjusted diluted EPS for Quilter International in 2021
was 3.0 pence per share (2020: 3.3 pence per share).
2Alternative Performance Measures (“APMs”) are detailed and defined on pages 255
to 258.
3Gross flows per adviser is a measure of the value created by our Quilter distribution
channel.
4Closing headcount as at 31 December.
£138m +28%
Adjusted profit before tax*
Quilter Annual Report 2021
57
Strategic ReportGovernance ReportFinancial statementsOther information
Financial review
continued
– The High Net Worth segment attracted net inflows
of £1.1 billion, an increase of 267% on the prior year (2020:
£0.3 billion), driven by a significant improvement in gross
flows in Quilter Cheviot, particularly from existing clients
as market confidence improved, promoting higher levels of
activity after the market uncertainty arising from COVID-19
in 2020. Gross flows in Quilter Cheviot from direct clients and
those advised by independent financial advisers increased
by 33% to £2.2 billion in 2021, while the gross flows originating
from our own advisers remained constant at £462 million for
the year. Persistency for the High Net Worth segment
marginally improved in 2021 compared to 2020.
Quilter channel gross flows per advisor* was £2.3 million
for the year (2020: £1.8 million) with average gross flows per
adviser increasing across both Quilter Investors and Quilter
Investment Platform, while gross flows to Quilter Cheviot was
broadly in line with the prior year. Gross flows to the Affluent
segment delivered a 25% improvement between years, with an
increase of £0.7 billion resulting from the full launch of the new
platform in February 2021 and the impact of COVID-19 on the
2020 comparative.
The Group’s AuMA ended the year at £111.8 billion, a 13%
increase from the opening position at the start of 2021.
Affluent’s AuMA was £83.1 billion, up 13% on prior year (2020:
£73.7 billion). The Affluent segment contributed 31% of AuMA
into Quilter solutions, in line with the prior year. High Net
Worth’s AuM of £28.7 billion, increased by 13% in the year (2020:
£25.3 billion), primarily the result of positive market movements
and net inflows of £1.1 billion. All the assets in this segment are
managed in Quilter solutions. In total, 49% of total AuMA is
managed in Quilter solutions across the Group.
The Group’s revenue margin* of 48 bps was 1 bp lower than
the prior year (2020: 49 bps). Quilter Investors’ revenue margin
decreased to 52 bps (2020: 53 bps) due to the increased AuM
concentration in lower revenue margin products. Within Quilter
Investment Platform the revenue margin decreased by 2 bps to
27 bps, due to the reprice that was implemented in April 2020,
an uplift in assets year-on-year arising from higher market levels
which contributes incremental revenue at lower pricing tiers,
and expected lower margins on net inflows, notably from
restricted advisers which contribute to the Quilter distribution
channel. Gross outflows were predominantly from older, higher
margin channels. Quilter Cheviot’s revenue margin decreased
by 1 bp to 71 bps, primarily due to lower commission and
contract charges and the impact of tiered fee structures
on higher average AuM.
Adjusted profit before tax increased by 28% to £138 million,
primarily due to increases in revenue generated from higher
average AuMA levels across the Group. Operating expenses in
2021 of £480 million were 5% higher than the prior year largely
driven by increases in FSCS levies and variable compensation.
The Group’s operating margin increased to 22% (2020: 19%)
driven by the increases in revenue of 10%, partially offset by
a 5% rise in operating expenses in the year.
The Group’s IFRS profit after tax from continuing operations
was £23 million, compared to a profit of £13 million for 2020.
The increase in profit is attributable to favourable equity
market movements throughout the year resulting in higher
average AuMA.
Adjusted diluted earnings per share increased 42% above
that of the previous year at 7.4 pence (2020: 5.2 pence).
£4.0bn +167%
Net flows*
7.4p
Adjusted diluted earnings per share*
+42%
58
Quilter Annual Report 2021
Financial performance by segment
Financial
performance
from continuing
operations
and Quilter
International
2021 (£m)
Net
management
fee*
Other
revenue*
Total net fee
revenue*
Operating
expenses*
Adjusted
profit before
tax*
Tax
Adjusted
profit after
tax*
Operating
margin (%)*
Revenue
margin (bps)*
Financial
performance
from continuing
operations
and Quilter
International
2020 (£m)
Net
management
fee*
Other
revenue*
Total net fee
revenue*
Operating
expenses*
Adjusted profit
before tax*
Tax
Adjusted profit
after tax*
Operating
margin (%)*
Revenue
margin (bps)*
Affluent
High Net
Worth
Head
Office
Continuing
operations
Discontinued
operations
Total
Group
311
189
95
23
406
212
–
–
–
500
118
618
89
589
6
124
95
713
(295)
(156)
(29)
(480)
(45)
(525)
111
56
(29)
138
(13)
50
–
188
(13)
125
50
175
27%
26%
22%
53% 26%
40
71
48
n/a
48
Affluent
High Net
Worth
Head
Office
Continuing
operations
Discontinued
operations
Total
Group
278
168
92
25
370
193
–
1
1
446
106
552
118
12
130
564
118
682
(265)
(154)
(37)
(456)
(58)
(514)
105
39
(36)
108
(15)
60
(1)
168
(16)
93
59
152
28%
20%
19%
51% 25%
42
72
49
n/a
51
The Group’s financial performance
for the year was strong, attributed to
the recovery in the equity markets
over the period, good net inflows and
continued focus on expense control.
Total net fee revenue*
The Group’s total net fee revenue on a continuing basis
increased by 10% to £618 million (2020: £564 million) due to
higher average Group AuMA of £105.3 billion (2020: £90.2 billion),
resulting from the positive equity market performance and net
inflows. The blended revenue margin for the Group, calculated
with reference to net management fees, decreased by 1 bp
to 48 bps.
Total net fee revenue for Affluent was £406 million, up 10% from
the prior year (2020: £370 million), principally due to the impact
of higher levels of assets with average AuMA increasing by
£11.6 billion to £78.5 billion in 2021. This was partially offset by
the impact on revenues of the shift to lower margin products in
Quilter Investors, continuing the trend of new business margins
being lower than the existing back book rates, an increase in the
proportion of assets from the Quilter distribution channel, and
the Quilter Investment Platform repricing implemented in April
2020. Other revenue predominantly reflects revenue generated
from the provision of advice within Quilter Financial Planning.
Within the revenue generated by advice, recurring and fixed
fees increased year on year, while initial fees were at similar
levels to those of 2020.
Total net fee revenue in High Net Worth increased by 10%
during the year to £212 million (2020: £193 million), principally
due to greater levels of average AuM, which increased by 15%
over the year to £26.8 billion (2020: £23.3 billion), partially offset
by an expected reduction in commission revenue as the
proportion of clients on fee-only propositions continues to
increase. This resulted in a 12% increase in net management
fees to £189 million (2020: £168 million). Other revenue,
reflecting revenue generated from Quilter Private Client
Advisers, was at a similar level to that of the prior year.
Quilter Annual Report 2021
59
Strategic ReportGovernance ReportFinancial statementsOther information
Financial review
continued
Operating expenses*
Operating expenses from continuing operations have increased
by £24 million to £480 million (2020: £456 million). In 2021, the
Group incurred £4 million of additional FSCS levy and regulatory
costs compared to the prior year and higher variable
compensation costs of £25 million as a result of improved
business performance in 2021. The higher variable compensation
cost in 2021 was predominantly incurred in the Affluent
segment which had been the area of the business more heavily
impacted by the reduced variable compensation in 2020. In
addition, included within operating expenses are £10 million
of costs previously incurred by Quilter International in 2020.
These costs have been included in 2021 in the cost base of
the continuing business as the costs do not transfer to Quilter
International on sale. The majority of these costs have also been
attributed to the Affluent segment in 2021.
2021
2020
Operating expense
split (£m)
Continuing
operations
As a
percentage
of revenues
Continuing
operations
As a
percentage
of revenues
Support staff costs have increased by 1% to £127 million
(2020: £126 million) driven by incremental hiring to support
ongoing controls remediation in Quilter Financial Planning
offset by continued savings realised from Optimisation activities.
The prior year included one-off costs relating to the initial
COVID-19 response.
Operations costs have decreased by 23% to £27 million (2020:
£35 million). The key factor for the reduction is the launch of
the new platform resulting in some operational activities being
outsourced to a third-party provider (FNZ), the costs of which
are reported in other variable costs.
Technology costs have increased by 40% to £42 million (2020:
£30 million). Technology costs have increased in the short term
as a result of the sale of Quilter International in 2021 leaving
a portion of previously shared costs to be borne by the
continuing business. These increases were partially offset by
the continuing Optimisation activities focusing on consolidation
and decommissioning of the technology estate.
Support staff costs
Operations
Technology
Property
Other base costs1
Sub-total
base costs
Revenue-
generating staff
base costs
Variable staff
compensation
Other variable
costs2
Sub-total
variable costs
Regulatory/
professional
indemnity costs
Operating
expenses*
127
27
42
31
25
252
83
80
36
199
29
480
126
35
30
43
28
262
86
55
26
167
27
456
46%
15%
10%
5%
30%
5%
81%
41%
13%
13%
6%
32%
5%
78%
1Other base costs includes depreciation and amortisation, audit fees, shareholder
costs, listed Group costs and governance.
2Other variable costs includes FNZ costs, development spend and corporate functions
variable costs.
Property costs have decreased by 28% to £31 million (2020:
£43 million) principally the result of a reduction in London
property costs as the dual running costs for Head Office
experienced in 2020 were eliminated as planned.
Other base costs have remained stable at £25 million (2020:
£28 million) where discretionary spend has remained subdued
as the pandemic continued throughout 2021.
Revenue-generating staff base costs have decreased by 3% to
£83 million (2020: £86 million) principally driven by Optimisation
activity in Quilter Financial Planning focused on adviser
productivity.
Variable staff compensation increased by 45% to £80 million
(2020: £55 million) reflecting the improved business performance
in 2021 compared to 2020 and the impact of COVID-19 on
variable remuneration following the equity market falls
experienced during the prior year.
Other variable costs increased by 38% to £36 million
(2020: £26 million) principally due to the recognition of operating
expenses associated with the new platform and the resultant
outsourcing of the operations capabilities and IT support
requirements during the year.
Regulatory and insurance costs have increased by 7% to
£29 million (2020: £27 million), largely driven by the increased
FSCS levy of £4 million.
60
Quilter Annual Report 2021
Taxation
The effective tax rate (“ETR”) on adjusted profit before tax
for the Group’s continuing operations was 9% (2020: 14%).
The Group’s ETR is lower than the UK corporation tax rate of
19% principally due to the change in the UK corporation tax rate
from 19% to 25% effective from 1 April 2023 which resulted in a
rebase in the Group’s deferred tax assets and liabilities. This
had a net positive impact to the tax expense as a consequence
of the Group currently being in a net deferred tax asset position.
The Group’s IFRS income tax expense on continuing operations
was a charge of £62 million for the period ended 31 December
2021, compared to a credit of £4 million for the prior period.
The income tax expense or credit can vary significantly between
periods as a consequence of market volatility and the impact
market movements have on policyholder tax. The recognition
of the income received from policyholders (which is included
within the Group’s IFRS revenue) to fund the policyholder
tax liability can vary in timing to the recognition of the
corresponding policyholder tax expense, creating volatility to
the Group’s IFRS profit or loss before tax attributable to equity
holders. In addition, the IFRS income tax credit for the period
ended 31 December 2020 included first-time recognition of
a deferred tax asset in relation to accrued interest expense.
An adjustment is made to adjusted profit before tax to remove
these distortions, as explained further on page 62 and in
note 7(b) to the consolidated financial statements.
Earnings Per Share (“EPS”)
Basic EPS for 2021 was 9.4 pence (2020: 5.0 pence). Basic EPS
is based on the Group’s IFRS profit (including both continuing
and discontinued operations). For 2021, the basic EPS relating
to continuing business was 1.4 pence (2020: 0.8 pence), and
8.0 pence relates to discontinued operations (2020: 4.2 pence).
Discontinued operations include profit attributable to Quilter
International and the gain recognised on sale. The average
number of shares in issue used for the basic EPS calculation
was 1,644 million (2020: 1,760 million), after the deduction
of own shares held in Employee Benefit Trusts (“EBTs”) and
consolidated funds of 77 million (2020: 82 million). The
reduction in the number of shares in issue in the period
is due to the share buyback programme, which commenced
in 2020. During the year ended 31 December 2021, a total
of 128.1 million shares (2020: 118.3 million) have been bought
and cancelled by Quilter plc.
The average number of shares in issue used for the diluted EPS
calculation was 1,683 million (2020: 1,797 million). This includes
the dilutive effect of shares and options awarded to employees
under share-based payment arrangements of 39 million (2020:
37 million). The dilutive effect of share awards has continued
to increase due to additional shares held in the EBT’s being
released to employees pursuant to employee share schemes.
At our Capital Markets Day on 3 November 2021, we announced
a revised Group dividend policy. The new policy sets a target
pay-out range of 50% to 70% of post-tax, post-interest adjusted
profits, revised from 40% to 60% of post-tax adjusted profits
previously. The new policy will become effective after our 2021
final dividend is paid. The Board has recommended a final
dividend of 3.9 pence per share taking the total dividend
declared for 2021 to 5.6 pence per share which equates to a
pay-out of 51% of the post-tax adjusted profit (i.e. based on the
current dividend policy) and 53.5% of the post-tax post-interest
adjusted profit (i.e. based on the new dividend policy).
Optimisation
The Optimisation programme has delivered further efficiencies
and improvements in operational performance for the Group
through greater technology utilisation, integration and
simplification activity. In 2021, we successfully deployed Phase 1
of our new finance, HR and procurement modules as part of our
general ledger consolidation and modernisation activity, with
Phase 2 (final) delivery of technical releases and efficiencies in
2022. We continue to consolidate our technology estate and
in particular our data centre, telephony and data reporting
solutions. In Quilter Financial Planning, the streamlining and
improvement in productivity of the business, which will continue
in 2022, has delivered cost savings during the year.
The Group delivered £11 million of sustainable cost savings in
2021 against the 2018 cost base, with £15 million of annualised
run-rate benefit. With the addition of benefits arising from prior
years, the total run-rate delivered is £61 million and associated
implementation costs since inception are £81 million. The
Optimisation programme remains on track to deliver its target
of annualised run-rate cost savings of £65 million by mid-2022,
with an anticipated total associated delivery cost of up to
£91 million, and includes anticipated governance, support and
further severance costs through to completion of the programme.
Business simplification
The business simplification programme is anticipated to reduce
operating costs by around £45 million by the end of 2024 on a
run-rate basis, with costs to achieve expected to be £55 million.
The programme will focus on the decommissioning of our
legacy IT estate, efficiencies and automation in our operational
areas and simplification of Quilter’s structures as we organise
ourselves to support our two segments, Affluent and High
Net Worth. Implementation of the first tranche of savings
is already underway.
Quilter Annual Report 2021
61
Strategic ReportGovernance ReportFinancial statementsOther information Financial review
continued
Lighthouse DB pension transfer advice provision
As reported in the Group’s 2020 Annual Report, a provision has
been recognised in relation to a number of complaints received
about DB to DC pension transfer advice that was provided by
Lighthouse advisers prior to our acquisition of Lighthouse which
may have been unsuitable and caused customers to sustain
losses, and results to date from the skilled person review
into historical DB to DC pension transfer advice provided by
Lighthouse prior Lighthouse transitioning to our systems and
controls following our acquisition of Lighthouse.
A total provision of £29 million (31 December 2020: £28 million)
has been calculated for the potential redress of British Steel
Pension Scheme cases and other DB to DC pension transfer
cases which are subject to the skilled person review. This includes
anticipated costs of legal and professional fees associated with
the redress activity. The provision was increased by £7 million
during 2021, which has been recognised within expenses of the
Group (and excluded from adjusted profit before tax), in order
to include the results to date of a review of certain non-British
Steel Pension Scheme member advice that is included within
the skilled person review. Redress on British Steel Pension
Scheme cases of £4 million and professional fees of £2 million
have been paid during the year. Subject to FCA confirmation, we
anticipate the skilled person review will conclude during 2022.
The final costs of redress will depend on the final number
of cases where advice is found to be unsuitable and where
customers have suffered losses and will also depend on the
specific calculations for each case, to be performed by the
skilled person, and are also impacted by market movements
and other parameters affecting the defined contribution
scheme asset. Final redress costs are therefore exposed
to volatility from these movements which may result in final
settlement costs varying from the amounts currently provided.
Reconciliation of adjusted profit before tax* to IFRS profit
Adjusted profit before tax for the Group on a continuing basis
was £138 million (2020: £108 million).
IFRS accounting standards require £10 million of costs (2020:
£17 million), previously reported as part of Quilter International,
to be disclosed within continuing operations, as these costs did
not transfer to Utmost Group on completion. Adjusted profit
before tax is presented both before and after the reallocation
of these costs in this report. These costs are expected to be
incurred in 2022 to provide services to Utmost Group under the
Transitional Services Agreement, with corresponding income to
cover these costs.
Reconciliation of adjusted profit before tax
to IFRS profit/(loss) after tax
For the year ended 31 December
2021
For the year ended 31 December
2020
Continuing
operations
Discontinued
operations1
56
111
(29)
138
(10)
128
(41)
2
(51)
(2)
(10)
(7)
(7)
(116)
12
73
(62)
23
–
50
–
50
10
60
–
90
(19)
–
–
–
–
71
131
–
–
131
Total
56
161
(29)
188
–
188
(41)
92
(70)
(2)
(10)
(7)
(7)
(45)
143
73
(62)
154
Continuing
operations
Discontinued
operations1
39
105
(36)
108
(17)
91
(42)
–
(70)
–
(10)
9
(5)
(118)
(27)
36
4
13
–
60
–
60
17
77
–
(1)
–
–
–
–
–
(1)
76
–
(1)
75
Total
39
165
(36)
168
–
168
(42)
(1)
(70)
–
(10)
9
(5)
(119)
49
36
3
88
£m
High Net Worth
Affluent
Head Office
Adjusted profit before tax*
Reallocation of Quilter International costs
Adjusted profit before tax after
reallocation*
Adjusting for the following:
Impact of acquisition and disposal related
accounting
Profit on business disposals
Business transformation costs
Managed Separation costs
Finance costs
Policyholder tax adjustments
Customer remediation
Total adjusting items before tax
Profit/(loss) before tax attributable to
equity holders*
Tax attributable to policyholder returns
Income tax (expense)/credit
Profit/(loss) after tax2
1Discontinued operations includes the results of Quilter International.
2IFRS profit/(loss) after tax.
62
Quilter Annual Report 2021
Adjusted profit before tax represents the Group’s IFRS profit,
adjusted for specific items that management considers to be
outside of the Group’s normal operations or one-off in nature,
as detailed on page 181 in the consolidated financial
statements. The exclusion of certain adjusting items may result
in adjusted profit before tax being materially higher or lower
than the IFRS profit after tax.
Adjusted profit before tax does not provide a complete picture
of the Group’s financial performance, which is disclosed in the
IFRS income statement, but is instead intended to provide
additional comparability and understanding of the financial results.
The profit on business disposals of £92 million (2020: loss of
£1 million) includes the recognised profit on disposal of £89 million
in relation to the sale of Quilter International to Utmost Group
on 30 November 2021.
Business transformation costs of £70 million in 2021 (2020:
£70 million) include £28 million (2020: £38 million) incurred on
the UK Platform Transformation Programme with total lifetime
costs of the programme at £202 million, and £22 million of costs
(2020: £33 million) in relation to the Optimisation programme.
The £19 million under discontinued operations represents the
costs still to be incurred in decommissioning systems required
to provide transitional services to Utmost Group and the
ongoing management required during the TSA period.
Policyholder tax adjustments were a debit of £7 million for 2021
(2020: credit of £9 million) in relation to the removal of timing
differences arising from market volatility that can, in turn, lead
to volatility in the policyholder tax charge between periods.
The recognition of the income received from policyholders
(which is included within the Group’s IFRS revenue) to fund the
policyholder tax liability can vary in timing to the recognition of
the corresponding tax expense, creating volatility to the Group’s
IFRS profit/(loss) before tax attributable to equity holders.
The customer remediation adjustment of £7 million in 2021
relates to a redress provision on advice in Lighthouse as part
of the ongoing skilled person review as explained earlier in the
Financial review. £5 million recognised in 2020 related solely to
the impact of post-acquisition market movements on the British
Steel complaints provision relating to Lighthouse.
Cash generation*
Cash generation measures the proportion of adjusted profit
after tax that is recognised in the form of cash generated from
operations. The Group achieved a cash generation rate on
continuing business of 76% of adjusted profit after tax over
2021 (2020: 78%, restated for continuing business only following
the disposal of Quilter International).
Review of financial position
Capital and liquidity
Solvency II
The Group’s Solvency II surplus is £1,030 million at 31 December
2021 (31 December 2020: £1,021 million), representing a Solvency II
ratio of 275% (31 December 2020: 217%). The Solvency II
information for the year to 31 December 2021 contained in this
results disclosure has not been audited.
The Group’s Solvency II capital position is stated after allowing for
the impact of the foreseeable dividend payment of £62 million
(31 December 2020: £61 million).
Group pro forma capital (£m)
Own funds
Solvency capital requirement (“SCR”)
Solvency II surplus
Solvency II coverage ratio
At
31 December
20211
At
31 December
20202
1,617
587
1,030
275%
1,897
876
1,021
217%
1Filing of annual regulatory reporting forms due 20 May 2022.
2As disclosed in the Group Solvency and Financial Condition Report for 2020.
The 58 percentage point increase in the Group Solvency II ratio
from the 31 December 2020 position is primarily due to the
capital movements associated with the sale of Quilter
International, the £197 million share repurchase programme
and the net profit recognised in the period. The SCR reduced
in 2021 as a consequence of the sale of Quilter International
completing on 30 November 2021.
The Board believes that the Group Solvency II surplus includes
sufficient free cash and capital to complete all committed
strategic investments. Quilter expects to continue to maintain
a solvency position significantly in excess of its internal target
in the near term as a consequence of the surplus capital
intended to be returned to shareholders arising from the sale
of Quilter International.
On 30 November 2021, the Group completed the sale of Quilter
International to Utmost Group for consideration of £481 million.
The Board is proposing a capital return of £328 million from the
proceeds by way of a B share issue and redemption followed by
a share consolidation, subject to regulatory engagement and
shareholder approval.
Quilter Annual Report 2021
63
Strategic ReportGovernance ReportFinancial statementsOther information Financial review
continued
Composition of qualifying Solvency II capital
The Group’s own funds include the Quilter plc issued
subordinated debt security which qualifies as capital under
Solvency II. The composition of own funds by tier is presented
in the table below.
Group own funds (£m)
Tier 11
Tier 22
Total Group Solvency II own funds
At
31 December
2021
At
31 December
2020
1,412
205
1,617
1,688
209
1,897
1All Tier 1 capital is unrestricted for tiering purposes.
2Comprises a Solvency II compliant subordinated debt security in the form of a Tier 2
bond, which was issued at £200 million in February 2018.
The Group SCR is covered by Tier 1 capital, which represents
241% of the Group SCR of £587 million. Tier 1 capital represents
87% of Group Solvency II own funds. Tier 2 capital represents 13%
of Group Solvency II own funds and 20% of the Group surplus.
Dividend
The Board has recommended a final dividend of 3.9 pence
per share at a total cost of £62 million. Subject to shareholder
approval, the recommended final dividend will be paid on
16 May 2022 to shareholders on the UK and South African share
registers on 8 April 2022. For shareholders on our South African
share register a dividend of 78.25993 South African cents per
share will be paid on 16 May 2022, using an exchange rate
of 20.06665. This will bring the dividend for the full year
to 5.6 pence per share (2020: 4.6 pence per share).
Capital return
The Board is proposing a capital return of £328 million,
equivalent to 20 pence per share, from the net surplus
proceeds arising from the sale of Quilter International by way
of a B share scheme accompanied by a share consolidation,
with this subject to regulatory engagement and shareholder
approval at a General Meeting on 12 May 2022.
Subject to shareholder approval, B shares will be issued
to shareholders on 23 May 2022. The B shares are expected
to be redeemed for 20 pence per share on 24 May 2022. For
shareholders on our South African share register, the B shares
will be redeemed for 401.33300 South African cents per share
on 24 May 2022, using an exchange rate of 20.06665, the
average rate achieved on 7 and 8 March 2022, the two days
immediately preceding the announcement of the capital return.
Holding company cash
The holding company cash statement includes cash flows
generated by the three main holding companies within the
business: Quilter plc, Quilter Holdings Limited and Quilter UK
Holding Limited. The flows associated with these companies will
differ markedly from those disclosed in the statutory statement
of cash flows, which comprises flows from the entire Quilter plc
Group including policyholder movements.
The holding company cash statement illustrates cash received
from the key trading entities within the business together with
other cash receipts, and cash paid out in respect of corporate
costs and capital servicing (including interest and dividends).
Other capital movements, including those in respect of
64
Quilter Annual Report 2021
acquisitions and disposals together with funding for ongoing
business requirements, are also included. It is an unaudited
non-GAAP analysis and aims to give a more illustrative view
of business cash flows as they relate to the Group’s holding
companies compared to the IFRS consolidated statement
of cash flows which is prepared in accordance with IAS 7
(statement of cash flows) and includes commingling of
policyholder-related flows.
£m
Opening cash at holding companies
at 1 January
2021
2020
517
815
Single Strategy business sale – (warranty)/
deferred consideration
Quilter International sale proceeds
Share repurchase and Odd-lot offer
Costs of disposal
Dividends paid
Net capital movements
Head Office costs and Optimisation
programme funding
Interest costs
Net operational movements
(2)
481
(197)
–
(89)
193
(74)
(9)
(83)
7
–
(198)
(24)
(81)
(296)
(74)
(9)
(83)
Cash remittances from subsidiaries
Net capital contributions, loan repayments
and investments
Other net movements
Internal capital and strategic
investments
184
170
(53)
(2)
129
(94)
5
81
Closing cash at holding companies at
end of period
756
517
Net capital movements
Net capital movements in the year were an inflow of £193 million.
This includes £481 million of proceeds from the sale of Quilter
International, offset by £197 million relating to the share
repurchase programme dividend payments made to
shareholders of £61 million in May 2021 and £28 million in
September 2021, and £2 million of costs relating to the disposal
of the Single Strategy business in line with expectations. The
costs associated with the disposal of Quilter International will
be incurred, in cash terms, in 2022.
Net operational movements
Net operational movements were an outflow of £83 million
for the period and include £74 million of corporate and
transformation costs. Interest paid of £9 million relates to
coupon payments on the Tier 2 bond and non-utilisation fees
for the revolving credit facility.
Internal capital and strategic investments
The net inflow of £129 million is principally due to £184 million
of cash remittances from the trading businesses, partially offset
by £53 million of net capital contributions made to support
business operational activities, and the Platform
Transformation Programme.
Balance sheet
Summary balance sheet (£m)
At 31 December 2021
At 31 December 2020
Total Group
Continuing
operations
Discontinued
operations
Total Group
Assets
Financial investments
Contract costs
Cash and cash equivalents
Goodwill and intangible assets
Trade, other receivables and other assets
Other assets
Total assets
Equity
Liabilities
Investment contract liabilities
Third-party interests in consolidated funds
Contract liabilities
Borrowings – sub-ordinated debt
Lease liabilities
Trade, other payables and other liabilities
Other liabilities
Total liabilities
Total equity and liabilities
Financial investments excluding the impact of consolidated
funds increased by £5,895 million from £41,670 million at
31 December 2020 to £47,565 million at 31 December 2021, due
to an increase in net inflows and positive market performance
predominantly driven by the recovery in the financial markets
in 2021. A corresponding increase is reflected in investment
contract liabilities, with the main difference between the two
being the impact of consolidated funds, which resulted in
a £415 million reduction in financial investments since
31 December 2020 (as a result of certain funds no longer
being subject to consolidation at 31 December 2021).
Cash and cash equivalents of £2,064 million increased by
£282 million from £1,782 million at 31 December 2020, primarily
due to receipt of £481 million of sales proceeds following the
sale of Quilter International on 30 November 2021, together
with inflows from pre-tax profits partially offset by £197 million
cash consideration for the share buyback programme and
£89 million of dividend paid.
47,565
9
2,064
457
381
264
50,740
41,670
5
1,782
504
430
309
44,700
21,604
408
139
52
271
198
22,672
63,274
413
1,921
556
701
507
67,372
1,739
1,553
325
1,878
41,071
6,898
–
199
100
484
249
49,001
50,740
35,591
6,513
1
199
108
543
192
43,147
44,700
21,816
–
378
–
12
129
12
22,347
22,672
57,407
6,513
379
199
120
672
204
65,494
67,372
Goodwill and intangible assets decreased by £47 million since
31 December 2020, principally due to the amortisation of
intangible assets.
Mark Satchel
Chief Financial Officer
Quilter Annual Report 2021
65
Strategic ReportGovernance ReportFinancial statementsOther information Risk review
Effective risk management is key
as Quilter embarks on the next phase
of its story.
Introduction
Quilter is at an inflection point, having delivered its post-Listing
three-year objectives of simplifying the business through
disinvestment of non-core businesses, completing the Platform
Transformation Programme; and reducing cost and complexity
through the delivery of the Optimisation initiatives.
The next phase of Quilter’s journey is now beginning, with the
business being reorganised into its new Affluent and High Net
Worth client segments, to facilitate the further development
of client-tailored propositions. Growth and efficiency are central
to the future vision for the business, with increasing digitisation,
and a commitment to being the responsible wealth manager
by applying ESG principles, in everything we do.
This ‘gear shift’ brings with it a changed risk profile as the
strategic focus on innovation brings with it new opportunities
and also risks to execution. Customers place their trust in
Quilter to help deliver their financial futures, and delivery of
strong customer outcomes in all of Quilter’s client propositions
will be key in the success of Quilter’s next phase.
How we manage risk
Our Enterprise Risk Management Framework (“ERMF”) is
embedded across Quilter and helps Quilter assess and manage
its risk exposures. A strong and embedded risk culture is vital
in ensuring that risk implications are considered when making
strategic and operational decisions, and that Quilter
understands its risk profile and manages the business within
the approved risk appetite. The ERMF drives consistency across
Quilter and aims to support the evaluation and management
of business opportunities, uncertainties and threats in a
structured and disciplined manner.
Risk governance
Quilter maintains a Group Governance Manual (“GGM”)
which sets out Quilter’s approach to governance. The Quilter
governance model is designed to promote transparency,
accountability and consistency through the clear identification
of roles, the separation of business management and
governance and control structures, and by tracking
performance against accountabilities. The segregation of risk
taking, oversight and assurance is codified in Quilter’s three
lines of defence model, which ensures clear accountability
and ownership for risk and controls. The Risk Function Charter
provides clarity on the purpose and role of the Risk Function
as Quilter’s second line of defence, and the means by which it
maintains its objectivity and independence from management.
The Executive Risk Forum is the primary management committee
overseeing the risk profile of the Quilter. This forum is chaired
by the Quilter Chief Executive Officer, with representation from
across Quilter. Ongoing oversight of the risk profile and of risk
management arrangements is undertaken by the Board Risk
Committee, with relevant matters also being considered by the
Board. Similar arrangements are maintained locally in each
significant business area.
On a quarterly basis, the Quilter Chief Risk Officer formally
reports the second line perspective on the risk profile of the
firm, performance against risk appetite and perspectives
on the effectiveness of management responses.
Policy framework
The Quilter Policy Suite forms an integral part of our governance
and risk management framework, ensuring an appropriate
system of internal control. Together with the GGM, they form
the basis of clear delegated authorities and accountabilities,
ensuring there is appropriate Board oversight and control of
important decisions, and efficient and effective management
of day-to-day business. The GGM and policies are approved
and adopted by the Board. The policies are subject to an annual
policy compliance review, with results provided to the Board.
66
Quilter Annual Report 2021
Matt Burton
Chief Risk Officer
Quilter’s three lines of defence model
First line of defence
Second line of defence
Third line of defence
Management and employees
Primary responsibility for managing
risks as part of day-to-day activities,
in line with risk policies and appetite.
Business management decides
which risks to take and the exposure
to assume.
Risk function
The Risk Function, which includes
Compliance, provides objective
oversight, monitoring and independent
challenge of the first line’s risk taking,
and risk management.
Group Internal Audit
Group Internal Audit provides
the Board and Management with
independent, objective assurance.
Strategic risk appetite principles
Customer
Quilter will ensure fair
customer outcomes
Liquidity
Quilter will ensure that
it has sufficient liquidity
to meet its financial and
funding obligations
Capital
Quilter will hold or have
access to sufficient capital
to maintain its own
capital need
Control environment
Quilter will at all times
operate a robust control
environment
Owner:
Chief Operating Officer
Owner:
Chief Financial Officer
Owner:
Chief Financial Officer
Owners:
Chief Operating Officer
Chief Risk Officer
Chief Internal Auditor
Risk appetite framework
Our risk appetite is the amount of risk we are willing to take
in the pursuit of our strategic priorities and is defined by the
Board. Culturally, it sets the tone regarding our attitude towards
risk taking. Risk appetite also plays a central role in informing
decision making across Quilter, protecting and enhancing the
return on capital invested. This risk appetite approach is applied
consistently across Quilter.
To support the strategic decision-making process, we apply risk
preferences which provide guidelines for striking the appropriate
balance of risk and reward when setting our business strategy.
A set of Strategic Risk Appetite Principles has been determined
by the Board. These principles provide the top-of-the-house
guidance on our attitude towards key areas of risk for Quilter.
They support the ongoing management and oversight of risk,
and are supported by a series of more granular risk appetite
statements, measures, policies and standards. Quilter’s position
against these principles is measured on a regular basis through
the monitoring of underlying risk metrics.
Conduct risk
The Financial Conduct Authority (“FCA”) is the primary conduct
regulator for Quilter’s UK regulated entities. Quilter takes its
regulatory obligations in relation to customers and our conduct
seriously and is committed to operating in a responsible and
compliant manner.
Quilter seeks to deliver on these obligations through culture
and values, backed by a rigorous governance system and
an approach to compliance that drives fair outcomes for
customers. The standards of behaviour Quilter expects from
its staff are set out in the Quilter Code of Conduct. This code
is aligned to the expectations of individuals set out in the FCA’s
Conduct Rules.
Conduct risk is a core element of Quilter’s ERMF, recognising
that conduct risks can both impact, and result from, other risks
within the risk universe.
Conduct risk is monitored across Quilter’s businesses, with
quarterly reporting on Quilter’s conduct risk profile, emerging
issues and trends. Areas of concern are noted, and actions are
identified and are tracked to completion.
Quilter Annual Report 2021
67
Strategic ReportGovernance ReportFinancial statementsOther information Risk review
continued
Prudential risk
Quilter is prudentially regulated by the Prudential Regulation
Authority (“PRA”) under Solvency II, by the FCA under the Capital
Requirement Directive (“CRD”) and other applicable prudential
regulations. Following the sale of Quilter International, Quilter
is no longer subject to insurance prudential requirements
of overseas regulators.
To meet these regulations, we operate a consistent approach
to risk management across Quilter. We have integrated the
Own Risk and Solvency Assessment (“ORSA”) and Internal
Capital Adequacy Assessment Process (“ICAAP”) into our
risk management framework. Quilter’s ORSA and ICAAP are
comprehensive risk processes which set out how risks are
managed and how risks might change over time as we execute
our strategy and respond to developing situations. From
1 January 2022, Quilter is subject to the Investment Firms
Prudential Regime, which replaces the CRD. In line with the new
regime, the ICAAP will be replaced with the Internal Capital and
Risk Assessment (“ICARA”) process, on a Group basis.
We analyse the capital required to protect the sustainability
of Quilter and how those capital requirements might develop
over our planning period. The assessments include a range of
stress and scenario testing covering a broad range of scenarios,
including market shocks, new business growth scenarios and
operational risk events. These tests are in addition to the
regulatory solvency capital requirements, which allow for severe
and extreme scenarios and stresses (1 in 200-year risk events).
Key to our process is preparing management action plans,
providing assurance that Quilter is both well capitalised and
prepared to take necessary action should adverse events occur.
Operational risk
Quilter operates a series of processes to facilitate the
identification and management of operational risk and the
reporting of risk events. A discipline of Risk and Control Self
Assessments (“RCSAs”) and risk event management is facilitated
by our risk system, along with remedial action tracking. Root
cause analysis is conducted on material events. During 2021, we
replaced our legacy operational risk system with a new Software
as a Service (“SAAS”) solution, which provides a modern
platform for effective operational risk management.
Environmental, Social and Governance (“ESG”) risks
Quilter takes its responsibilities to the environment and society
seriously, with responsible business at the heart of Quilter’s
strategy. The Risk taxonomy has been updated to reflect climate
risk aspects, and the Risk Function will be placing increased
focus on ESG risk management, including ensuring that Quilter
is clear on its commitments, and has appropriate arrangements
in place to support the achievement of ESG commitments.
Remuneration and reward
The most important element to risk management is a good
culture of risk informed decision making. We believe that a good
risk culture enables effective management of risk. We link risk
management to performance and development, as well as to
Quilter’s remuneration and reward schemes. An open and
transparent working environment which encourages our people
to embrace risk management, and speak up where needed, is
critical to the achievement of our objectives.
Risk-based planning
On an annual basis a Risk Plan is developed based upon a risk
analysis exercise. This analysis encompasses a risk assessment
of the prevailing risk profile, as well as external factors, including
regulatory change. The Risk Plan details the activities that will
be implemented by the Risk Function across the risk domains,
including regulatory compliance, and includes advisory and
assurance. The Risk Plan is approved annually by the Board
Risk Committee, with regular tracking on progress.
Risk profile
2021 has been a year of gradual and incremental recovery
from the COVID-19 pandemic conditions. Key success in 2021,
against this backdrop included, completion of the platform
transformation programme, the completion of activities
associated with the Optimisation plans and the sale of Quilter
International. Much of this activity has removed complexity,
including legacy technology, and has had the impact of reducing
the associated risk profile.
Quilter continues to work with the FCA’s appointed skilled
person to address historic DB to DC pension transfer advice
provided by Lighthouse advisers to British Steel Pension
Scheme (“BSPS”) members and some other pension transfer
cases. Quilter is committed to ensuring fair outcomes for
impacted customers who have received unsuitable advice and
suffered losses, and a provision of £29 million is held in respect
of delivering the remediation and redress programme to these
customers. Quilter Financial Planning is also undertaking control
environment enhancement programme to ensure a strong and
modern control infrastructure supports the delivery of suitable
financial advice.
Quilter enters 2022 in a new phase of its development, with a
focus on propositional development, digitisation and embedding
ESG within the business. Accordingly the risk profile has shifted
towards the risks associated with strategic delivery against this
ambition. Global concern on the longer-term impact of climate
change continues to mount, with an increasing demand on all
firms, including financial services firms, to play their part in
achieving net zero carbon emissions. More recently the evolving
Ukraine crisis is likely to have far reaching social, economic, and
political implications in both the medium and long term.
68
Quilter Annual Report 2021
Principal risks and uncertainties
Principal risks and uncertainties
The Directors have carried out a robust assessment of the
principal and emerging risks facing Quilter, including those that
would threaten its business model, future performance, solvency
and liquidity, as well as those risks that are non-financial in
nature. The articulation of these principal risks and
uncertainties is consistent with Quilter’s Enterprise Risk
Framework categorisation, and with the ‘Top Risk’ reporting that
is provided quarterly to the Board Risk Committee and Board.
The Board requires management to put in place actions to
mitigate these risks, and controls to maintain risk exposures
within acceptable levels defined by Quilter’s risk appetite.
Business and strategic risks
The table below sets out Quilter’s principal risks and
uncertainties, including Executive Committee member ownership
and key mitigants being implemented by management. The risk
trend noted is the residual risk trend (risk after the application
of mitigants) during 2021.
During the year we have removed Investment Management risk,
given a relative reduction in risks associated with investment
management activities as supporting control frameworks have
been enhanced. We have added new risks related to Strategic
Delivery and Climate Strategy, given the increased impact of
both of these risks to Quilter during 2021.
Economic environment
2021 risk trend: Mitigation:
Quilter’s principal revenue streams are asset value related
and as such Quilter is exposed to the condition of global
economic markets. Whilst market conditions generally
stabilised during 2021 from the COVID-19 pandemic,
the evolving Ukraine crisis is having an impact on the
economic environment resulting in short term market
volatility. Volatility in debt, equity and currency markets
may adversely impact customer investment portfolios
which in turn impacts Quilter’s ability to generate
fee-based revenue.
Stable
2021 activity
– 2021 economic scenario testing at Group and
Risk owner:
Chief Financial
Officer
subsidiary level.
– The share buy-back programme was performed in
tranches, to enable Board consideration of market
conditions prior to execution.
Planned and ongoing activity
– Stress and scenario analysis, including in respect
of market shocks.
– Ongoing enhanced monitoring of market and liquidity
risk exposures.
Business financial performance
2021 risk trend: Mitigation:
While the direct impact of the pandemic on business
performance moderated during 2021, consequential
impacts including inflationary pressures and an increase
in the cost of living could impact customers’ ability to
invest and therefore investment inflows. The Russian
invasion of Ukraine creates increasing economic and
political uncertainty which could impact consumer
confidence. The potential for tax increases as well as direct
inflationary impacts could result in adverse cost impacts
for Quilter, acting as headwinds to our performance. Any
negative impact on earnings, share price and/or capital
position could have a resulting adverse effect on Quilter’s
market credibility and financial standing.
Stable
2021 activity
– Continued 2021 in-year cost focus, with favourable
out-turn against plan achieved.
– Longer-term expense targets established aligned
to the strategic Simplification programme.
Risk owner:
Chief Financial
Officer
Planned and ongoing activity
– Propositional activity under Quilter’s new
segment model to drive revenue growth, including
Wealth Select+.
Quilter Annual Report 2021
69
Strategic ReportGovernance ReportFinancial statementsOther information Risk review
continued
Business and strategic risks continued
Strategic delivery (new for 2021)
2021 risk trend: Mitigation:
Quilter has embarked on an ambitious strategy focused
on growth and efficiency, while increasing digitisation and
embedding ESG wherever possible. Achieving this
ambition will require the operation of a robust strategic
delivery framework, and investment in capabilities. As we
are now embarking on our next strategic phase and with
the ambitious programme of work needed to deliver it, we
are further increasing our focus in this area. Any failure to
deliver on the strategic delivery programme, could expose
the Group to competitive risks and impact Quilter’s
franchise value.
Not applicable
Risk owner:
Chief Executive
Officer
2021 activity
– Sale of Quilter International, and realisation of
the post-Listing objective of becoming a modern
UK wealth manager.
– Establishment of the Simplification programme
and identification of strategic initiatives.
Planned and ongoing activity
– Full mobilisation of activities to support delivery
against Quilter’s new strategic objectives.
Change execution
2021 risk trend: Mitigation:
Quilter continues to be subject to change execution risk
given an ongoing programme of material change projects,
although the maturing of Quilter’s change execution
capabilities, and the successful completion of a number
of key projects in 2021, including the Platform
Transformation Programme, has reduced the impact of
this risk. The effective embedding of new technology and
process across Quilter is key for the next phase. Any loss
of focus on change execution disciplines could impact the
delivery of the intended benefits, and risk disruption to
continuing operations and the control environment.
Reducing
2021 activity
– Successful final PTP migration.
– Successful implementation of Workday as a strategic
platform for HR and Finance activities.
Risk owner:
Chief Operating
Officer
Planned and ongoing activity
– Active management and prioritisation of the change
portfolio.
– Enhanced executive oversight and change assurance.
– Disciplined programme and portfolio governance
arrangements.
Climate strategy (new for 2021)
2021 risk trend: Mitigation:
Quilter takes its responsibility to the environment
seriously, and is determined to play its part in reducing
climate impacts. In order to do this, Quilter must develop
and deliver an achievable, coherent, comprehensive and
robust long-term climate strategy to manage climate
related financial and non-financial risks. Failure to do so
would result in Quilter being unable to meet regulatory
and other stakeholder expectations, and fulfil our strategic
priority to become the responsible wealth manager.
Not applicable
2021 activity
– Climate Risk Appetite statement development.
– Implementation of climate change scenario testing.
– Implementation of the required TCFD statement
in this document, and the associated TCFD report.
Risk owner:
Chief Executive
Officer
Planned and ongoing activity
– Further development of Quilter’s climate change
strategy including specifying targets.
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Quilter Annual Report 2021
Operational and regulatory risks
Advice
2021 risk trend: Mitigation:
Quilter’s financial advice services are subject to
fundamental regulatory conduct requirements to assure
suitability of advisory recommendations. This risk remains
elevated and stable, as Quilter continues to address
historic DB to DC transfer advice shortcomings of the
acquired Lighthouse Group, as announced by Quilter in
2020. Remediation programmes are ongoing to ensure
impacted customers receive fair outcomes and to ensure
robustness of the control framework to support the
ongoing delivery of suitable advice. Failure to operate
effective arrangements to support the ongoing delivery
of suitable advice could expose Quilter to risks associated
with customer detriment, regulatory censure and
remediation programmes, with consequential impacts to
the Group’s business, financial condition and reputation.
Stable
Risk owner:
Chief Executive
Officer, Quilter
Financial Planning
2021 activity
– Ongoing remediation exercise to address historic
defined benefit pension transfer advice provided by
Lighthouse to British Steel Pension scheme members
and some other pension transfer cases, with a total
provision of £29 million held to fund the exercise and
resultant redress to these customers.
– Ongoing programme of work to enhance the control
environment that supports the delivery of suitable
advice in the Quilter Financial Planning business.
Planned and ongoing activity
– Completion of defined benefit remediation activity.
– Further uplifts of controls in operational processes
supporting the delivery of suitable of advice.
Information technology
2021 risk trend: Mitigation:
Quilter’s business is dependent on its technology
infrastructure and applications to perform necessary
business functions. Much of Quilter’s legacy IT estate is
currently being replaced, by cloud-based applications,
thereby reducing internal complexity. Nevertheless, a
range of legacy applications are still supported, including
the technology platform underpinning the divested Quilter
International business, which will be supported until 2023
under a Transitional Services Agreement. Failure to
manage technology risk could have a material adverse
impact on Quilter’s business, resilience capabilities,
operations, financial condition and reputation.
Stable
Risk owner:
Chief Operating
Officer
2021 activity
– Technology transformation programmes across Quilter
have achieved retirement of many legacy systems, with
their replacement by modern cloud-hosted systems.
– Retired systems include legacy UK Platform technology,
and supporting systems in HR, Finance and Risk.
Planned and ongoing activity
– Technology transformation continues, with further
system retirements.
– Active systems monitoring.
– Technology policy and standards compliance
arrangements.
Information security
2021 risk trend: Mitigation:
Quilter’s business, by its nature, requires it to store,
retrieve, evaluate and utilise customer and Company data
and information, some of which is highly sensitive. Quilter
and its service providers are subject to the risk of
information security breaches from parties with criminal
or malicious intent. Should intrusion detection and
anti-penetration processes not anticipate, prevent or
mitigate a network failure or disruption, it may have a
material adverse effect on Quilter’s customers, business,
financial condition, operations and reputation.
Stable
2021 activity
– Completion of most elements of the Information
Security Improvement Programme, which has delivered
uplifted controls, processes and tools.
– Cyber attack framework implementation.
Risk owner:
Chief Operating
Officer
Planned and ongoing activity
– Evolution of the information security framework in
the context of a cloud-based third-party application
ecosystem.
– Cyber threat defences and monitoring.
– Information Security Policy and standards and
associated compliance arrangements.
Quilter Annual Report 2021
71
Strategic ReportGovernance ReportFinancial statementsOther information Risk review
continued
Operational and regulatory risks continued
People
2021 risk trend: Mitigation:
Quilter relies on its talent to deliver its service to
customers. People risk has remained heightened during
the pandemic as Quilter’s people have adapted to new
ways of working during a period of significant change.
Delivery of Quilter’s ambitious new strategic objectives will
require particular skills and competencies to be successful,
including in digital and ESG-related competencies. Failure
to attract and retain suitable talent may impact on the
delivery of Quilter’s strategy and may have an adverse
impact on Quilter’s business, its financial and operational
performance and its delivery of service to customers.
Stable
2021 activity
– Launch of HR Transformation plan.
– Implementation of Workday HR to enhance HR
related process.
Risk owner:
HR Director
Planned and ongoing activity
– Talent management and succession programme.
– Performance and risk-adjusted remuneration
arrangements.
– Regular employee engagement surveys.
– Quilter’s staff wellbeing initiative, ‘Thrive’.
Third-party
2021 risk trend: Mitigation:
Quilter procures certain services from third parties, which
has increased given the significant business process and
technology outsourcing to FNZ and the deployment of
multiple new cloud-based technologies. If Quilter does not
effectively oversee its third-party providers, they do not
perform as anticipated, or Quilter experiences
technological or other problems with a third party, Quilter
may experience operational difficulties, increased costs
and loss of business, potential customer detriment and
damage to its reputation.
Stable
Risk owner:
Chief Operating
Officer
2021 activity
– Maturing of the Third-Party Risk Management
arrangements, including systemisation of controls
within the Coupa procurement system.
– Centralisation of supplier management teams
to facilitate consistency of approach.
Planned and ongoing activity
– Continued evolution of oversight approach, including
optimising for cloud-based applications.
– Third-Party Risk Management Framework and associated
policy and standards compliance arrangements.
Operational resilience
2021 risk trend: Mitigation:
Quilter provides important services for its customers, and
its ability to maintain these services during unforeseen
events is key. The continuing COVID-19 pandemic has
provided comfort on Quilter’s ability to operate in a severe
operational resilience scenario. Any failures in Quilter’s
preparation for, or response to, sudden disruptions could
compromise the maintenance of important business
services, resulting in the potential for customer detriment,
financial loss, damage to reputation or regulatory sanction.
Stable
Risk owner:
Chief Operating
Officer
2021 activity
– Preparation for the March 2022 implementation of
the enhanced UK operational resilience requirements,
including identification of Important Business Services.
– Business disruption exercises, including a scenario of
significant service failure by a strategic supplier.
Planned and ongoing activity
– Business Continuity and Crisis Management Policy
and related policy compliance arrangements.
– Systemised inventories of processes and
dependencies.
– Resilience plans and resilience testing.
Regulatory
2021 risk trend: Mitigation:
Quilter is subject to regulation in the UK by the PRA and
the FCA, and following the sale of Quilter International, by
a now reduced number of other regulators internationally.
Additionally, the firm is subject to the privacy regulations
enforced by the Information Commissioner’s Office and
international equivalents. Quilter faces risks associated
with compliance with these regulations and to changes
in regulations or regulatory focus or interpretation in the
markets in which Quilter operates. Failure to manage
regulatory compliance effectively could result in regulatory
censure, including the possibility of fines or prohibitions
which could impact business performance and reputation.
Reducing
2021 activity
– Reduced exposure to international regulatory regimes
Risk owner:
Chief Risk Officer
through sale of Quilter International.
– Close engagement with regulators on regulatory
developments including in respect of the FCA’s
Consumer Duty proposals.
Planned and ongoing activity
– Compliance monitoring programme.
– Regulatory engagement management.
– Regulatory horizon scanning.
– Staff training and staff awareness programmes.
– Regulatory Compliance Policy, as associated policy
compliance arrangements.
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Quilter Annual Report 2021
Emerging risk radar
Emerging risk radar
Near term
Medium term
Longer term
Quilter is a long-term business and as such we monitor risks which are less certain in terms of
timescales and impact. The emerging risk profile is subject to regular review by management
committees and the Board. The identification of these risks contributes to our stress and
scenario testing which feeds into our strategic planning process and informs our capital
calculations. The following are the emerging risks we feel are the most significant.
Cyber threat developments
Evolving sophisticated cyber criminality presents a persistent threat of attack, capable
of compromising the continuity of operations, or the security and integrity of information.
Margin pressure
Increasing market pressures may require provision of services at a lower overall cost
to customers to remain competitive.
Economic outlook and geopolitical risk
In addition to the severe humanitarian and geopolitical impacts, the Russian invasion
of Ukraine has led to increased economic uncertainty, market volatility and energy shocks
in Europe which could threaten global economies emerging from two years of pandemic.
In the UK, increased energy prices could compound pre-existing inflationary pressures,
which could impact on consumer confidence and ability to save and invest. A prolonged
period of market downturn, reduction in consumer confidence and inflationary pressures
could materially impact on Quilter’s business performance. Additionally, further escalation
of the conflict in Ukraine could increase the threat of cyber attacks, for example aimed at
critical UK infrastructure in retaliation for economic sanctions.
Disruptive competition and technology
There is a continued trend of merger and acquisition activity in the asset management
sector, which is increasing competition and accelerating technological advances. This could
mean competitors grow in scale and acquire skills and technology, accelerating their digital
capabilities and having the potential to erode Quilter’s market share.
Climate change – disorderly transition to net zero
Accelerating action towards the goals of the Paris Agreement was a key goal of the COP26
climate change conference in Glasgow in November 2021. Securing global net zero emissions
by mid-century is a stretching demand. A disorderly transition to a low carbon economy
could have financial impacts for Quilter caused by investment volatility or increased costs
due to additional regulatory burden. Given current industry-wide data limitations and
evolving guidance in this area, careful consideration will also need to be given to the risk
of unintentionally conveying misleading information about our environmental soundness,
or about the environmental soundness of our products and services.
Political changes and taxation
Restoration of public finances after the pandemic may require further changes to the tax
regime, in addition to the rises in UK National Insurance that have been announced. These
could include direct taxes on wealth or changes to pension tax relief for high earners. Tax
changes affecting customers’ wealth and ability to save could impact Quilter’s investment
flows and assets under advice and administration.
Generational shifts
The UK’s ageing population, combined with the rapid growth in the total value of
UK household wealth over the last 20 years, is causing shifts in generational wealth
accumulation. A significant proportion of this wealth is held by the over-45s and, over the
next 30 years, this is set to be transferred between generations as inheritance or gifts. A
further intergenerational trend is the transfer of risk from institutions (employers, the state
and financial service providers) to individuals, for example as seen in the pension industry.
These trends present opportunities for Quilter of increased demand for wealth management
and advice services, but Quilter will also need to strategically adapt to changing future
customer needs.
Quilter Annual Report 2021
73
Strategic ReportGovernance ReportFinancial statementsOther information Viability statement
and going concern
Risk management and internal control
The Directors are responsible for ensuring that management
maintains an effective system of risk management and internal
control and for assessing its effectiveness. Such a system is
designed to identify, evaluate and manage, rather than
eliminate, the risk of failure to achieve business objectives
and can only provide reasonable and not absolute assurance
against material misstatement or loss.
Quilter is committed to operating within a strong system of
internal control that enables business to be transacted and risk
taken without exposing itself to unacceptable potential losses
or reputational damage. The Quilter Group Governance Manual
sets out the Group’s approach to internal governance and
establishes the mechanisms and processes by which
management implements the strategy set by the Board
to direct the organisation, through setting the tone and
expectations from the top, delegating its authority and
assessing compliance.
Quilter’s principles of internal control (covering financial,
operational and compliance areas) are to maintain:
– clearly defined delegated authorities;
– clearly defined lines of responsibility;
– robust recording and reporting of transactions to support
the financial statements;
– financial reporting controls procedures and systems which
are regularly reviewed;
– protection of assets; and
– financial crime prevention and detection.
The Enterprise Risk Management Framework is overseen
by the Board Risk Committee and aims to align strategy, capital,
processes, people, technology and knowledge in order to
evaluate and manage business opportunities and threats in
a structured, disciplined manner. The Group’s principal risks
and uncertainties are set out on pages 69 to 72.
Further information on the Directors’ review of Risk and internal
control can be found on pages 104 to 107.
Viability statement
In accordance with provision 31 of the UK Corporate
Governance Code 2018, the Directors have assessed the
prospects of the Group for a period longer than the 12 months
required in the going concern statement.
Quilter’s Risk Appetite Framework supports the delivery of
Quilter’s strategy and business plan with risk preferences and
appetite playing a central role in informing decision making
across the Group.
Every year, the Board considers a three-year strategic plan and
also an ORSA for the Group, as required by our UK regulators.
The plan makes certain key assumptions in respect of the
competitive markets and political environments in which the
Group operates, economic assumptions, the level of support
provided to companies within the Group and the impact of key
strategic initiatives. This year, the strategic plan considered the
impact of COVID-19, and the risks and challenges this presents
to the Group, in particular, the potential for further volatility in
debt, equity and currency markets which can adversely impact
the Group’s AuMA, revenue and profitability.
The one-year planning period has greater certainty, and is used
to set detailed budgets across the Group. Although three years
is regarded as an appropriate period for the assessment of the
Group’s viability, the Board also regularly considers other
strategic matters that may affect the longer-term prospects of
the Group. This includes the Board’s assessment of the principal
risks and uncertainties facing the Group in the longer term,
including any emerging risks, such climate change and the
generational shifts potentially impacting the ability of newer
generations to accumulate wealth from income. The Board’s
longer-term view is that the Group will continue to grow as a
wealth manager, serving clients throughout their lives
encompassing their accumulation and decumulation phases.
The Board’s assessment included reviews of capital and liquidity
and an assessment of the principal risks over the three-year
planning period, which included the impact of COVID-19. A large
portion of the Group’s revenue is correlated to the Group’s
AuMA, which can move materially when there is significant
volatility in global financial markets, as was experienced in 2020
with the impact of the COVID-19 pandemic.
74
Quilter Annual Report 2021
Conclusion on viability
Considering the Group’s current capital and trading position,
its principal risks, and remaining three-year period of the
strategic plan, with due consideration of the impact of the
COVID-19 pandemic, the Board has a reasonable expectation
that the Company and the Group can continue in operation
and meet their liabilities as they fall due over the period to
31 December 2024.
Going concern
The Directors have considered the resilience of the Group,
taking into account its current financial position, the principal
risks facing the business and the effectiveness of the mitigating
strategies which are or will be applied. As a result, the Directors
believe that the Group is well placed to manage its business risks
in the context of the current economic outlook and has sufficient
financial resources to continue in business for a period of at least
12 months from the date of approval of these consolidated
financial statements, and continue to adopt the going concern
basis in preparing the consolidated financial statements.
This Strategic Report was approved by the Board
on 9 March 2022.
Glyn Jones
Chair
On behalf of the Board
Appropriate aspects of the strategic plan are stress-tested
under the ORSA and ICAAP reviews to understand and help
set capital and other requirements. The stress tests considered
include a broad range of scenarios, including economic and
market shocks of up to 40% falls in equity markets, mass lapse
events, new business growth scenarios and severe business
interruption, equivalent to 1-in-50 and 1-in-200 year events.
In all severe but plausible adverse tests, sufficient capital and
liquidity were available after management actions,
demonstrating the Group’s resilience to adverse conditions.
Management actions included the cessation of dividend
payments in the most extreme scenarios, as well as actions
to reduce costs, which included reductions in variable
compensation costs, discretionary spend, and staff recruitment
freezes, similar to the tactical cost savings made during 2020.
Reverse stress tests, which are performed to identify events
which would make the current plan unviable, have also been
performed. The results of these tests indicate that the Group
can reasonably expect to have sufficient capital and liquidity
to be able to meet its liabilities over the planning period and
could sustain a significant equity market fall, after management
actions, well below the market falls experienced during the first
half of 2020 with no foreseeable market recovery.
The Board has further considered potential scenario outcomes
for the overall costs associated with client redress in relation
to Defined Benefit transfer advice in Quilter Financial Planning.
The outcome of the analysis confirmed that under the potential
scenario outcomes modelled Quilter is expected to remain
profitable in all future years over the plan period and that free
cash is projected to remain above internal long-term target
levels set by reference to the Group’s risk appetite at all points
during the projection period.
The Board regularly monitors performance against a range
of predefined key performance indicators and early warning
thresholds, which will identify if developments fall outside of
the Group’s risk appetite or expectations, allowing management
action to be taken.
The Strategic Report, on pages 1 to 75, sets out the Group’s
financial performance, business environment, outlook and
financial management strategies. In addition, details of the
Group’s principal risks and risk management framework
are set out on pages 69 to 72.
Quilter Annual Report 2021
75
Strategic ReportGovernance ReportFinancial statementsOther information Chair’s introduction to
corporate governance
In this section
76
Chair’s introduction
to corporate governance
78 Governance at a glance
80 Board of Directors
85 Principal decisions of the Board in 2021
86 Governance in action: The sale of Quilter International
88
Governance in action: Report from the Designated
Workforce Engagement Directors
Board Corporate Governance and Nominations
Committee report
90
Board Technology and Operations Committee report
96 Board Audit Committee report
102 Board Risk Committee report
108
112 Board Remuneration Committee report
119 Directors’ Remuneration Policy
132 Annual Report on Remuneration
146 Directors’ Report
Glyn Jones
Chair
76
Quilter Annual Report 2021
Dear shareholder,
The Board governance framework we established when the
business was listed in 2018 has served us well through a period
of great change when the business has established itself as a
standalone listed company, defined for itself a sharper more
focused business perimeter, implemented its new investment
platform and laid the foundations for future growth. In 2021
that robust Board governance has supported and challenged
management while it tackled the continuing challenges created
by the COVID-19 pandemic, completed the sale of the Quilter
International business and continued to build our business
strategy to become even more customer centric. We describe
in more detail on pages 86 and 87 how the Board and its
Committees worked together to oversee all aspects of the sale
of Quilter International from the strategic analysis that a sale
at an acceptable price would be in the best interests of our
stakeholders to considering how the transaction should be
presented in our financial statements.
The sale of the Quilter International business, which was
announced to the market in April 2021, marked the completion
of the redefining of the business perimeter and, with the launch
of our new investment platform, the transformation of Quilter
into a modern wealth management business. We are now a
smaller, simpler and highly focused business.
This was therefore a natural point at which to review the
strategy for the business and the new business model which
more effectively brings to bear the strong capabilities in our
various businesses. We expect our new operating structure
to deliver growth, and outstanding service for our customers
in a more efficient and effective organisational structure.
We were very fortunate that our Board strategy meeting in
July 2021 took place in a period when UK Government guidance
in relation to the COVID-19 pandemic restrictions were at their
lightest and Paul Feeney and his management team were able
to put forward a comprehensive and compelling vision of what
the Quilter business could become. That refreshed strategy and
several new initiatives, such as the plan to launch a hybrid
advice offering and the combination of our Financial Planning
business, Quilter Private Client Advisers, with our Discretionary
Fund Management Business, Quilter Cheviot, are indications
that Quilter is in very good health and ready to fully leverage
all of its capabilities.
Culture and engagement
Our business has benefited over many years from having
engaged people who are passionate about providing great
service to our customers and advisers. The significant changes
we have delivered in the midst of a global pandemic have been
stretching and we have seen colleague engagement slightly
decline as measured by our regular Peakon colleague surveys.
While not surprising, we are determined to regain lost ground.
The Quilter executive team are firmly focused on providing
strong leadership through these challenging times and they
have initiated the “We Rise” campaign to ensure our people
are truly inspired by the strategy for our business. The early
indications are that these initiatives are making a difference.
The sale of the Quilter International
business, which was announced to the
market in April 2021, marked the
completion of the redefining of the
business perimeter and with the
launch of our new investment
platform the transformation of
Quilter into a modern wealth
management business.
During the year we appointed Tazim Essani as our second
Workforce Engagement Director responsible for bringing the
voice of our people into our Boardroom. Tazim will particularly
focus her time on supporting management’s Diversity and
Inclusion agenda. You can hear more from Paul Matthews
(our other Workforce Engagement Director) and Tazim on
pages 88 and 89.
Changes to your Board
Rosie Harris has decided not to seek re-election at our 2022
Annual General Meeting and is stepping down from our Board
on 30 April 2022. On behalf of the Board, I would like to thank
Rosie for her tremendous work as a Board member and as
Chair of the Board Risk Committee.
As previously reported, I have now served for just under six
years as your Chair and I intend to retire as Chair of your Board
in 2022, once a successor is ready to take the reins. Our Board
governance had already put in place a Chair succession process
and that process is being followed under the leadership of our
Senior Independent Director, Ruth Markland.
When I step down from the Board in 2022, I will leave a strong,
cohesive Board that has successfully navigated the challenges
our business has faced in its first few years as an independent,
listed company with great commitment. I am very grateful for
the strong support I have received from my colleagues in my
time as Chair of Quilter.
Looking ahead
In 2022, the Board will be even more focused on ensuring
that our business is delivering on the commitments we have
made to all our stakeholders to deliver growth and efficiency.
By delivering a broader range of suitable, competitive products
for our customers and the advisers we support, our people
can benefit from the opportunities that growth and success can
bring. In addition to this, the communities in which we operate
benefit from the success of a company that sets high standards
and has a clear purpose.
Glyn Jones
Chair
Compliance with the UK
Corporate Governance Code 2018
UK Corporate Governance Code 2018 (the “Code”)
Quilter is subject to the Code and complied with all of
its provisions during the year. Details of our Corporate
Governance Framework are available on page 79 and our
website at plc.quilter.com. The Code is publicly available at
www.frc.org.uk.
Disclosure Guidance and Transparency Rules (“DTRs”)
By virtue of the information included in this Governance
section of the Annual Report including our Directors’ Report
(pages 146 to 149) we comply with the corporate governance
requirements of the FCA’s DTRs.
Johannesburg Stock Exchange (the “JSE”)
Quilter has a secondary listing on the Johannesburg Stock
Exchange and is permitted by the JSE Listings Requirements
to follow the corporate governance practices of our primary
listing market, London. Quilter is, however, mindful of the
provisions of the King IV Governance principles and the
expectations of our South African shareholders.
Principles of the UK Corporate
Governance Code 2018
More
information
Board leadership and company purpose
Long-term value and sustainability
Culture
Shareholder engagement
Other stakeholder engagement
Oversight of Board level conflicts of interest
Division of responsibilities
Role of the Chair
Division of responsibilities on the Board
Assessment of Non-executive Directors role
Assessment of independence on the Board
Composition, succession and evaluation
Board effectiveness
Board and Executive succession planning
Audit, risk and internal control
Integrity of financial statements
Fair, balanced and understandable
Internal controls and risk management
Assessment of external independent auditor
Principal and emerging risks (Risk Review)
Viability statement and going concern
Remuneration
Policy, practices and alignment with purpose,
values and long-term strategy
Independent judgement and discretion
1-55
76-77
38
35-38
94
79
79
79 and 92
79
94 and 95
92
98
99
104
100-101
66-69
74
117-119
112
Quilter Annual Report 2021
77
Strategic ReportGovernance ReportFinancial statementsOther information Governance at a glance
Strong and effective leadership
8
Board members under
five-year tenure
36%
9%
Female Board members
Asian-Indian Board members
Length of tenure for Chair and
Non-executive Directors
Female representation on Board
Ethnicity
0-1 years
1-3 years
3-4 years
4-5 years
5-6 years
Female
Male
2
1
2
3
1
4 (36%)
7 (64%)
White
Asian-Indian
Other
10 (91%)
1 (9%)
0 (0%)
Female representation in senior
Board roles*
Sexual orientation
Industry knowledge and experience
Female
Male
1 (25%)
3 (75%)
Heterosexual
LGBT+
11 (100%)
Accounting and finance
0 (0%)
Asset management
*Defined by the FTSE Women Leaders Review as being
the Chair, Senior Independent Director, Chief Executive
Officer and Chief Financial Officer roles.
Female representation
in senior Non-executive Board roles
Female
Male
4 (57%)
3 (43%)
Quilter defines senior Non-executive Board roles as the
Chair, Senior Independent Director, or Chair of a Board
Committee.
Other/Prefer not to say
0 (0%)
Distribution
Governance
Insurance
International financial services
IT and operations
Legal
Risk
Wealth management
Figures represent number of Board members with
relevant experience.
Board meeting attendance during 2021
Chairman and
Executive Directors
Scheduled Board
meetings
Ad hoc Board
meetings1
Independent Non-executive
Directors
Scheduled Board
meetings
Ad hoc Board
meetings1
Glyn Jones
Paul Feeney
Mark Satchel
8/8
8/8
8/8
3/3
3/3
3/3
3/3
3/3
3/3
3/3
1/1
In addition to the meetings reported above, sufficient time was provided, periodically, for the Chair to meet privately with the Senior Independent Director and the Non-executive
Directors.
Tim Breedon2
Tazim Essani3
Rosie Harris
7/8
6/6
8/8
8/8
8/8
8/8
8/8
4/4
George Reid
Chris Samuel4
Paul Matthews
Ruth Markland
Moira Kilcoyne
3/3
3/3
3/3
1The ad hoc meetings shown above related to the oversight of the sale of Quilter International.
2Tim Breedon was unable to attend one meeting due to a long-standing commitment. He provided his comments to the Chair in advance of the meeting.
3Tazim Essani joined the Board in March 2021.
4Chris Samuel joined the Board in July 2021.
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Quilter Annual Report 2021
Operating within a robust governance framework
The Board
Chair
Glyn Jones
The Chair is accountable to shareholders
for leading the Board and ensuring the
Board receives timely accurate
information to take good decisions
for the benefit of all stakeholders.
Senior Independent Director
Ruth Markland
The Senior Independent Director
supports the Chair on all governance
issues and provides a communication
channel between the Chair and
Non-executive Directors.
Independent Non-executive Directors
The Non-executive Directors support
and constructively challenge the
executive team within a spirit of
partnership and mutual respect.
All the Non-executive Directors are
considered to be independent.
Board Committees
Board Corporate
Governance and
Nominations
Committee
Chair: Glyn Jones
Board Audit
Committee
Board Risk
Committee
Board Technology
and Operations
Committee
Board
Remuneration
Committee
Chair: George Reid
Chair: Rosie Harris
Chair: Moira Kilcoyne
Chair: Ruth Markland
Executive Directors
Paul Feeney and Mark Satchel
The Quilter Board has delegated the day to day running of the Group to the Chief Executive Officer. The Executive Directors make and implement
operational decisions to run the Quilter business on a day-to-day basis. To support the Chief Executive Officer in discharging his responsibilities,
he has created the Quilter Group Executive Committee. The Quilter Group Executive Committee has in turn delegated certain of its
responsibilities to the management committees below and receives regular reports from each of these committees on their activities. The
executive team reports to the Chief Executive Officer for their respective areas of responsibility and delivery of the Operating and Business Plans.
Key management committees
Responsible for overseeing specific areas of responsibility such as the Group’s operations, technology functions and responsible investing.
Executive Risk Forum
Overseeing, challenging and
monitoring the effectiveness of
the Risk and Control framework
of the Group.
Operating Committee
Supporting the Chief Operating
Officer in the discharge of her
duties and co-ordinating the
Group’s operations and
technology arrangements.
Inclusion and Diversity
Committee
Driving the Group’s diversity and
inclusion agenda across the
Group.
Responsible Wealth Manager
Steering Group
Providing direction and
monitoring of the responsible
wealth manager strategy.
The Board is the decision-making body for all matters of
such importance as to be of significance to Quilter as a whole
because of their strategic, financial or reputational implications
or consequences. A summary of the matters that are reserved
for the Board’s decision, which includes Board appointments,
Quilter’s strategy, financial statements, capital expenditure
and any major acquisitions, mergers or disposals, and the
appointment and removal of the Company Secretary,
can be found at plc.quilter.com.
2021 Board activity and how the Board spent its time
26%
35%
Business performance
oversight
(2020: 35%)
Strategy and delivery
of strategy
(2020: 20%)
15%
Stakeholder management
(2020: 10%)
24%
Risk management
and governance
(2020: 25%)
Quilter Annual Report 2021
79
Strategic ReportGovernance ReportFinancial statementsOther information Board of Directors
7.
9.
8.
11.
2.
1.
The Quilter plc Directors met in person during 2021 when
permitted under the UK Government COVID-19 restrictions.
1. Glyn Jones
Chair
2. Paul Feeney
Chief Executive Officer
The Chair and all the Non-executive Directors have served on
the Board for six years or less. All the Directors are subject to
annual re-election by shareholders and the specific reasons
why each Director’s contribution is, and continues to be,
important to the Company’s long-term sustainable success are
set out in their biographies on pages 82 to 84. As announced
on 28 January 2022, Rosie Harris has decided not to stand for
re-election at the Company’s 2022 Annual General Meeting
and she will stand down from the Board on 30 April 2022.
Glyn Jones has announced his intention to retire in 2022.
80
Quilter Annual Report 2021
7. Rosie Harris
Independent
Non-executive Director
8. Moira Kilcoyne
Independent
Non-executive Director
4.
5.
10.
3.
6.
3. Mark Satchel
4. Ruth Markland
Chief Financial Officer
Senior Independent Director
5. Tim Breedon CBE
Independent
Non-executive Director
6. Tazim Essani
Independent
Non-executive Director
9. Paul Matthews
Independent
Non-executive Director
10. George Reid
Independent
Non-executive Director
11. Chris Samuel
Independent
Non-executive Director
Quilter Annual Report 2021
81
Strategic ReportGovernance ReportFinancial statementsOther information
Board of Directors
continued
Glyn Jones
Chair
Appointed November 2016
Paul Feeney
Chief Executive Officer
Appointed August 2012
Committee membership
– Board Corporate Governance and Nominations Committee (C)
– Board Remuneration Committee
Skills and experience:
Glyn has over 20 years’ experience of chairing Boards, including
those of Aldermore Group, Aspen Insurance Holdings, Hermes
Fund Managers, BT Pension Scheme Management and Towry.
This extensive experience provides him with the skills and
understanding needed to lead an effective and cohesive Board
at Quilter. His significant experience in UK and international
financial services, gained during his tenures as CEO of Gartmore
Investment Management and Coutts Group, and whilst running
Standard Chartered’s international private banking business
in Hong Kong, provides him with the necessary knowledge to
lead discussions on key business matters including strategy,
performance and risk. Glyn is a Fellow of the Institute of
Chartered Accountants in England and Wales. Glyn intends
to retire in 2022 once his successor is in place.
Skills and experience:
Paul is an experienced, entrepreneurial leader, having held
various senior business roles in large international financial
services businesses, including as Chief Executive Officer of
NatWest Private Bank, and NatWest Investments USA, Group
Managing Director and Head of Distribution for Gartmore
Investment Management, and Global Head of Distribution at
BNY Mellon Asset Management International. During his career,
Paul has developed a deep understanding of the challenges,
risks and opportunities faced by the industry, thereby enabling
him to create and develop the vision and strategy of the Group.
Paul’s strong commercial acumen and dynamic leadership style
allow him to effectively oversee the execution of our strategy.
In recognition of his role in the industry, in January 2021, Paul
was asked to chair the FCA Practitioner Panel and he held this
position until 1 March 2022. Paul is passionate about promoting
good mental health, and issues around mental health, both
across the industry and at Quilter where he has sponsored
the Thrive campaign to support colleagues including those
impacted by the COVID-19 pandemic.
Mark Satchel
Chief Financial Officer
Appointed March 2019
Ruth Markland
Senior Independent Director
Appointed June 2018
Skills and experience:
Mark brings deep finance, corporate action and business
experience to the Board. He joined Old Mutual in the UK in
January 2000 and held numerous leadership positions within
the finance function and businesses there, during which time
he played key roles in the acquisitions of Intrinsic (now Quilter
Financial Planning) and Quilter Cheviot. This experience has
been invaluable in ensuring that Quilter effectively executes
its strategy, for example allowing him to lead the successful
disposals of Quilter Life Assurance and Quilter International.
Mark previously served as Chief Financial Officer of the business
from 2010 to August 2017 and as Corporate Finance Director
for the 17-month period to March 2019. Mark is qualified as a
Chartered Accountant in South Africa, and worked for KPMG
in both South Africa and Canada prior to moving to the UK.
Mark is a Trustee of The Old Grey Europe Charitable Trust.
Committee membership
– Board Audit Committee
– Board Corporate Governance and Nominations Committee
– Board Remuneration Committee (C)
Skills and experience:
Ruth, a solicitor and previously Managing Partner of Freshfields
Bruckhaus Deringer’s Asia business, has a wealth of FTSE-100
Board experience. She spent over ten years on the Boards of
Standard Chartered plc and Sage Group plc, where she served
as Senior Independent Director and Chair of the Remuneration
Committees. Ruth was also an independent Non-executive
Director of Deloitte LLP for five years until May 2020 and was a
member of the Supervisory Board of Arcadis NV until April 2021.
She has a strong understanding of corporate governance and
Boardroom dynamics, enabling her to act as a helpful sounding
board for the Chair and other Board members. Ruth was
appointed Chair of the Board Remuneration Committee in May
2020, having served as a member since joining the Board. She
brings extensive knowledge of remuneration governance and
best practice, together with her deep understanding of the
remuneration framework at Quilter.
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Quilter Annual Report 2021
Tim Breedon CBE
Independent Non-executive Director
Tazim Essani
Independent Non-executive Director
Appointed June 2020
Appointed March 2021
Committee membership
– Board Corporate Governance and Nominations Committee
– Board Risk Committee
– Board Remuneration Committee
Committee membership
– Board Audit Committee
– Board Remuneration Committee
– Workforce Engagement Director
Skills and experience:
Tim is an experienced Non-executive Director and Committee
member. He has had a distinguished career in financial services,
with past appointments including Group Chief Executive Officer
of Legal & General, being a Member of the Takeover Panel, and
holding Non-executive Director roles with the Association of
British Insurers and the Financial Reporting Council. In February
2022, Tim retired from the board of Barclays Bank plc, and
stood down as chair of the Barclays plc and Barclays Bank plc
Board Risk Committee, and as a member of the Barclays Board
Audit Committee, Board Nomination Committee and Board
Remuneration Committee. Tim continues to serve on the Board
of Barclays plc and chairs Barclays Bank Ireland PLC and Apax
Global Alpha Limited. Tim’s extensive business leadership and
governance best-practice experience enables him to provide
challenge, advice and support to Quilter management on
business strategy, performance, decision making and
governance matters.
Skills and experience:
Tazim’s wealth of experience in senior executive roles at
regulated financial services businesses over the last 30 years
equips her well to provide strategic guidance and constructive
challenge to Quilter’s leadership team. Her executive career has
focused on strategy and business development to drive growth
and transformation, with her previous roles including a senior
business strategy role at Santander UK, Group Head of
Corporate Development at Close Brothers Group plc and senior
roles at GE Capital and Royal Bank of Scotland. Throughout her
career, Tazim has developed a deep understanding of corporate
finance, transformational change and business development,
enabling her to contribute strongly to the Board’s deliberations.
Tazim also brings in depth experience of interpretation and
analysis of financial statements enabling her to contribute to the
work of the Board Audit Committee, which she was appointed
to in September 2021. Alongside Paul Matthews, Tazim is a
designated Workforce Engagement Director with a particular
interest in promoting diversity and inclusion. Tazim is a Non-
executive Director of City of London Investment Group plc.
Rosie Harris
Independent Non-executive Director
Moira Kilcoyne
Independent Non-executive Director
Appointed April 2017
Appointed December 2016
Committee membership
– Board Audit Committee
– Board Risk Committee (C)
– Board Technology and Operations Committee
Committee membership
– Board Risk Committee
– Board Technology and Operations Committee (C)
Skills and experience:
Rosie has extensive knowledge and experience of risk
management within the insurance and wealth management
industries, having served as Chief Risk Officer for UK Life at
Aviva, Group Risk Director at Old Mutual plc and Chief Risk
Officer (Insurance) and Managing Director, General Insurance
at Lloyds Banking Group plc. She is also currently Chair of Tokio
Marine Kiln’s Insurance business, a Non-executive Director
of its Syndicates business and chairs its Risk Committee.
This extensive experience has been invaluable as Quilter has
developed and embedded its risk management framework.
Rosie provides valuable insights into managing and mitigating
the risks that are inherent in running a successful wealth
management business. Rosie will be stepping down from
the Quilter Board on 30 April 2022 as in January 2022 she was
appointed to the Board of several companies within the Phoenix
Group. Rosie is a member of the Institute of Chartered
Accountants in England and Wales. She is also a Council
Member of the University of Birmingham.
Skills and experience:
Moira brings over 25 years’ technology and cyber security
leadership, having spent much of her career working in senior
technology roles at Morgan Stanley and Merrill Lynch, latterly
executing global change management and transformative IT
implementation as Co-Chief Information Officer for Global
Technology and Data at Morgan Stanley. Moira is also currently
a Non-executive Director of Citrix Systems Inc and Arch Capital
Group. This experience, gained at both executive and non-
executive level, together with her understanding of business
operations, operational resilience, management of data and
supplier oversight, equips her to oversee and challenge the
design and delivery of Quilter’s technology and operations
strategies as well as the ongoing oversight of Quilter’s
investment platform. Moira is Trustee of the Board of
Manhattan College.
Quilter Annual Report 2021
83
Strategic ReportGovernance ReportFinancial statementsOther information Board of Directors
continued
Paul Matthews
Independent Non-executive Director
George Reid
Independent Non-executive Director
Appointed August 2018
Appointed February 2017
Committee membership
– Board Risk Committee
– Board Remuneration Committee
– Workforce Engagement Director
Committee membership
– Board Audit Committee (C)
– Board Risk Committee
– Board Technology and Operations Committee
Skills and experience:
Paul is an experienced FTSE-100 Board Director who has over
four decades’ worth of knowledge of the savings and pensions
industry. His career at Standard Life, spanning nearly 30 years,
where his roles included Group Executive Director, Chief
Executive Officer UK & Europe and Chair of Standard Life
Wealth, enables him to identify, and support management
to understand, the opportunities and risks facing Quilter,
particularly in its distribution businesses. This insight enables
him to effectively assess and challenge the executive’s strategy
proposals, execution and risk management. As an executive
mentor at Merryck & Co, Paul uses his extensive leadership
skills and experience to coach senior leaders. Paul’s track
record in leading major businesses that rely on having strong
leadership and positive cultures is also helpful in discharging
his role as a designated Workforce Engagement Director,
which he performs alongside Tazim Essani.
Skills and experience:
George has extensive financial experience having spent over
20 years in the accounting profession. This knowledge, gained
during lengthy tenures at PwC, and, latterly, Ernst & Young LLP
as managing partner and Head of Financial Services for
Scotland and UK regions, provides George with a deep
understanding of accounting and audit matters, and the control
environment required for a wealth management business.
Such experience allows him to critically assess key accounting
and financial considerations including those associated with
our recent disposal of Quilter International. George is a Fellow
of the Institute of Chartered Accountants in England and Wales.
In September 2021 George was appointed as the Senior
Independent Director and Audit Committee Chair of FIL Life
Insurance Limited.
Patrick Gonsalves
Company Secretary
Appointed January 2017
Skills and experience:
Patrick is an experienced Company Secretary with broad
experience across the financial services industry gained with
Lloyds Bank, NatWest Bank and, up until December 2016,
as Deputy Secretary of Barclays plc. Patrick was appointed
Company Secretary of Quilter in January 2017 and is a Fellow
of the Chartered Governance Institute. Patrick has extensive
experience of providing advice and support to listed company
boards in periods of significant change which is relevant to his
role at Quilter.
Chris Samuel
Independent Non-executive Director
Appointed July 2021
Committee membership
– Board Risk Committee
– Board Technology and Operations Committee
Skills and experience:
Chris is an experienced Chair and Non-executive Director and
his deep experience in the financial services industry enables
him to challenge, advise and support Quilter’s management
team on a wide range of business, investment, distribution,
finance and operational matters. Chris was Chief Executive of
Ignis Asset Management, a business with circa. £65bn of assets
under management, from 2009 to mid-2014. Over this period,
he led the successful transformation, and then sale, of the
business. Chris has held Board-level positions at a number of
asset management businesses including Gartmore, Hill Samuel
Asset Management, Cambridge Place Investment Management
and spent 10 years with a US Investment Bank, Prudential-
Bache. He began his career with KPMG where he qualified as
a Chartered Accountant. Chris chairs BlackRock Throgmorton
Trust plc and JP Morgan Japanese Investment Trust plc and is
a Non-executive Director of UIL Limited. Chris will stand down
as a Non-executive Director of Alliance Trust PLC at their Annual
General Meeting in April 2022.
84
Quilter Annual Report 2021
Principal decisions of the Board in 2021
Building a simpler, more
focused business
We reported to shareholders in our 2020 Annual Report that
we were conducting a strategic review of Quilter International.
As part of that review, the Board carefully considered a range
of options for the future of the International business, including
the option to retain the business and invest further to drive
growth. The Board concluded that there would be significant
risks and costs associated with retaining the business which
had limited strategic fit with the rest of the Group. The Board
assessed that a sale would be the most value-enhancing
strategy as it would enhance the growth profile of the Group
and allow a simplified, more focused wealth management
business to be created. A range of bids were received for the
Quilter International business and were critically assessed by
an ad hoc Committee, the Transaction Oversight Committee,
appointed by the Board, with support from external advisers.
In coming to the conclusion to sell the business to Utmost Group,
the Board carefully considered the impact of the transaction on
the customers and employees of Quilter International and on
the communities in which the business operates. There were
regular interactions with the relevant regulators. Quilter’s
shareholders confirmed their support for the transaction at a
General Meeting held on 17 June 2021. Further details on how
the Board and its Committees oversaw the transaction are set
out on pages 86 and 87.
The sale of Quilter International
pages 86 and 87.
Setting a strategy for growth
and efficiency
Having agreed the sale of the Quilter International business
which would conclude the re-shaping of the perimeter of the
business, the Board reviewed the Group’s strategy to ensure
that the simplified and more focused business was structured
to deliver for its customers and shareholders. A more customer-
oriented operating model was endorsed with two business
segments closely aligned to our key customer groups. The
Board also agreed a range of growth initiatives for the two
business segments that would leverage the broader capabilities
of the Group’s new investment platform. New growth initiatives
supported by the Board included the decision to launch a
hybrid advice channel and the further digitalisation of the
business. It was also agreed that the time was right for Quilter
to hold a Capital Markets Day.
Being transparent with investors
In preparation for the Capital Markets Day held on 3 November
2021, the Board reviewed the capital that the business would
require to deliver the growth that the business is capable of, as
well as the investment required to enhance the efficiency of the
business as part of a programme of simplification. The Board
concluded that some £90 million of the gross cash proceeds
from the sale of the International business should be retained
for these purposes. The Board also agreed that £328 million of
the sale proceeds should be returned to shareholders. Given
the enhanced growth profile of the business, the Board agreed
that a revised Dividend Policy should be adopted that sets a
target pay-out range of 50% to 70% of post-tax, post-interest,
adjusted profits, revised from 40% to 60% of post-tax adjusted
profits previously. Board members reviewed and commented
on drafts of the Capital Markets Day presentations ahead of
publication and endorsed the targets that were communicated
to the market.
Setting stretching targets for
management
Having completed the implementation of the new investment
platform and completed the disposal of Quilter International,
in December 2021 the Board approved a three-year operating
plan which clearly articulates the key deliverables for the Group
over the next three years. Achievement of these strategic and
business as usual objectives will ensure that Quilter is able to
provide new, innovative products for its customers, create
opportunities for employees to develop their careers and
provide superior returns for investors. Alongside the Operating
Plan, the Board has approved a three-year Business Plan that
sets stretching financial and business growth targets for
management that are consistent with the commitments
made at the Group’s Capital Markets Day.
Becoming the Responsible
Investment Manager
The Board has for some time recognised both the opportunity
our business has in responding to the increased demand from
customers for ESG products as well as enhancing our risk
framework to ensure we are effectively managing
environmental risks. The Board confirmed its support for
the first phase of the responsible investing strategy which
is requiring Quilter to embed consideration of our customers
ESG preferences into our advice, investment management and
platform services. The second phase of that strategy will be
reviewed by the Board early in 2022. The Board will continue to
closely oversee this important element of the Group’s strategy.
Quilter Annual Report 2021
85
Strategic ReportGovernance ReportFinancial statementsOther information Governance in action
The sale of Quilter International
Overview
In April 2021, Quilter announced that it had entered into an
agreement with Utmost Group with respect to the sale of
Quilter International. The disposal completed on 30 November
2021 for a total cash consideration of £481 million. The Board
and relevant Committees all oversaw specific aspects of the
transaction and worked in collaboration to oversee the
July to November 2020
The Quilter Board reviewed the strategy for the Quilter
International business including the option to retain and invest
in the business.
A Board Transaction Oversight Committee was formed to
review in detail the strategic options for Quilter International,
including the possibility of a sale.
December 2020 to March 2021
The Board concluded that a sale of Quilter International could
be in the best interests of all stakeholders if a transaction could
be concluded at an appropriate price and terms.
A robust sales process was initiated under the leadership
of the Chief Financial Officer with strong interest from a range
of interested parties bidding to buy the business.
The Board Transaction Oversight Committee reviewed the
list of interested parties and, with support from their advisers,
identified a short-list of potential buyers who were invited to
take part in an in-depth due diligence process.
transaction through to completion. Quilter continues to work
closely with Utmost Group to ensure a smooth transition of
essential business services to protect customer interests. The
Board and Board Committee were supported by their advisers
on the process and conclusions.
March to May 2021
The Quilter Board, on the recommendation of the Board
Committee and its external advisers, unanimously agreed to
recommend to shareholders the sale of Quilter International
to Utmost Group.
Quilter shareholders were sent a Circular setting out the
rationale for the sale of Quilter International.
June 2021
Quilter shareholders approved the sale of Quilter International
with a majority of 99.99% of votes in favour.
Shareholder approval at
99.99%
November 2021
Quilter outlined its plans for returning the proceeds of the sale,
subject to regulatory and shareholder approvals.
The sale of Quilter International to Utmost Group is completed.
The Board Transaction Oversight Committee assessed the
bids from interested parties against an objective set of criteria
including price, achievability, impact on colleagues, customers,
regulatory implications and the pre-agreed terms.
Quilter continues to provide services to the Quilter
International business under a Transitional Services
Agreement.
2022 onwards
Quilter confirms the arrangements for the return of the
proceeds of the sale of Quilter International to shareholders.
Quilter seeks regulatory approval, and convenes a General
Meeting to obtain shareholder approval for the B share scheme
and share consolidation.
Mark Satchel
Chief Financial Officer
Glyn Jones
Chair
Paul Feeney
Chief Executive Officer
86
Quilter Annual Report 2021
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Board and Committee activities
Board/Committee role and
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Number of times the
Board and Committees
considered the sale
Stakeholders considered
The Board
8
Advisers
Colleagues
Communities
Customers
Investors
Regulators
Advisers
Colleagues
Communities
Customers
Investors
Regulators
Investors and
Regulators
Customers and
Advisers
Customers and
Investors
Colleagues and
Investors
Colleagues
Board Transaction
Oversight
Committee
5
Board Audit
Committee
Board Technology
and Operations
Committee
Board Risk
Committee
Board Corporate
Governance and
Nominations
Committee
Board
Remuneration
Committee
3
2
3
1
1
Actions taken
– Oversaw the strategic decision to sell Quilter International
and provided appropriate review and challenge on the
analysis of the various strategic options including the
option to retain the business and invest for future growth.
– Debated the impact of the proposed transaction for our
stakeholders, and most particularly our customers,
colleagues, communities, investors and our regulators.
– Ensured that communications to all stakeholder groups
were appropriate and timely.
– Oversaw the pre-sale preparations in relation to the sale
of Quilter International and approved the criteria to support
the decision making in selecting potential buyers.
– Reviewed the Non-binding Offers received in relation to the
initial price discovery phase and approved on behalf of the
Board which, if any, bidders should proceed to the second
phase of the process.
– Reviewed the Binding Offers received from potential buyers.
Recommended to the Board the buyers with whom a
transaction might be concluded in accordance with the
selection criteria.
– Reviewed the financial impacts of the transaction on the
Group and carefully considered the resulting disclosures
in the Group’s financial statements. PwC were appointed
as advisers on the sale to support on the production of the
Working Capital Report, in accordance with item 1(2)(b) of
Annex 1R to chapter 13 of the Listing Rules, and confirmed
their independence in relation to the transaction.
– Reviewed the details of the Transitional Services
Management Agreement and ensured the appropriate
controls were in place for an efficient transition.
– Considered the impact of the sale on the Group’s overall
risk profile and the impacts for the Group’s capital and
liquidity position.
– Oversaw the assessment of the impact of the transaction
on the Group and provided review and challenge on the sale
to assist in the delivery of the transaction whilst minimising
the operational risk of this change, and in particular ensuring
that there would be no customer detriment.
– Reviewed the impact of the transaction on the succession
plans for the Group.
– Carefully considered the impact on colleagues leaving
the Group and agreed how the all-employee and other
discretionary incentive plans should operate.
Quilter Annual Report 2021
87
Governance in action
continued
Report from the Designated
Workforce Engagement Directors
We are delighted to present our joint report as Workforce
Engagement Directors. We want to share with you our thoughts
on progress in the year, why this is important to the Board and
what we intend to achieve in 2022.
Talking and actively listening to
people’s views is the best way to learn
about the health of an organisation. It
helps me understand the type of culture
that people thrive in which ultimately
drives the long-term success of the
Company. I want to use my skills and
experience to help Quilter be a place
where people can thrive.
Paul Matthews
How we perform our role
As Paul reported in 2020, we have continued to work with
the Quilter Employee Forum. With the agreement of the forum
members, and facilitated by the Forum Chair, Farhana Sadeque,
we attend their meetings in rotation. We only attend part of the
Forum meetings for pre-agreed topics, but we have been able
to listen to the discussions directly and share our thoughts with
Workforce engagement key themes:
Supporting our people
Quilter has continued to conduct regular surveys on employee
engagement. During the year there has been, understandably,
a slight decline in the overall engagement scores reflecting the
considerable level of change Quilter has undergone.
The implementation of our new platform and sale of Quilter
International impacted many people and the measures to
simplify our business have sometimes created uncertainty.
Face to face meetings and gatherings have been largely
impossible during the year as most colleagues have adopted
hybrid working patterns.
Forum members. We have sought views on matters as diverse
as strategy, culture and the return to offices. We have been
impressed with how engaged and committed Quilter
colleagues are and how they are driven to support our clients
and customers. Although we have not been able to meet
people face to face as often as we would have liked during the
pandemic, video technology has enabled good conversations.
We intend to meet more colleagues in person during 2022.
Our progress
People are our most important asset. It is important that Quilter
is an agile employer that attracts and retains talented people
– whoever they are. The pandemic has brought a generational
change in how people work and we are seeing a competitive
labour market where talented people are much in demand.
The Board wishes to support management in creating a culture
where everyone can thrive and people are able to bring their
whole self to work. Appointing Tazim, who is diverse both in
gender and ethnicity, as an additional Workforce Engagement
Director, sets a clear tone from the top as to how seriously the
Board takes its role in actively championing diversity and
inclusion. Since Tazim’s appointment in September 2021,
her priority has been to raise awareness of her role and her
personal interest in championing all talent. She has proactively
built a strong relationship with the Head of HR and the new
Head of Diversity, Inclusion and Talent Acquisition. An example
of how we have raised awareness of the work to create a truly
diverse workforce was when Tazim hosted a dinner to celebrate
Black History month.
Leadership
Management continued to use video technology to remain
extremely visible to colleagues during the pandemic.
Additionally, when possible, the Executive Committee members
and other leaders spent time updating Quilter colleagues and
advisers in person on our strategy and ensuring colleagues
are informed to show them how their work contributes to our
success. The launch of the “We Rise” programme, sponsored
by our Executive Committee, has been an important step to
support our leadership team and all colleagues. In January
2022, our Executive Committee led a virtual conference for
all colleagues to discuss our strategy and support “We Rise”.
“ “ My manager cares about me
as a person.”
“ People from all backgrounds
are treated fairly here.”
“ My manager provides me
with the support I need to
complete my work.”
2021
2020
8.4/10
8.5/10
2021
2020
8.4/10
8.4/10
2021
2020
8.2/10
8.3/10
“Overall engagement.”
2021
2020
7.0/10
7.5/10
88
Quilter Annual Report 2021
Workforce engagement key themes:
Why our role is important
Management is extremely focused on ensuring that our
employees’ voices are heard. The Board receives regular
updates on People and Culture, with data sourced from a
weekly Colleague Pulse survey. Our role has enabled us to get
more colour around the data and help understand the tone of
the conversation, which is not always obvious from data alone.
One important lesson is to ensure we do not generalise about
what our employees think. For example, in the period of
enforced home working, some colleagues actively wanted and
needed to come to the office for mental health or family
reasons or just to be with other like-minded people, whereas
others have thrived working from home and feel this enables
them to be more productive, with a better work/life balance.
Our achievements to date and what we are most proud of
We are delighted to represent the Board to Quilter colleagues
and vice versa. Our role provides a clear, senior direct link to
the Board and our engagement shows colleagues how
seriously the Board takes their issues and wants to hear their
voices. We are looking at ways to reach the broader workforce,
particularly important sub-groups and colleagues in all offices.
We are extremely supportive of the robust strategy that the
Board has already endorsed to progress our diversity and
inclusion agenda and making Quilter a place where you can
bring your whole self to work. The Board recognises that it is a
competitive market for talented individuals, both in the financial
services industry and more broadly, and we need to create an
environment that attracts and retains that talent. We intend to
sponsor and champion opportunities to ensure all colleagues
are heard and make Quilter an open and inclusive workplace.
In 2022 we hope that we can do a lot more in person and share
directly how colleagues’ voices have made a difference in the
decisions the Board has made. We are currently planning how
we can best support the Company in 2022.
When the Board asked me to be an
additional Workforce Engagement
Director in July 2021, I was delighted
to bring a diverse lens to the
conversation. As an ethnically diverse
female, I bring a different perspective
to discussions, particularly within the
financial services industry. I want to
help colleagues to make their voices
and experiences heard.
Tazim Essani
Aligning our culture and values to our strategy
The Board pays particular attention to our culture metrics to
ensure that our culture and values align to our strategy. The
proportion of our colleagues who feel aligned to our purpose
and vision marginally declined in the year, and the “We Rise”
programme has been devised to drive this score up.
One further extremely important measure of a strong and
healthy culture is the extent to which employees feel able
to voice concerns and know that they will be listened to and
appropriate action taken should issues be raised. The survey
makes it clear it is easy for colleagues to highlight areas of
potential concern.
As Paul reported last year, in 2021 the Board has reviewed
both a Group-wide view and individual business lens to ensure
that management action was targeting the underlying issues.
Our employees continue to be aligned to our culture and values
of Dependable, Stronger Together and Pioneering.
George Reid, who is our Whistleblowing Champion, talks more
about this important role in the Board Audit Committee report
which you can read on page 100.
“ “ I feel able to report risks
without fear of reprisal.”
“ The overall business
strategy set by senior
leadership is taking Quilter
in the right direction. ”
2021
2020
8.2/10
8.2/10
2021
2020
7.4/10
7.9/10
Paul Matthews
Independent
Non-executive Director
Tazim Essani
Independent
Non-executive Director
Note: Data as at 31 December 2021 and 30 December 2020 respectively.
Data derived from Peakon staff surveys.
Quilter Annual Report 2021
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Nominations Committee report
At a glance
Committee activity
7%
Board evaluation
2020: 11%
26%
Board and Board
Committee succession
planning
2020: 19%
10%
Executive succession
planning and talent
2020: 24%
40%
17%
Corporate governance
2020: 23%
Responsible business
2020: 23%
Committee highlights 2021
Diversity and inclusion
Heightened focus on Quilter’s
diversity and inclusion strategy.
Committee membership and meetings
attended/eligible to attend
Glyn Jones (Chair)
Tim Breedon
Ruth Markland
6/6
6/6
6/6
Refreshed Board
Continued refresh of Board and Board
Committees, including recommending
to the Board the appointments of Tazim
Essani and Chris Samuel as new
Non-executive Directors.
The process we followed
page 92
ESG
Oversight of the framework to drive
ESG matters.
Committee governance
The Board Corporate Governance and Nominations Committee
currently comprises the Chair of the Board and two
independent Non-executive Directors. Details of the skills and
experience of the Committee members can be found in their
biographies on pages 82 to 84.
Evaluation
As part of the 2021 Board effectiveness review, the Board
has assessed that the Committee membership is appropriate
in providing challenge and oversight and that the Committee
is operating effectively.
Discharging our responsibilities
The Committee reviewed its activities over the previous
12 months against its Terms of Reference and confirmed that
it had fully discharged its responsibilities in line with its remit.
The Terms of Reference are available at plc.quilter.com.
Committee responsibilities
– Reviews the composition of the Board and recommends
the appointment of new Directors.
– Considers succession plans for the Chair and other
Attendance
The Chief Executive Officer and HR Director regularly attend
Committee meetings, except when it would not be appropriate
for them to do so.
Board positions.
– Considers succession plans for key executive leadership
positions.
– Monitors corporate governance issues.
– Oversees the annual Board effectiveness review.
– Provides oversight of the Group’s responsible
business agenda.
Collaboration
The Chair briefs the Board on key discussions and provides a
written report to the Board, where feasible, after each meeting.
The papers and reports presented to the Committee are made
available to all Quilter Non-executive Directors.
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Quilter Annual Report 2021
Dear shareholder,
The work of this Committee focuses largely around ensuring
that the people who make up our Board and our Executive
leadership team have the skills, experience and competencies
needed to deliver the Group’s strategy. We recognise that our
success and the delivery of our corporate strategy, our purpose
and our values, is dependent on attracting, retaining and
motivating high-quality people. As Quilter has moved to being a
simpler, modern wealth manager, we reviewed and shared with
the Board a briefing on talent and succession planning for our
leadership team. This was particularly important as we realigned
our businesses to the two business segments we now report
against and positioned our business to deliver fully on its potential.
The Committee has continued to provide oversight to the
Board and Board Committee succession plans. As I reported
last year, we recommended the appointment of Tazim Essani
to our Board in March 2021 and in July we were pleased to
recommend the appointment of Chris Samuel to the Board.
In January 2022, we announced that Rosie Harris has confirmed
that she will not seek re-election at our 2022 Annual General
Meeting. Rosie has been a tremendous asset to our Board,
and as Chair of our Board Risk Committee. She has overseen
the development of a more mature and embedded risk
management framework and leaves with our thanks and best
wishes. As I stated before, I am intending to retire in 2022 once
my successor is in place, so I have asked our Senior
Independent Director, Ruth Markland, to lead the search for
a new Board Risk Committee Chair. We are fortunate that we
were able to implement our contingency succession plan and
that George Reid, who has been a member of the Board Risk
Committee since his appointment in 2017, has agreed to act as
an interim Chair of the Board Risk Committee from 1 May 2022.
Since Listing, our Board has consistently met or exceeded the
minimum requirements for female representation on the Board
with females taking senior roles chairing the majority of our
Board Committees, and we have also met the recommendations
of the Parker Review. As with all our external recruitment, the
search for the Board Risk Committee Chair and for my successor,
will be managed in accordance with our Board Diversity Policy
and our desire to promote equality in its broadest sense. I remain,
however, conscious that capable diverse talent is in high demand
and that many companies and organisations are seeking
diverse candidates with skillsets similar to the criteria we set.
In addition to our focus on talent and succession, the
Committee has spent considerable time on the oversight and
promotion of our diversity and inclusion agenda to ensure that
Quilter can create an environment where talented and capable
people feel included and can flourish. The Board is strongly
supportive of building a diverse talent pipeline. The strategy
approved by the Committee will maximise how we access talent
that can benefit our Company and ultimately our customers
and advisers. To that end, in July 2021, we asked Tazim Essani
to work alongside Paul Matthews as a Workforce Engagement
Director. You can read more from Paul and Tazim on pages 88
and 89 on their work to date, what has happened as a result
and how they intend to engage with our people going forward.
A key area of focus this year has
been ensuring that our governance
framework overseeing Quilter
as a responsible wealth manager
maximises the opportunities and
minimises the risks.
A further key area of focus for this Committee in 2021 has been
ensuring that our governance framework overseeing our role
as the responsible wealth manager maximises the opportunities
and minimises the risks that this initiative presents. We have
endorsed management’s simplification of the framework and
have been pleased with the progress made both for Quilter as
an investment manager and as a Company. There is, of course,
more to do.
As announced in October 2021, it is my intention to retire
in 2022 and I am not directly involved in the search for my
successor. Our Senior Independent Director, Ruth Markland has
formed a Sub-Committee of the Board Corporate Governance
and Nominations Committee comprising herself, as Chair, Tim
Breedon and George Reid to oversee the recruitment of my
successor. Having sought the views of all Board members, the
Sub-Committee approved a detailed candidate specification in
line with the Board Diversity Policy. External search agents have
been appointed but the process is ongoing at the moment, and
once complete we will update you on the outcome and provide
full details of the process followed.
Ruth Markland provides an update on our 2021 Board
effectiveness review and the changes made to address
the feedback from the review on page 95.
Glyn Jones
Chair
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Board Corporate Governance and Nominations Committee report
continued
Key areas of Committee focus
Board and Board Committee succession planning
The accountabilities, competencies and expectations required
of the holder of each role on the Board, including those
required by the Code, have been documented in our Board
Charter, which is reviewed annually. This includes the
responsibilities of the Directors as a whole, including their
responsibilities under section 172(1) of the Companies Act 2006,
and the role profiles of the Chair, Senior Independent Director,
Committee Chairs, Non-executive Directors and Executive
Directors. Performance against these expectations was
assessed in the 2021 Board effectiveness review, detailed in
the report from our Senior Independent Director on page 95,
and it was confirmed that all Directors were discharging their
roles effectively. The time commitment expected of the
Non-executive Directors is set out in the Board Charter
and their letters of appointment.
The Committee is responsible for overseeing the composition
of the Board and its Committees and ensuring that it is an
appropriate size and that there is an appropriate balance
of diversity in skills, experience, thought, independence and
knowledge. It is also responsible for reviewing and making
recommendations to the Board on succession planning for the
Board and key leadership positions within Quilter. The Chair
and all the Non-executive Directors have served on the Board
for six years or less. All the Directors are subject to annual
re-election by shareholders and the specific reasons why each
Director’s contribution is, and continues to be, important to the
Company’s long-term sustainable success are set out in their
biographies on pages 82 to 84. The membership of the Quilter
Board is regularly reviewed by the Committee using a Board
Skills, Experience and Diversity matrix to ensure that the Board
has available to it all of the required skills to oversee the
delivery of Quilter’s strategy and long-term success. A summary
of this matrix is set out on page 78. In line with best practice,
the Committee has also agreed emergency succession
arrangements for all of the key Board positions including the
Chair of the Board, the Senior Independent Director and the
Board Committee Chairs. Although strong candidates are
available for each position on an emergency basis it is still
likely that some external recruitment would be required for
permanent successors given that the Board is not large enough
to carry a pool of succession candidates for all Board roles.
As I wrote in last year’s Annual Report, after a full external
search, we were pleased to appoint Tazim Essani to our Board
on 9 March 2021. The recruitment agency engaged, Egon
Zehnder, was fully independent of Quilter and was not
conflicted in providing this service. Egon Zehnder have been
retained for other Non-executive Director searches but have
no other connection with Quilter or individual Directors. Tazim
joined our Board Remuneration Committee on appointment.
Tazim had a full induction programme, meeting with both
her fellow Board members and senior management and
colleagues. Tazim’s appointment enabled us to continue
to meet our targets in terms of gender and ethnic diversity
on the Board, as we have done for nearly all of the period since
Listing. As Tazim only recently finished her executive career,
her appointment to our Board Audit Committee was staged
to enable her time to more fully familiarise herself with our
business. Again, following consultation, she has undergone
a full induction programme with management, and internal
and external auditors on matters important to that Committee.
In July 2021, we recommended to the Board that Chris Samuel,
who chairs our Quilter Financial Planning Board, join the Quilter
plc Board. Chris also joined our Board Risk Committee and
Board Technology and Operations Committee. Chris is an
experienced Non-executive Director and has deep expertise
in operations and asset management. Chris has chaired the
Quilter Financial Planning Board since June 2020 and was
therefore well known to Quilter, so, exceptionally, in this
instance no external search firm was used. Provision 20
of the Code requires that “Open advertising/External search
consultants should generally be used for the recruitment of the
Chair or Non-executive Directors”. External search consultants
have been used in relation to all other appointments of
Non-executive Directors since the Company’s Listing in 2018.
As explained in more detail on page 91, Rosie Harris will
not seek re-election at our 2022 Annual General Meeting and
will step down from the Board on 30 April 2022. Quilter has
a strong Board and, in line with our succession plan, George
Reid will serve as the interim Board Risk Committee Chair
from 1 May 2022, pending the recruitment of a new Board Risk
Committee Chair. Ruth Markland has been leading the search
for a new Board Risk Committee Chair so that this search is
closely co-ordinated with the Quilter Chair search. As at the
time of writing this search is underway.
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Quilter Annual Report 2021
Executive succession planning and talent management
Following a review of our succession and talent management
for our senior leadership team in November 2020, and to
address feedback from the 2020 Board effectiveness review,
the Board received an update from our Chief Executive Officer
and HR Director in January 2021 on the development of talent
within the Group and the succession arrangements in place
for key executive positions. They presented the People strategy
which the Committee challenged and endorsed the strategy
to support succession within senior leadership roles and the
development of talent to build capability for the future.
Diversity and inclusion
In recognition of our desire to become a more diverse
organisation, in July 2021 we asked Tazim Essani to work
alongside Paul Matthews as an additional director with
responsibility for workforce engagement. You can read more
about the progress and outcomes as a result of that work on
pages 88 and 89. The Committee and the Board place
significant reliance on this role, although all our Board routinely
engage with colleagues in a variety of ways. We have formally
documented the responsibilities of this role which are set out in
our Board Charter published on our website at plc.quilter.com.
Talent development is an area which has continued to progress
in preparation for the implementation of our new business
segments and in November 2021 the Committee received a
further update on how our leadership team is being developed
to support our new business segments, including the
appointment of a single business head across the Quilter
Investment Platform and Quilter Investors businesses. The
update covered initiatives to develop internal capability to
support succession, the leadership and management
programmes being offered to colleagues and an update on
external recruitment. The update included both a gender and
ethnicity lens as these populations are closely monitored and
tracked to promote a more diverse workforce.
Responsible business framework
As our goal of being the responsible wealth manager is so
integral to our strategy, this is an area where the Committee
focused on overseeing our responsible business framework
with the Board monitoring our responsible investment strategy,
and the Board Risk Committee ensuring that the reporting of
risks and risks around our ESG strategy were appropriately
identified, monitored and mitigated.
One important facet of our responsible business agenda
is to ensure that our colleagues are representative of the
communities that they work in. The Committee has spent time
ensuring that there are appropriate mechanisms and support
in place to promote a diverse workforce and an inclusive
environment for our people. We strongly endorsed
management’s strategy to promote diversity and inclusion,
and we were joined by Tazim Essani, who has a particular
focus on diversity and inclusion, for these important
discussions. The Committee has also been updated directly by
Tosin James-Odukoya, the new Head of Diversity, Inclusion and
Talent Acquisition. Tosin was made responsible for recruitment
in recognition of how important it is for practical access routes
to be available to reach new joiners from diverse backgrounds.
As at 31 December 2021, 28% (2020:26%) of our senior
management team, comprising the Executive Committee,
the Company Secretary and their direct reports, are female.
We received updates on the progress being made to build
supportive networks, promote mentoring and achieve greater
diversity in its broadest sense.
Key objectives of the Diversity Policy
1. The Board is committed to maintaining a minimum one third
female Director representation at Board level, which is in line
with the Hampton-Alexander review recommendations.
2. In order to achieve the development of a more diverse
pipeline for Board succession, the Board will proactively seek
opportunities to support Quilter’s strategy of creating more
diversity at senior levels including but not limited to gender,
LGBT+, BAME, age, disability and socio-economic background.
3. We strive to ensure that the Board is made up of an
appropriate range of skills, experience, knowledge and
background. To support that objective, we only engage search
firms who have signed up to the voluntary Code of Conduct
on both gender and ethnicity.
4. We will consider all aspects of diversity, including age, gender,
LGBT+, disability, socio-economic background and ethnicity,
when reviewing the composition and balance of the Board,
and will seek opportunities to drive a more diverse pipeline.
The Board Diversity Policy is online at plc.quilter.com
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Board Corporate Governance and Nominations Committee report
continued
Key areas of Committee focus
Sponsored by our Chair, the Committee has reviewed and
commented on important consultations on diversity and
inclusion for financial services firms and also for listed
companies. We have decided to review again our Board
Diversity Policy in 2022 once the outputs of these consultations
are known. In light of the publication in February 2022 of the
FTSE Women Leaders Review, the Committee will be reviewing
the Board Diversity Policy and will be setting more stretching
targets for gender diversity on the Board and a timetable to
achieve these targets. In the meantime, with the support of
our Board, I am pleased we are reporting on a broader range
of diverse characteristics for our Board on page 78 and for our
colleagues more broadly on page 47 for the first time this year.
I am pleased to report that the Board continues to meet or
exceed the recommendations of the Hampton-Alexander
Review and meet the Parker Review, and indeed a majority
of our Board Committees continue to be chaired by female
Directors. Since the year end the Board, along with senior
executives who support the Board, took part in a thought
provoking interactive session on diversity and inclusion led
by John Amaechi OBE, Founder of APS Intelligence exploring
our roles as leaders in making change happen.
Board evaluation
The Committee concluded that a lighter touch, internally
facilitated review would be appropriate in 2021. A full report
on that review and the outcomes are set out on page 95. The
Committee intends to ask our Senior Independent Director
to oversee an externally facilitated review in 2022.
Corporate governance
The Quilter corporate governance framework places material
emphasis and reliance on the role and work of our subsidiary
boards and during the year the Committee continued to
facilitate further alignment across our governance structure
with the appointment of Chris Samuel to the Quilter plc Board.
The Group Subsidiary Governance Manual was reviewed and
an updated version was published in January 2021 to clarify
some of the reporting and escalation processes from
subsidiary boards. With the simplification of our business and
the operation of our new business segments, the Committee
continues to review regularly the governance framework to
ensure that it remains appropriate and proportionate.
Conflicts of interest
In accordance with the Companies Act 2006 and the Company’s
Articles of Association, the Board may authorise conflicts of
interest. Directors are required to declare any potential or
actual conflicts of interest that could interfere with their ability
to act in the best interests of Quilter. The Company Secretary
maintains a conflicts of interest register which is reviewed
by the Board and the Board Corporate Governance and
Nominations Committee. Noting the recommendations of
the Code, the Committee is required to pre-approve, on behalf
of the Board, any new external appointments that a Director
wishes to adopt. During the year, the Committee carefully
reviewed requests to approve new external appointments
for a number of our Non-executive Directors, and concluded
that these additional responsibilities would not impact their
time commitment or cause any potential conflicts of interest
for Quilter.
The Board continues to meet or
exceed the recommendations of the
Hampton-Alexander Review and meet
the Parker Review, and a majority of
our Board Committees continue to
be chaired by female Directors.
Read more about our Board diversity
page 93
94
Quilter Annual Report 2021
2021 Board effectiveness review
2021 Board effectiveness review update
As Senior Independent Director, I was asked to oversee the
2021 Board effectiveness review which the Board decided
should be managed internally.
The 2021 review was conducted in September 2021 using a
questionnaire which was completed by all Board members and
a small number of executives who work closely with the Board.
The questionnaire covered the performance of the Board,
each of its Committees and individual Board members.
The Board intends that the next Board effectiveness review
in 2022 will be facilitated externally.
Culture
Conclusions
I am pleased to report that the review concluded that the
Board and the Board Committees continue to be fully effective
in the discharge of their responsibilities and overall the Board’s
assessment of performance was stable year on year. The
Board was pleased with progress made during the year,
despite the challenges of largely meeting virtually. As usual, the
review identified a small number of areas where improvements
could be made and an action plan to address those areas of
focus was debated and agreed by the Board in November
2021. The Board Corporate Governance and Nominations
Committee is monitoring the delivery of that action plan.
2021 overall Board
effectiveness score
6.4/7
Summary of themes, outputs and how these will be
addressed
Themes
Monitor
corporate
performance
Matters to be
addressed
Continue to
drive a culture
of lessons learnt
throughout the
organisation
How the issue will be addressed
There would be benefit in working
with management to access
opportunities to learn from, and to
escalate more quickly, the insights
gained from the handling of past
issues and the reviews conducted
of the root causes, and to embed
those learnings into the business.
Greater insight
into culture
within individual
businesses
required
The Board will continue to receive
regular reporting on culture, and
will monitor closely the success,
or otherwise, of the “We Rise”
programme.
Continued focus
on performance
and succession
of the leadership
team
The Board calendar has been
updated to include updates
on executive performance,
succession and management
structure.
Leadership
and talent
Subsidiary
oversight
Continue to
work closely
with subsidiary
boards.
The Board Corporate Governance
and Nominations Committee will
oversee the subsidiary governance
framework. Corporate Secretariat
will support the reporting to the
Quilter Board, and Quilter Board
Committee Chairs will continue
to meet with subsidiary board
counterparts.
2021 Committee effectiveness
The performance of each Board Committee was assessed
and each concluded that the Committees were operating
effectively. You can read about those reviews in the individual
Committee reports elsewhere in the Governance report.
Progress against the 2020 Board effectiveness review
The Board Corporate Governance and Nominations
Committee has regularly reviewed the progress on the
action plan in response to the 2020 Board effectiveness
review. In accordance with the action plan, the Board has
received more detail on the KPIs used by management to
drive our business forward and measure long-term business
health. Greater reporting on executive succession planning,
and culture at business level, and the activities of the
subsidiary boards has been welcomed by the Board. The
Committee was content that all the findings of the 2020
effectiveness review had been fully addressed.
Ruth Markland
Senior Independent Director
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Board Audit Committee report
At a glance
Committee activity
30%
Review of financial
statements
2020: 26%
24%
Internal controls
2020: 18%
34%
Internal and
external audit
2020: 31%
8%
Regulatory compliance
and reporting
2020: 19%
4%
Governance
2020: 6%
Committee highlights 2021
Fair, balanced and understandable
A comprehensive review process
to support the Board in reaching its
conclusion that the 2021 Annual
Report is fair, balanced and
understandable.
Read more on
page 99
Internal Audit
The External Quality Assessment
confirmed that Quilter has a leading
internal audit function.
Read more on
page 100
Committee responsibilities
– Reviews the Group’s accounting policies and the contents
of financial statements.
– Monitors disclosure controls and procedures.
– Considers the adequacy, scope of work and resourcing
of the external and internal audit functions.
– Oversees the relationship with our external auditors.
– Monitors the effectiveness of internal financial controls.
The Committee relies on and is supported by the detailed
work conducted by the Audit Committees and Governance,
Audit and Risk Committees of Quilter’s significant subsidiaries.
Committee membership and meetings
attended/eligible to attend
George Reid (Chair)
Tazim Essani*
Rosie Harris
Ruth Markland
*Appointed 1 September 2021.
12/12
4/4
12/12
12/12
Committee governance
The Board Audit Committee currently comprises four
independent Non-executive Directors. The Chair of the
Committee has recent and relevant financial experience and
the Committee as a whole has competence relevant to the
business sectors that Quilter operates in. Details of the skills
and experience of the Committee members can be found
in their biographies on pages 82 to 84.
Evaluation
As part of the 2021 Board effectiveness review, the Board
has assessed that the Committee membership is appropriate
in providing challenge and oversight and that the Committee
is operating effectively.
Discharging our responsibilities
The Committee reviewed its activities over the previous
12 months against its Terms of Reference and confirmed that
it had fully discharged its responsibilities in line with its remit.
The Terms of Reference are available at plc.quilter.com.
Attendance
The Chief Internal Auditor, the Chief Financial Officer, the Chief
Risk Officer and representatives of PwC, the external auditors,
attend all meetings of the Committee. The Committee holds
regular private sessions with the Chief Internal Auditor and
the representatives of PwC in accordance with best practice.
Collaboration
The Chair briefs the Board on key discussions and provides
a written report to the Board after each meeting. The papers
and reports presented to the Committee are made available
to all Quilter Non-executive Directors. The Committee has
continued to work collaboratively and effectively with other
Board Committees on matters such as the effectiveness
of internal controls.
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Quilter Annual Report 2021
Dear shareholder,
As Chair of the Board Audit Committee, I am pleased to have
this opportunity to present this report on the Committee’s
work during 2021.
The Committee has focused clearly on its key responsibilities
of assisting the Board in monitoring the Group’s control
environment, providing robust governance over the Group’s
financial reporting and challenging the judgements made by
management and the estimates and assumptions on which
they are based, whilst ensuring appropriate, balanced
disclosures are included.
During the year, the Committee continued to deal with the
challenges of the COVID-19 pandemic which required the
majority of our employees to perform their roles remotely.
The Committee has regularly assessed the state of the financial
control environment throughout the year and is content that
remote working has not led to any significant weakening in the
operation of our internal financial controls and the controls
over our financial reporting.
I reported to you last year that in light of the COVID-19 pandemic,
the Committee had deferred the External Quality Assessment
(“EQA”) of the Internal Audit function to 2021. I am pleased,
therefore to confirm that in 2021 we were able to commission
and oversee a thorough EQA process conducted by KPMG.
Further details on the EQA, which confirmed that the Quilter
Internal Audit function is a leading internal audit function that
benchmarks well to its peers, are set out on page 100.
In September, the Committee was pleased to welcome Tazim
Essani as a member. Tazim’s breadth of business experience
and expertise in the interpretation, analysis and presentation
of financial statements has enabled her to contribute
immediately to the Committee’s deliberations.
During the year, the Committee received communications from
the Financial Reporting Council (”FRC”) in relation to two items,
the Group’s pension transfer advice provision, as part of the
FRC’s thematic review of provisioning, and a separate request
for clarification on the intention for the Group to reduce the
number of Alternative Performance Measures (“APMs”) used in
the 2021 Annual Report. The FRC confirmed they were satisfied
with the Group’s approach to both of these matters.
The second half of 2021 saw the Committee focus on the
presentation of the Group’s financial results on the basis of
continuing and discontinued businesses, following the disposal
of Quilter International at the end of November 2021, and
ensuring that the Committee satisfied itself with the basis for
reporting on the Group’s new business segments: High Net
Worth and Affluent.
The Committee has also spent time reviewing how the Finance
function has operated and maintained the effectiveness of
financial controls, particularly whilst working remotely and
during the transition to a new General Ledger system. Further
information on how the Committee has overseen the Group’s
financial reporting and controls can be found on pages 98 to 100.
Information on how the Committee has discharged its role
is set out below covering the following areas:
– financial reporting
– CASS compliance
– whistleblowing
– regulatory reporting
– internal audit; and
– external audit.
Looking ahead, given the relative complexity of the Group’s
2021 financial statements the Committee will be focused on
simplifying the Group’s financial disclosures and I will report
on the progress made in this regard in the 2022 Annual Report.
George Reid
Chair
Quilter Annual Report 2021
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continued
Key areas of Committee focus
Financial reporting
The Group’s accounts are prepared in accordance with
International Financial Reporting Standards (“IFRS”). Certain
APMs are used to add insight for Quilter’s shareholders on the
performance of the business, aligned with how the business is
managed. The Committee has continued its close scrutiny of
APMs to ensure that where they are used they are necessary,
clearly highlighted and explained and are reconciled to
statutory performance measures in line with the guidance
from the FRC.
The Committee has reviewed the Group’s Accounting Policies
and confirmed that they are appropriate to be used for the
2021 financial statements. Following the sale of Quilter
International, specific attention has been paid to the
presentation of the financial results on the basis of continuing
and discontinued businesses. Consideration has also been
given to the basis for reporting on the new business segments:
High Net Worth and Affluent.
The Committee has also reviewed the basis of accounting,
the appropriateness of adopting the going concern basis
of preparation for the Group’s financial statements, and
the Group’s viability statement. In doing so, the Committee
considered:
– the Group’s three-year Business Plan which includes
consideration of the economic, regulatory, competitive
and risk environment; and
– the latest Group Own Risk and Solvency Statement, and
Internal Capital Adequacy Assessment Process, which
cover current and future risk profile and solvency positions
based on a series of core assumptions, stress tests and
scenario analysis.
The form of the viability statement and period covered by
the statement were specifically considered by the Committee.
The Committee was satisfied with the content of the viability
statement and supported the time period of the statement
which aligns with the three-year internal financial planning
cycle. The viability statement can be found on pages 74 and 75.
The Committee reviewed and challenged the Interim Results
for 2021 and the Annual Report and Accounts for 2021. The
Committee’s reviews were supported by analysis and discussion
provided by the Finance and Actuarial teams, reports from the
second line on the solvency position and the reports of the
external auditors. Having considered these inputs and the
Committee’s own independent judgements, the Committee
recommended to the Board the approval of each of these
sets of financial statements.
During the year end process the Committee reviewed the
Task Force on Climate-related Financial Disclosures Report.
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Quilter Annual Report 2021
Accounting judgements and estimates
The Committee has continued to receive good support from
the Quilter Finance team which has enabled it to consider
in advance of the end of each reporting period the approach
that it would wish to take on the key areas of judgement and
estimates that impact the financial results.
Critical accounting judgements, critical accounting estimates
and other principal estimates deliberated by the Committee
during review of the 2021 Annual Report and Accounts
included the treatment of:
Area of focus
Issue/role of the Committee
Sale of Quilter
International
Provisions
for Lighthouse
British Steel
and other
past business
review cases
Goodwill and
intangibles
Deferred tax
The Committee reviewed and challenged the
accounting for, and disclosure of, the sale of
Quilter International including considering the
key judgements and estimates of provisions,
presentation of ongoing costs and the
treatment of costs associated with the sale.
The Committee reviewed the estimates
involved in the provisioning for DB pension
to DC pension cases which are subject to
a skilled person review in Lighthouse and
other past business review cases, which
have been assessed for suitability and the
number of cases requiring redress
ascertained. The disclosures in the Group’s
financial statements were reviewed to ensure
compliance with IFRS and transparent
presentation in the financial statements.
The Committee considered the
appropriateness of the key assumptions
underpinning the Group’s goodwill
impairment testing, and the sensitivities
modelled, which were based upon the
Group’s two operating segments: Affluent
and High Net Worth, and followed the
allocation of a portion of the goodwill to the
Quilter International disposal group. The
Committee reviewed the associated
disclosures in both the half-year and year-end
financial statements to ensure these met the
requirements under IFRS, and provided the
relevant information to the readers of the
financial statements.
The approach taken for the recognition
of deferred tax assets, and the estimations
and assumptions used, were reviewed by the
Committee, along with consideration of the
associated disclosure in the Group’s financial
statements for compliance with IAS 12.
The sale of Quilter International
pages 86 and 87
Fair, balanced and understandable
There has been a comprehensive review process to support
the Board in reaching its conclusion that the 2021 Annual
Report is fair, balanced and understandable and provides the
necessary information for shareholders to assess the Group’s
financial position, performance, business model and strategy.
The process which enabled the Committee to reach this
conclusion included:
– the production of the 2021 Annual Report and Accounts,
managed closely by the Chief Financial Officer, with overall
governance and co-ordination provided by a cross-functional
team of senior management;
– cross-functional support to drafting the 2021 Annual Report
and Accounts which included input from Finance, Risk,
Investor Relations, Corporate Secretariat, HR and wider
business leaders;
– a robust review process of inputs into the 2021 Annual
Report and Accounts by all contributors, to ensure
disclosures are balanced, accurate and verified, with further
comprehensive reviews by senior management;
– a review by the Company Secretary of all Board and Board
Committee minutes to ensure all material matters considered
at Board level meetings have been disclosed in the 2021
Annual Report and Accounts;
– a specific management paper detailing the 2021 year end
assessment of fair, balanced and understandable;
– a formal review by the Board Audit Committee of the draft 2021
Annual Report and Accounts in advance of final sign-off; and
– a final review by the Quilter Board of Directors.
Having carefully reviewed and considered all relevant
information, the Committee is satisfied that, taken as a whole,
the 2021 Annual Report and Accounts are fair, balanced and
understandable and has confirmed that to the Quilter Board.
This process was also undertaken in respect of the Group’s
2021 Interim Results to ensure that, taken as a whole, based
on the information supplied to it and challenged by the
Committee, they were fair, balanced and understandable,
and the Committee advised the Board to that effect.
Controls over financial reporting
The Committee has continued to closely monitor the
programme of work to strengthen and enhance the Group’s
internal financial controls and governance framework that
underpins the Group’s financial reporting. Management has
regularly reported on the state of the financial control
environment throughout the year, confirming that good
progress has been made towards delivering the enhancements
required. The Committee has monitored the progress made
against the PwC internal control recommendations and is
content that good progress has been made towards closing
these agreed actions.
The Committee has also spent time reviewing the work to
enhance the financial control environment within the Quilter
Financial Planning business.
As part of the process to review and challenge the 2021 financial
statements, the Committee considered the processes and
controls in place to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of the
financial statements. The Chair of the Committee has reported
to the Board on this area.
Alternative performance measures
The Committee understands that APMs are an area of
particular focus in terms of the understanding of the Group’s
financial statements by shareholders and other stakeholders.
The refinements made to these disclosures in 2020 have
continued to be enhanced in the 2021 Annual Report in light
of the Financial Reporting Council’s thematic review report on
APM’s published in October 2021. As part of its review of the
financial statements, the Committee has challenged the clarity
of any APMs used and careful consideration has been given to
these disclosures. The Committee is satisfied that they provide
clear definitions and explanations of the APMs, as well as a
reconciliation of the APMs to the nearest IFRS line item which
has been cross-referenced to Quilter’s KPIs.
Alternative performance measures
pages 255 to 258
CASS compliance
Monitoring compliance with the CASS rules, and the
programmes of work under way in each of the regulated
businesses to maintain appropriate CASS controls, is crucial to
protecting the interests of Quilter’s customers. The Committee
performs this role by reviewing reports on CASS produced by
the internal and external auditors, the second line and by
management. This has included overseeing the impact of the
Platform Transformation Programme on our CASS processes
and controls and the performance of third-party suppliers who
manage the Group’s CASS arrangements in certain parts of the
business. The Committee has also heard from management
about the challenges faced by the businesses in maintaining a
strong CASS control environment during a year of considerable
change and continued remote working. The Committee has
been kept informed about how the various CASS entities in the
Group have been increasing co-ordination and moving towards
simplifying and harmonising their CASS Control Frameworks.
Quilter Annual Report 2021
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continued
Key areas of Committee focus
Regulatory reporting
During the year, the Committee reviewed, challenged and
recommended to the Board for approval the Solvency II
reporting for the Quilter businesses for the 2020 year end
and, in doing so, were supported by detailed reports on the
disclosures from management, the second line Actuarial
function and the external auditors. The Committee also
scrutinised and approved the methodology and assumptions
to be applied to the 2021 year end Solvency II reporting and
reviewed the 2020 year end consolidated Capital Requirements
Directive IV disclosures for the Group ahead of their publication
on Quilter’s website. The Committee has closely monitored the
Department of Business, Energy & Industry Strategy (“BEIS”)
consultation on restoring trust in audit and corporate
governance. The consultation included recommendations
arising from the Competition and Market Authority’s statutory
audit market study, the Brydon Review on the quality and
effectiveness of audit, and the Kingman Review of the Financial
Reporting Council. The Committee carefully considered the
potential impacts of these recommendations and formally
responded to BEIS on the initial consultation. Once the
consultation is finalised we will focus on the impact to our
business and any required changes.
Whistleblowing
Quilter is committed to ensuring a transparent and open
culture that encourages employees to speak up. To support
this, it is important that the Group’s whistleblowing
arrangements are not only effective in practice but are seen
by staff and all other stakeholders as being fair, rigorous and
effective in resolving concerns. During the year, the Committee
has reviewed the effectiveness of the whistleblowing processes
in place across the Group and reviewed the details of specific
whistleblowing complaints and the outcome of management’s
investigations. The Committee has also reviewed data on
grievances and other indicators that the Group has an open
culture where employees feel able to raise concerns. The
Committee has continued to encourage management to
embed a “speak up” culture in the organisation and receives
assessments of the culture of transparency and a “speak up”
environment. The Chair of the Board Audit Committee is the
Whistleblowing Champion for Quilter.
Internal audit
Quilter’s shareholders and customers can take comfort that the
Group’s internal audit function is mature, appropriately focused
and is functioning efficiently and effectively. The Chief Internal
Auditor attends all meetings of the Committee and has
reported in detail on the work conducted by Internal Audit
including key statistical analysis on the results of their work, the
pace at which management is addressing any issues raised and
the extent to which management has self-identified the issues
being raised by internal audit. This is an important indicator of
the maturity of the Group’s control framework and this
measure is tracked closely.
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Quilter Annual Report 2021
The Committee has regular meetings with the Chief Internal
Auditor without management present, in accordance with
best practice.
During the course of the year, the Committee received regular
reports from Group Internal Audit on its activities across the
Group detailing their assessment of the internal control
environment and highlighting to management where action
is needed to enhance internal controls.
In December 2021, the Committee approved a risk-based
internal audit plan for 2022 focused on the most critical areas
for the Quilter business and supporting the delivery of good
customer outcomes. The internal audit plan was formulated to
complement the second line’s plan for 2022 and was reviewed
in conjunction with the Board Risk Committee. The Chief
Internal Auditor has confirmed that he has the necessary
resources to deliver the 2022 internal audit plan, including
having contingency resources in place to ensure that they
can respond to unexpected demands.
In line with the Chartered Institute of Internal Auditors
standards, the Committee commissioned an external quality
assessment (”EQA”) which was undertaken by KPMG during
the second half of 2021. The report concluded that:
– Group Internal Audit is a leading internal audit function
and benchmarks well against other financial services internal
audit functions, particularly in its organisational position and
its process, methodology and reporting;
– Group Internal Audit generally conforms with the
International Standards for the Professional Practice of
Internal Auditing, as published by the Chartered Institute
of Internal Auditors. This is the highest score that can be
achieved during an EQA; and
– the strength of the function gives Group Internal Audit
opportunities to consider implementing optional alternative
working practices to drive greater efficiency.
As part of the assessment, the Group Internal Audit team held
workshops with KPMG to explore areas where the function
could drive even greater efficiency. Increased use of data
analytics was identified as an area where the function could
continue to develop its capabilities. The Committee confirmed
that it was satisfied with the conclusions drawn in the report
and supports the function’s drive for greater efficiency.
External audit
The Committee deems it vital that Quilter benefits from a robust,
high-quality external audit conducted by an independent and
professional audit firm. PricewaterhouseCoopers (PwC) were
appointed as the Group’s statutory auditors, with effect from
the 2020 financial year, following a formal tender process.
The Committee has received regular and detailed reports
from PwC throughout 2021.
The Committee has also assessed management’s response
to the external auditor’s internal control findings. In advance
of each Board Audit Committee meeting, the Chair of the
Committee meets separately with PwC’s lead audit partner,
Mark Pugh, to ensure the discussions at Committee meetings
are appropriately focused, challenging the conclusions reached
by management as well as the audit work performed thereon.
During the period, the external auditors provided reports
covering all aspects of their work. The information provided
to the Committee included:
– The non-audit services provided by PwC, including preparing
the Working Capital Report in preparation for the sale of
Quilter International and reports on their own independence.
The Committee were content that providing these services
would not impair PwC’s independence.
– An effectiveness review report focused on whether the
External Auditors have delivered a high-quality audit.
– Reviewing the PwC audit plans, their reports on their work
and any management actions recommended as evidence
of their objectivity and effectiveness.
– Reviewing lessons learnt from the audit conducted during
the 2020 year end cycle.
In addition to the reports provided by PwC on their
independence, the Committee has also received reports
from management providing details of the non-audit services
provided by PwC and consultancy support provided by other
leading audit firms. The Committee has adopted a policy of
non-audit services, which requires that non-audit services
provided by the statutory auditor, will not exceed 25% of the
fees charged for audit and audit related services. In line with
the policy, the Committee approved the appointment of PwC
to conduct the reporting accountant work in relation to the sale
of Quilter International as clearly as Quilter’s Group auditors,
PwC were clearly best placed to provide this service.
The Committee engaged with PwC in a pilot programme on
using Audit Quality Indicators (“AQIs”) as a tool to inform the
assessment of the effectiveness of the external audit. The
Committee and PwC agreed five AQIs in areas important to an
effective audit, such as project management and the timeliness
of management deliverables. The AQIs have been reported on
by the external auditor to the Committee throughout the
course of the audit which has led to the Committee having
a more granular understanding of the audit process.
The Company has complied with the Statutory Audit Services
for Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 for the financial year ended
31 December 2021.
PwC partners and staff have attended all meetings of the
Committee since their appointment, withdrawing only when
their attendance would be inappropriate. PwC have contributed
strongly to discussions on Quilter’s financial statements,
enhancements to the Group’s internal financial controls, the
Group’s financial reporting processes and key accounting and
reporting judgements.
In November 2021 an effectiveness review was conducted by
the Company Secretary, using a written survey of management’s
assessment of PwC’s performance across a range of criteria
including independence, effectiveness, objectivity, industry
knowledge, efficiency and service quality. The results of that
survey concluded that PwC in their first audit since
appointment had performed strongly and had delivered an
effective service overall for the Group and achieved a very
strong rating for independence and challenge. The Committee
commended PwC for delivering a high-quality audit despite the
difficult circumstances that have applied during their audits of
the 2020 and 2021 financial statements. Accordingly, PwC are
recommended for re-appointment by shareholders at Quilter’s
AGM to be held in May 2022.
Auditors’ remuneration
Fees payable for audit services
Group and Parent Company
Subsidiaries
Additional fees payable to KPMG LLP related to the prior year audit of the Group
Total fees for audit services
Fees for audit-related assurance services
Fees for non-audit services
Total Group auditors’ remuneration – continuing operations
Total Group auditors’ remuneration – discontinued operations
Total Group auditors’ remuneration
All fees are presented net of VAT.
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
1.5
2.2
–
3.7
0.8
0.5
5.0
0.3
5.3
1.5
2.0
0.6
4.1
1.0
–
5.1
0.8
5.9
Quilter Annual Report 2021
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At a glance
Committee activity
60%
Top risk oversight
2020: 54%
15%
Risk appetite, profile and
capital & liquidity
2020: 20%
6%
Change programmes
2020: 13%
19%
Regulatory change
2020: 13%
Committee highlights 2021
Liquidity
Maintaining an appropriate capital
and liquidity position.
Read more on
page 104
Customer
Ensuring our advice process is
robust and promotes good customer
outcomes.
Operational risk
Monitoring our operational risk
profile at a time when COVID-19
continued to challenge our markets
and our business.
Committee responsibilities
– Monitors and reviews the effectiveness of the internal control
and risk management system.
– Provides advice to the Board on the management of the top
risks faced by the Group.
– Recommends the total level of risk Quilter is prepared to take
(risk appetite).
– Monitors the risk profile.
– Advises the Board on risk strategy.
– Oversees the effectiveness of the Compliance function.
Committee membership and meetings
attended/eligible to attend
Rosie Harris (Chair)
Tim Breedon
Moira Kilcoyne
Paul Matthews
George Reid
Chris Samuel*
9/9
8/9
9/9
9/9
9/9
5/5
*Chris Samuel was appointed to the Committee on 1 July 2021.
Committee governance
The Board Risk Committee currently comprises six
independent Non-executive Directors. Details of the skills and
experience of the Committee members can be found in their
biographies on pages 82 to 84.
Evaluation
As part of the 2021 Board effectiveness review, the Board
has assessed that the Committee membership is appropriate
in providing challenge and oversight and that the Committee
is operating effectively.
Discharging our responsibilities
The Committee reviewed its activities over the previous
12 months against its Terms of Reference and confirmed that
it had fully discharged its responsibilities in line with its remit.
The Terms of Reference are available at plc.quilter.com.
Attendance
The Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Chief Risk Officer and Chief Internal Auditor
regularly attend Committee meetings. The Group Chair and,
on occasion, other Non-executive Directors attended
Committee meetings for matters as desired.
Collaboration
The Chair briefs the Board on key discussions and provides
a written report to the Board after each meeting. The papers
and reports presented to the Committee are made available
to all Quilter Non-executive Directors.
Read our Terms of Reference
at plc.quilter.com
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Quilter Annual Report 2021
Our attention has also been directed to the environmental risks
for Quilter, both for us as a business through our own carbon
footprint and importantly in our role in providing advice to our
customers and as an investment manager. Our new Committee
Terms of Reference approved in December 2021 set out how
we have refined our governance for this important oversight
responsibility. Following a Board briefing in June 2021, in
November the Committee requested an environmental stress and
scenario test and we will continue to monitor this closely in 2022.
The Committee is focused on the articulation and mitigation of
the transition risk as we move to a lower-carbon economy.
I am pleased to confirm that the Committee has fully
discharged its responsibilities within the year and worked
in collaboration with other Board Committees to ensure that
appropriate scrutiny and oversight was exercised on key risk
matters. There continues to be a high degree of overlap in
Committee membership with the Board Audit Committee and
the Board Technology and Operations Committee and we work
closely to ensure issues are given appropriate scrutiny. We
were pleased to welcome to the Committee Chris Samuel, who
Chairs Quilter Financial Planning, and brings additional insights
into the risks in our advice business.
Looking forward
The Committee has asked management to focus more
attention on emerging risks, their identification and mitigation.
We will invite first line risk owners to our meetings to update us
on this as well as crystallised risks. I have also asked the Internal
Audit function to perform some follow up work in 2022 on
aspects of the work of the Risk function, as this work was
postponed in 2021 due to COVID-19.
This is my last report as your Committee Chair, as I am stepping
down from the Board on 30 April 2022. I am pleased to leave
behind a strong and focused Committee.
Rosie Harris
Chair
Dear shareholder,
I am pleased to share with you my report on the work the
Committee has undertaken during the year. As we strive to meet
our goal to be the responsible wealth manager, we have focused
on protecting our customers and meeting the expectations of
other key stakeholders. The Committee supports and advises
the Board on Quilter’s risk profile and we monitor the Group’s
overall risk appetite, which is the amount and type of risk the
Company is prepared to accept in the delivery of its strategy, by
monitoring both our internal and external risk profile. Overall,
our risk profile has marginally reduced in the year in line with
a reduction in the Group’s complexity and we have maintained
strong and conservative capital and liquidity positions, with
prudent surpluses over risk appetite targets throughout the year.
2021 was an important year for Quilter as we transitioned to
a smaller, simpler and more focused business. The Committee
continued to ensure that the risks to delivery of our strategy
are understood and mitigated. 2021 has also proved to be the
second year influenced by the direct and second order impacts
of the COVID-19 pandemic. Externally, the economic
environment fluctuated as the UK economy grew following
the sharp contraction in 2020 and the threat of higher interest
rates and inflation challenge economic stability. During the year,
the wealth advice market has become even more margin
focused, with some competitor disruption from new entrants
targeting our advisers and flows have been disrupted. Despite
these headwinds, Quilter remains resilient.
Most of our people ended the year as it started, working
remotely, as the numbers of people affected by the latest
COVID-19 Omicron variant rose, and the UK Government
again asked people to work from home where they could.
The Committee continues to review the adequacy of our
systems for risk assessment, risk management and reporting.
We have been rigorous in our oversight of the Company’s
operational risk profile. We have sought to minimise the
impacts for our customers when our operational risk increased
as it did through the platform migration. We commissioned
additional updates to better inform our discussions on the
impacts for customers. We continue to work closely with the
Board to ensure that there is appropriate focus on delivering day
to day for our customers and advisers and ensuring we know
when we delight these important stakeholders. There continues
to be a high level of regulatory change and we are focused on
ensuring the new FCA Consumer Duty is embedded in Quilter’s
day-to-day processes and is well understood by our workforce.
As we reported last year, we have continued to pay close
attention to situations where it is identified that potentially
unsuitable Defined Benefit to Defined Contribution pension
advice has been provided by businesses before we acquired
them. We are ensuring that in such cases customers are, where
appropriate, appropriately compensated. Management is
working closely with Grant Thornton (including in its capacity as
skilled person in relation to the s166 process for Lighthouse) and
the FCA to ensure fair outcomes are delivered. In light of these
issues in an acquired business, we have asked management to
perform a stress test for a reasonable worst case scenario.
Quilter Annual Report 2021
103
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continued
Key areas of committee focus
Risk appetite
On behalf of the Board, the Committee monitors the Group’s
risk appetite. During the year we reviewed the Strategic Risk
Appetite Principles (“SRAPs”) and approved changes to the
Customer SRAP and a new Climate Related Risk Appetite
Statement.
We also approved the methodology for constructing the
risk appetite thresholds (Long Term Targets, Early Warning
Thresholds and Limits) together with their actual levels as
at year end 2021 for the Group.
The Company continued to operate inside of risk appetite limits
in 2021, based on performance against the SRAP measures.
Top risks
You can read about the Group’s assessment of our top risks
and how these are identified, managed and mitigated in the
Risk Report on pages 66 to 73. Our Committee routinely
receives quarterly updates from the Chief Executive Officer
and the Chief Risk Officer on their assessment of these risks.
Despite the challenging external
environment, Quilter remains
strongly capitalised and within
risk appetite.
Prudential risk
An important area of focus has been to ensure that the control
framework is strong and that the Group’s stress and scenario
planning is comprehensive and robust. We debated and
challenged the scenarios underpinning the own risk and
solvency assessment (“ORSA”) and internal capital adequacy
assessment process (“ICAAP”) on behalf of the Board. Over the
year, we reviewed the component parts of the ORSA and ICAAP,
including the capital allocations and stress and scenario testing.
The Committee further reviewed the impacts of the sale of
Quilter International on the Group’s reports. We were briefed
on the implications for Quilter of the introduction of the new
UK Investment Firms Prudential Regime (“IFPR”)” and in
December 2021 took a first look at the reporting timetable
and inputs for the new internal capital adequacy and risk
assessment (ICARA), which we will report against in 2022.
Capital and liquidity
The Committee received quarterly updates from our Chief
Financial Officer on the Group’s capital, cash and liquidity
against our risk appetite during the year. Despite the challenging
external environment, Quilter remains strongly capitalised and
within risk appetite. We remain well positioned to support our
stakeholders. On all measures, the Company is projected to
remain within thresholds for the Business Plan period.
We have asked management to perform further stress testing
on the impacts for our business of inflation and interest rates
for our scrutiny in 2022.
The Committee reviewed the potential impact of negative
interest rates on the Group and impressed upon management
the need to be prepared both operationally and financially for
such an eventuality.
Internal control
The Board Risk Committee, the Board Audit Committee and the
Board Technology and Operations Committee regularly review
internal controls on behalf of the Board and receives regular
reports from management, Internal Audit and the Finance
function. The Chairs of the Board Audit Committee, the Board
Risk Committee and the Board Technology and Operations
Committee regularly brief the Board on the key matters
discussed by these Committees. Throughout the year ended
31 December 2021 and to date, the Group has operated a
system of internal control that provides reasonable assurance
of effective operations covering all controls, including financial
and operational controls and compliance with laws and
regulations. Processes are in place for identifying, evaluating
and managing the principal risks facing the Group in
accordance with the ‘Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting’
published by the Financial Reporting Council.
The Board Risk Committee received management’s
assessment of the effectiveness of internal controls over
financial reporting as of 31 December 2021 and concluded
that, based on their assessment, they were effective. The
Board also considered and endorsed this assessment as well
as the Board Audit Committee’s review of the internal controls
over financial reporting. The Chair of the Board Audit
Committee reports on the review of controls over financial
reporting and how the Board Audit Committee has monitored
the independence and effectiveness of the internal and
external auditors on pages 100 and 101.
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Quilter Annual Report 2021
Operational risk
Our operational risk profile was heightened in 2021 as the
mandatory lock-downs due to COVID-19 meant our contact
centres were impacted by periods of remote working and
sickness absence. The final move of some £14 billion of assets
and more than 5,000 advisers and customers to our new
investment platform in February 2021 coincided with a
COVID-19 lock-down and fewer of our contact centre staff could
work in our offices. Whilst service levels were maintained in the
immediate migration period, we were disappointed that the
service levels subsequently declined and we have asked to
receive regular updates on the programme of upgrades that
will enable us to better support our customers. Our team have
worked hard to provide support for advisers and customers
who have been impacted and by the end of the year we saw
a welcome return to more stable service levels.
The Committee monitored on behalf of the Board the risks
associated with the sale of Quilter International which occurred
on 30 November 2021. The sale reduced Quilter’s overall
operational risk profile and will continue to incrementally
reduce it further as legacy systems are closed or migrated
to the purchaser, Utmost Group. The Committee will continue
to monitor the risk associated with the transitional services
agreement in place with Utmost Group. You can read more
about our role, alongside those of the Board and the other
Board Committees on pages 86 and 87.
The introduction of a new internal risk assessment tool,
Resolver, will further inform management and the Board
of management’s assessment of top risk issues through the
tracking and monitoring of risk and control self assessments.
The Risk team review and assess the effectiveness of the risk
framework and the Committee receives assurance from the
Chief Executive Officer on internal control and the Committee
approve any material changes to the Quilter Policy Suite.
The increased focus on the
environment and climate change risk
meant we counselled management to
give careful consideration to the risk
of “greenwashing” and the need to
ensure that our products promote and
record ESG meaningfully.
Advice
The Committee has received routine updates on the progress
in enhancing controls to mitigate the risk associated with
providing inappropriate advice to customers. Along with the
Board of Quilter Financial Planning, we have monitored the
steps management are taking to fully embed a robust and
effective control culture throughout the business to ensure
our customers are appropriately protected and we can
demonstrate that the advice provided is in their best interests
and will promote good customer outcomes. The measures
taken include education and robust on-boarding processes
for new advisers.
Conduct
Quilter always seeks to treat customers and advisers fairly,
before, during and after the advice process through offering
products which meet their needs and expectations, perform
as represented and provide value for money. The Committee
has continued to champion our vision of being the responsible
wealth manager with our on-going management of conduct
risk, meaning that our products and processes are focused on
delivering good customer outcomes. This year the increased
focus on the environment and climate change risk meant we
counselled management to give careful consideration to the
risk of “greenwashing” and the need to ensure that our
products promote and record ESG metrics meaningfully and
transparently and will not be reviewed retrospectively and
found by regulators or other stakeholders to be inadequate
in some way.
Quilter Annual Report 2021
105
Strategic ReportGovernance ReportFinancial statementsOther information Board Risk Committee report
continued
Key areas of committee focus
People
We monitored closely the impact for our people of prolonged
periods of remote working and the reduction in the number of
people the Group employs as a result of the introduction of our
new platform, the sale of Quilter International and increased
efficiency. We noted the slight decline in the Peakon scores
which measure colleague engagement, and you can read more
in the Board Report on pages 88 and 89 how the Board has
supported management in ensuring appropriate
understanding of culture and staff turnover. The Committee
has also asked management to consider performing scenario
testing with regards to the risk of wage inflation and reduced
talent availability in 2022.
Third party suppliers
The Group’s technology platforms are provided by third parties,
and this Committee, along with the Board Technology and
Operations Committee, oversee the effectiveness of the control
processes in place to manage the services they provide to the
Group, particularly as the services provided directly impact our
customers and advisers. We have urged management to work
closely with our suppliers to ensure that the necessary
upgrades and technology fixes are applied promptly.
Cyber and information security
Cyber Risk and Information Security Risk is a threat commonly
faced across the financial services industry. Along with the
Board Technology and Operations Committee, we received
an update on mitigation of these important risks.
New and emerging risks
The bi-annual updates on emerging risks identified risk to
Quilter as a business from the external environment including
an assessment of likelihood and time scale. As a result of these
reports, we commissioned additional stress and scenario
testing, subsequently receiving an additional deep dive on
climate change reporting risk.
We commissioned additional stress
and scenario testing, subsequently
receiving an additional deep dive on
climate change reporting risk.
As part of our preparations for the new UK Investment Firms
Prudential Regime, we ensured that the Board received a
detailed presentation on the impacts for Quilter. The Committee
was routinely briefed on progress as part of our plans for
reporting in 2022.
Strategic delivery
We continued to pay close attention to strategic delivery risk
issues facing the Group. Quilter is at an inflection point as we
transition to a simpler, digitally enabled, business which brings
new risks into focus.
The Committee received detailed updates on the operational
risk issues arising from the sale of Quilter International. In
collaboration with the Board Technology and Operations
Committee, we will continue to monitor the risk associated
with the transitional services agreement with Utmost Group.
The degree of strategic change underpinning the Business Plan
also commanded our attention and our Chief Operating Officer
provides full updates on the plans to achieve our Business Plan
targets. Given the breadth of the agenda of work facing the
Group, we asked management to consider what we could stop
or pause which would not cause detriment to the overall
delivery for our stakeholders.
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Quilter Annual Report 2021
Regulatory risk
The Committee receives a quarterly report which provides
analysis and commentary on the interactions with our
regulators. The reporting covers regulatory and legal change
that impacts our business, clients and customers. It includes
horizon scanning and an assessment of likely change and the
impact for Quilter. Work to embed the new FCA Customer Duty
is fully underway and changes in the regulations underpinning
how we define people who are deemed to be Material Risk
Takers were reviewed in collaboration with the Board
Remuneration Committee.
Conflicts of interest
The conflicts of interest inherent in our business model are
closely monitored and as the business moved to the new
reporting segments, the Chief Executive Officer provided us
with an update on the identification and education processes
in place to mitigate this risk alongside a second line assessment.
Data privacy
Twice a year the Committee receives an update from the Group
Data Protection Officer with his assessment of the data privacy
risk. This assessment details the adequacy of data protection
policies, procedures and governance arrangements to mitigate
data protection risks and comply with data protection
legislation, including the General Data Protection Regulation.
Money Laundering Officer’s report
The Committee further receives an annual update from
the Group’s Money Laundering Officer’s report. Despite a
deteriorating external environment with an increase in fraud
attempts our processes and procedures have performed
adequately and we have continued to train colleagues in how
to spot fraud and work with others to reduce fraud. The Money
Laundering Officer has led industry efforts to raise the profile
of digital fraud and its prevention.
Risk and Compliance function and plans
The Committee receives regular updates on the Risk and
Compliance function and plans. This includes an assessment
of the quality and appropriateness of resourcing and overall
delivery of key activity. Adjustments to the plans are brought
back to the Committee if necessary.
The Chair continues to
collaborate with other Committee
Chairs to ensure that risk issues
are given appropriate scrutiny.
The collaboration is supported by
the cross-committee membership
with the Board Audit Committee,
Board Technology and
Operations Committee and the
Board Remuneration Committee.
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Board Technology and Operations
Committee report
At a glance
Committee activity
15%
IT security
2020: 12%
11%
Operational resilience
2020: 11%
31%
PTP and other change
programmes
2020: 59%
43%
Technology and operations
strategy
2020: 18%
Committee highlights 2021
Oversight of embedding Quilter’s
new investment platform.
Read more on
page 110
Committee membership and meetings
attended/eligible to attend
Moira Kilcoyne (Chair)
Rosie Harris
George Reid
Chris Samuel*
*Chris Samuel was appointed to the Committee on 1 July 2021.
7/7
7/7
7/7
3/3
Simplification of our IT estate to
reduce risk and ensure our services
are resilient.
Committee governance
The Board Technology and Operations Committee currently
comprises four independent Non-executive Directors. Details
of the skills and experience of the Committee members can
be found in their biographies on pages 82 to 84.
Ensuring our technology continues
to enable business growth.
Committee responsibilities
– Oversees delivery of the Operations and Technology
strategy.
– Provides oversight and challenge on Operations and
Technology risk.
– Oversee Information Security, Information Management
and Operational Resilience strategy, systems and controls.
– Oversees strategic operational and technology change
programmes.
Evaluation
As part of the 2021 Board effectiveness review, the Board
has assessed that the Committee membership is appropriate
in providing challenge and oversight and that the Committee
is operating effectively.
Discharging our responsibilities
The Committee reviewed its activities over the previous
12 months against its Terms of Reference and confirmed that
it had fully discharged its responsibilities in line with its remit.
The Terms of Reference are available at plc.quilter.com.
Attendance
The Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Chief Risk Officer and Chief Information
Officer regularly attend Committee meetings. The Group Chair
and other Non-executive Directors attended Committee
meetings for matters of particular interest, such as the Platform
Transformation Programme.
Collaboration
The Chair briefs the Board on key discussions and provides a
written report to the Board, where feasible, after each meeting.
The papers and reports presented to the Committee are made
available to all Quilter Non-executive Directors.
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Quilter Annual Report 2021
During the year, the Committee’s membership has been
strengthened by the addition of Chris Samuel to the
Committee. Chris has added deep experience of operations
in the financial services industry to our deliberations.
By the end of 2021, the Group’s technology estate looks very
different to when the business was separated from Old Mutual
in 2018. We have made significant progress in building a
simpler, less fragmented technology estate that is more secure,
agile and resilient and there is more to be done. Managing and
leveraging the new opportunities created has required the
business to acquire new skills such as in managing and
collaborating with major third party providers as well as new
capabilities in digital technology. The Committee will continue
to make sure that the business has the skills that it requires
to continue to make progress in these areas.
Moira Kilcoyne
Chair
Dear shareholder,
During 2021 the Group successfully completed the safe
delivery of its new investment platform which had been the
Group’s number one priority in the period leading up to the
third and final phased adviser migration in February 2021. The
Committee’s work in relation to the Platform Transformation
Programme did not of course end there and the Committee
has continued to oversee the transition to the new platform,
the plans for closing down the legacy platform, the resourcing
of our operations area through the transition and over the busy
tax year end period and the leveraging of the new platform to
provide enhanced services to our customers and advisers.
Inevitably there have been challenges in implementing the
new investment platform in the midst of a global pandemic.
Management has had to adapt to the increased complexity of
having many of our staff working remotely through this process
which has made training and embedding of new skills more
difficult. Staff sickness and isolation absences and reduced
productivity resulting from remote working in our platform
customer servicing area have coincided with periods of
heightened customer demand creating inevitable pressures.
Quilter’s management has continued to ensure that Quilter’s
advisers and customers receive the best quality of service
possible when using our platform even when this has added
materially to short-term costs and delayed other revenue
enhancing initiatives. By the end of 2021, with management
focus and determination, our service levels have returned
to our usual high standards.
In accordance with best practice, the Committee required that
management conduct a thorough lessons learned exercise
following the completion of the Platform Transformation
Programme. Overall, the review concluded that the programme
had been well managed with careful planning and good risk
decision making such that the programme was delivered with
the minimum of disruption for our advisers and customers.
The lessons learned will prove valuable as the Group continues
to adopt significant change activity.
The Committee has continued to oversee the programme of
work to enhance the resilience of the Group’s operations and
technology so that our customers and advisers can be
confident in the availability of our services.
Good progress has been made on the Group’s digital strategy
which encompasses our digital customer proposition, public
websites and portals. The implementation of our digital advice
proposition and our digital transformation of our business
operations will be a key focus for 2022.
Quilter Annual Report 2021
109
Strategic ReportGovernance ReportFinancial statementsOther information Board Technology and Operations Committee report
continued
Key areas of committee focus
Platform Transformation Programme
The final migration for our new investment platform moved
some 5,000 advisers and approximately £14 billion of assets
onto the new platform in February 2021. The Committee
received assurances from management as to the readiness
of our call centres, our regulatory reporting arrangements and
the advisers to be migrated before endorsing management’s
decision to proceed.
Management had prepared a detailed plan for
decommissioning the legacy investment platform. By the end
of 2021 over 1,584 legacy servers had been decommissioned
leaving a materially simplified technology estate, reducing costs
and security risks.
The lessons learned exercise conducted at the end of the
Platform Transformation Programme (“the Programme”)
highlighted clearly that the Programme had benefited
significantly from being identified early as the most critical
and high priority strategic programme in the Group. The whole
firm was engaged in the Programme and the Programme had
access to the firm’s best talent and a diverse skillset. The quality
of the end product delivered for customers and advisers was
emphasised throughout the Programme and critical decisions
were made to prioritise quality over cost savings and speed
of delivery. The whole Board attended a full demonstration
of the new platform so that they could see first hand what
our advisers and customers experience when they are using
the platform.
No programme of this scale is without challenges. The
Committee is satisfied that the Programme succeeded in its
objective to safely deliver a high-quality investment platform
that meets the needs of customers and advisers, and positions
the business for growth despite the challenges of a complex
programme and the COVID-19 pandemic.
Quilter Financial Planning payments programme
Quilter Financial Planning’s new payments solution, CommPay,
was successfully launched in February 2021, following a
re-planning of the programme in 2020. The new system has
delivered benefits to both advisers and staff with streamlined
processes and enhanced reporting tools.
Operations
The Group’s operations areas have been the most directly
impacted by the continuing effects of the COVID-19 pandemic.
The business has had to manage the challenges of remote
working and heightened sickness levels. The demand for staff
in the operations areas has been unprecedented, challenging
management to be more flexible and adaptive for recruitment
and retention.
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Quilter Annual Report 2021
While the COVID-19 pandemic created significant management
challenges, it also offered opportunity. The rapid move to
remote working allowed the Group to accelerate existing
optimisation strategies resulting in the early deployment of a
Group-wide standard desktop enabling a consistent and stable
work from home solution. Productivity levels have been kept
almost as high as when staff were working from the office. The
Group has adopted remote training successfully, but as with all
new processes, there will need to be a balance as staff feedback
has highlighted the need for face to face options as well.
Some operational processes have been made more efficient
in response to the crisis such as a reduction in the numbers of
cheques being issued by some business areas. Controls have
been re-engineered to ensure they remain effective whilst
working remotely.
As some COVID-19 restrictions were eased in the summer, staff
were able to return to the office. Where appropriate, flexible
working has been implemented and staff have welcomed the
ability to better balance their home and work life.
The Committee is mindful of the large number of manual
processes across the organisation and encouraged management
to reinvest some of the proceeds from the sale of Quilter
International to simplifying and automating operational areas,
commencing with Quilter Financial Planning which will have
the additional benefit of enhancing controls.
Information security
Mindful of the pressures on all firms and organisations to
manage the risks posed by external threats, and the need to
manage data well, we continued to urge management to remain
focused in managing this risk within risk appetite. During the
year, we received a deep dive on information security threats
and management actions to mitigate such risks through the
implementation of appropriate controls, monitoring and
training. Management provided assurance on the measures
we take as a firm to protect client data and our systems.
We discussed the continuing use of data access management
tools and the risks associated with unstructured data.
Technology strategy
The Group has made significant progress in 2021 on the
delivery of several major transformational programmes
including the Platform Transformation Programme, the
Enterprise Resource Planning Programme and the Quilter
Financial Planning payments system mentioned previously.
The first phase of the Group’s Infrastructure Transformation
Programme has been completed and the second phase, which
includes the data centre consolidation, is progressing well. New
cloud-based capabilities are now available and new Enterprise
Telephony services are being introduced. Management has
defined and gained support for the new data strategy which
the Committee will be overseeing delivery against in 2022.
Digital strategy
The Group’s digital strategy covers several initiatives aimed at
improving the digital access and experience of our customers
and advisers. The digital customer proposition includes
enhancements to the Group’s public websites, online portals
and mobile apps. Good progress has been made in relation
to public websites. Since 2019 we have moved from having
nine different public websites on nine different technologies.
All of our websites are now on the same strategic technology
with shared functionality across the Group’s websites and
an aligned look and feel. As part of the launch of the new
investment platform, a new online customer portal has also
been made available with enhanced functionality and useability.
A new customer mobile app is also being developed for the
Affluent business.
There is more to be done to leverage digital capabilities that
will support the Group’s intention to create a simpler, more
efficient business.
ReAssure migration
As part of the sale of the Quilter Life Assurance business to
ReAssure in 2019, a Transitional Services Agreement was put
in place for Quilter to continue to provide certain core services
to support the Quilter Life Assurance business. The Committee
has carefully overseen the preparations for the migration of
these customers from Quilter’s systems to ReAssure’s,
including a number of dry run exercises and dress rehearsals
held between June and September 2021 to ensure that the
process would run smoothly, customers would not be
impacted and ReAssure’s operations area could seamlessly
take on the support for these customers. The migration was
successfully completed in October 2021.
In parallel with the planning for the customer migration,
management also developed a detailed plan for
decommissioning the systems and hardware that service these
customers. Robust governance is in place for IT environment
decommissioning post-migration with the majority of the work
completed by the end of 2021.
Operational resilience
The Committee has continued to oversee the work to ensure
the Group’s operational resilience continues to be in line with
our and our regulators’ expectations. As part of this review,
management has identified its important business services
and defined the tolerances for impact to those services that
we are prepared to accept. The aim is to ensure that Quilter can
continue to make these important business services available
to our customers and advisers in a range of severe but
plausible scenarios. With the support of our second and third
lines of defence, there is a strong plan in place for achieving
the required end state.
Strategic change initiatives
Given the large volume of change that the Group has navigated
in recent years and the strategic changes that are planned to
complete the transformation of the Group to a simpler, more
efficient modern wealth manager the Committee has
prioritised the identification of lessons learnt from major
programmes. All major change programmes have, on their
conclusion, conducted lessons learnt reviews with the support
of the second and third lines of defence. These learnings are
captured and built into the methodology for future change
initiatives to help ensure that the Group’s material investment
in change delivers the benefits that were agreed at the
inception of the programme.
Business technology and operations updates
In addition to the Committee’s oversight of significant change
programmes it has also exercised oversight at a more granular
level on the technology and operations areas in each of our
businesses, Quilter Financial Planning, Quilter Investors, Quilter
Investment Platform, Quilter International, Quilter Cheviot and
our Group functions. These were helpful, interactive sessions
which enabled the sharing of best practice and new initiatives
across the Group.
Sale of Quilter International
pages 86 and 87
Quilter Annual Report 2021
111
Strategic ReportGovernance ReportFinancial statementsOther information Board Remuneration
Committee Report
At a glance
Committee activity
26%
Group remuneration policy
2020: 10%
25%
Specific remuneration
arrangements
2020: 27%
23%
Remuneration schemes,
including all employee schemes
2020: 36%
26%
Risk and governance
2020: 27%
Committee highlights 2021
Strong year of performance
Remuneration outcomes for
Executive Directors reflect a year
of strong business performance
and strategic execution.
Committee membership and meetings
attended/eligible to attend
Ruth Markland (Chair)
Glyn Jones
Tim Breedon
Tazim Essani*
Paul Matthews
*Appointed to the Committee on 9 March 2021.
10/10
10/10
9/10
7/7
9/10
New Policy
We have reviewed our Directors’
Remuneration Policy to ensure it aligns
to the next phase of the Quilter strategy.
We have proposed minimal changes
to the Policy previously approved by
shareholders with a 97% vote at the
2019 AGM, and we are proposing
evolutionary changes to its
implementation for 2022.
Committee responsibilities
– Sets the overarching principles and parameters
of remuneration policy across Quilter.
– Considers and approves remuneration arrangements
for Executive Directors and senior executives.
– Approves individual remuneration awards.
– Agrees changes to Senior Executive incentive plans.
Compliance with the Code
The Board Remuneration Committee (“Committee”) currently
comprises four independent Non-executive Directors and the
Group Chair, who was independent on appointment. Details
of the skills and experience of the Committee members can
be found in their biographies on pages 82 to 84.
Evaluation
As part of the 2021 Board Effectiveness Review, the Board
has assessed that the Committee membership is appropriate
in providing challenge and oversight and that the Committee
is operating effectively.
Discharging our responsibilities
The Committee reviewed its activities over the previous
12 months against its terms of reference and confirmed that
it had fully discharged its responsibilities in line with its remit.
The terms of reference are available at www.quilter.com.
Attendance
The Chief Executive Officer, Chief Financial Officer, HR Director,
Reward Director and the Committee’s independent
remuneration adviser regularly attend Committee meetings,
except when it would not be appropriate for them to do so.
Collaboration
The Chair briefs the Board on key discussions and provides a
written report to the Board, where feasible, after each meeting.
The papers and reports presented to the Committee are made
available to all Quilter Non-executive Directors. The members
of the Board Risk Committee are invited to join Committee
meetings when the impact of risk on remuneration matters
is being discussed.
112
Quilter Annual Report 2021
Shareholder feedback has been gratefully received and is
reflected in the new Policy. As you will see, we are proposing
a new Policy which is evolutionary in nature, with no major
structural changes, except the removal of the ability to grant
an exceptional LTI award above the normal Policy maximum
in line with market practice.
For 2021 we have reported a median gender pay gap of 29%
and a median bonus gap of 53% for the continuing business.
Whilst our pay gaps have reduced since Gender Pay Gap
Reporting was introduced five years ago, we still have much
further to go. Last year, the Company committed to long-term
gender and ethnic minority representation targets for our
Senior Leadership Community and progress against these will
be formally incorporated into the Executive Directors’ 2022 STI
scorecards. Further details of our gender pay gap and diverse
representation targets can be found on pages 46 to 47 of the
Responsible Business Report.
Looking at the year ahead, we look forward to inviting
shareholders to vote on the new Policy at the AGM. We will
continue to monitor executive remuneration developments
within the industry and the regulatory landscape to ensure
that remuneration supports the alignment of executive and
shareholder interests and is consistent with the prudent risk
management of the business.
The Committee actively engages with shareholders and
investor bodies and welcomes the opportunity for further
engagement to discuss remuneration issues in advance of the
2022 AGM. I appreciate the ongoing support and feedback
from our shareholders.
Ruth Markland
Chair of the Remuneration Committee
Dear shareholder,
As Chair of the Board Remuneration Committee (“Committee”),
I am pleased to present on behalf of the Board the
Remuneration Report (“Report”) in respect of the year ended
31 December 2021. This statement and the accompanying
Report aims to ensure high levels of disclosure regarding pay
policy in accordance with the Corporate Governance Code and
transparency of remuneration decision making.
2021 was a year of strong business performance and significant
strategic progress for Quilter, as demonstrated in our 2021
results and reflected in remuneration outcomes for the
Executive Directors. During 2021, we completed the strategic
reshaping of the business with the sale of Quilter International
and the final migration to our new platform, whilst delivering
robust financial performance with net flows of £4.0 billion (up
from £1.5 billion in 2020) and Adjusted Profit for the continuing
business of £138 million (up from £108 million in 2020).
The Committee approved a 2021 STI outcome of £886k (66% of
maximum) for the Chief Executive and £618k (69% of maximum)
for the Chief Financial Officer, and an outcome of 56% of
maximum for the vesting of the 2019 LTIP award after
exercising discretion to adjust for corporate activity. Full details
of these outcomes are set out in the Report.
As part of its review of 2021 performance, the Committee –
at a joint meeting with the Board Risk Committee – considered
the impact of any material risk events or risk issues that arose
during the year. The Committee noted that several past reviews
into historic defined benefit pension transfers initiated in 2020
and 2021 resulted in a further £12 million of estimated
customer remediation costs and professional fees during the
2021 financial year. The formulaic impact of these costs within
the profit component of the STI scorecard was to reduce the
Chief Executive’s STI outcome by £93k (a reduction of 9% of the
outcome) and the Chief Financial Officer’s STI outcome by £62k
(a reduction of 9% of the outcome). The Committee concluded
that the 2021 financial impact of the customer remediation
provisions was appropriately reflected in the 2021 STI
outcomes. It will continue to monitor the impact of all defined
benefit past business reviews as they progress and will
consider carefully whether any further risk adjustments
to remuneration outcomes are necessary in the future.
Our Report for 2020 received 97% of votes in favour at the
last AGM and our current Directors’ Remuneration Policy also
received 97% of votes in favour at the 2019 AGM. This year we
will present our new Directors’ Remuneration Policy (the “Policy”),
which we will put to a binding shareholder vote at the 2022
AGM. The Committee undertook an extensive and holistic
review of the Policy during 2021, taking into account Quilter’s
strategic priorities and the alignment of executive reward
with the long-term sustainable success of the Company in
the interests of all stakeholders, as well as the latest market
developments, regulatory requirements and corporate
governance best practice. The Committee consulted with the
Company’s major shareholders on the Policy, engaging with
over 50% of the share register.
Quilter Annual Report 2021
113
Strategic ReportGovernance ReportFinancial statementsOther information Remuneration at a glance
2021 remuneration in numbers
STI metrics
£60m
IFRS profit before tax
(STI Outcome)
2020: £3m
4%
Executive Directors’ outcomes
Paul Feeney
66%
56%
69%
Net flows as a percentage
of opening AuMA
2020: 2%
Short-term incentive
(STI) as a % of max
2020: 0%
Long-term incentive
(LTI) as a % of max
2020: 49%
Total compensation
as a % of max
2020: 41%
LTI metrics (2019-2021)
12%
Earnings per share (EPS)
CAGR performance
achieved
2020: 7%
27%
Total Shareholder
Return (TSR)
2020: 9%
Mark Satchel
69%
56%
70%
Short-term incentive
(STI) as a % of max
2020: 0%
Long-term incentive
(LTI) as a % of max
2020: 49%
Total compensation
as a % of max
2020: 39%
Components of Executive remuneration and outcomes for 2021
Components of remuneration
Fixed pay
Short-term incentive (“STI”)
Long-term incentive (“LTI”)
– Salary, benefits, and pension.
– Normally reviewed annually with
effect from 1 April.
How much our Executive Directors
earned in 2021
The following charts set out the
aggregate emoluments earned by the
Executive Directors in the year ended
31 December 2021.
Paul Feeney
£2,519k
£886k
£753k
Fixed
Salary
Benefits
Pension
Short-term incentive
Total incentive award
Long-term incentive
Award vests
£880k
675.0
10.2
67.5
886.0
880.6
Mark Satchel
£1,707k
£618k
£502k
Fixed
Salary
Benefits
Pension
Short-term incentive
Total incentive award
Long-term incentive
Award vests
£587k
450.0
7.1
45.0
618.0
587.0
m
r
e
t
-
g
n
o
L
e
v
i
t
n
e
c
n
i
114
Quilter Annual Report 2021
– Award based on annual performance
metrics that assess Company and
individual performance. 50% of the
award is subject to deferral under
the Share Reward Plan.
– Awards subject to three-year
performance period ending
31 December 2021.
– Award vests in Q1 following end of
the performance period and subject
to further two-year holding period.
Link between remuneration and business strategy
Performance
indicators
STI scorecard
weighting
2021
achievement
(% of maximum)
IFRS profit before tax
(excluding amortisation, policyholder tax adjustments,
business disposal impacts and one-off items)
40%
69%
Net flows as a percentage of opening AuMA
20%
43%
Risk management
10%
75%
Customer outcomes
10%
61%
Strategic personal performance:
– Paul Feeney
– Mark Satchel
t
h EPS compound annual growth rate
w
o
r
g
(2018-2021)
e TSR relative to FTSE-250
u
l
a
v
(excluding investment trusts)
R
S
T
20%
80%
95%
LTI scorecard
weighting
70%
2021
achievement
(% of maximum)
63%
30%
42%
e
v
i
t
n
e
c
n
i
m
r
e
t
-
t
r
o
h
S
l
a
i
c
n
a
n
i
F
l
a
i
c
n
a
n
fi
-
n
o
N
S
P
E
Summary of the key elements of our Policy
2021
2022
2023
2024
2025
Fixed pay
Performance
period
Short-term
incentive
Performance
period
Vesting
period
1/3
1/3
1/3
Maximum short-term incentive opportunity is 200% of salary.
Cash element of incentive outcome (50% of the whole award) is paid in Q1 following the end of the performance year.
Deferred element of incentive outcome (50% of the whole award) is granted in shares and vests in three equal tranches
in Q1 2023, Q1 2024 and Q1 2025 subject to the plan rules.
Long-term
incentive
Performance
period
Vesting period
Additional
holding period
Maximum long-term incentive opportunity 200% of salary.
Shareholding
Paul Feeney
Mark Satchel
280% of salary
300% of salary
310% of salary
300% of salary
Owned shares
Unvested shares
Additional awards subject to performance conditions
Minimum shareholding required (after five years)
Current shareholding
Quilter Annual Report 2021
115
Strategic ReportGovernance ReportFinancial statementsOther information Board Remuneration Committee report
continued
Key areas of Committee focus
Key performance highlights
– IFRS profit before tax (excluding amortisation, policyholder
tax adjustments, business disposal impacts and one-off
items) for remuneration purposes was £60 million for 2021,
compared to £3 million in 2020 (£63 million including
Quilter International).
– Net flows from continuing operations of £4.0 billion was more
than double the £1.5 billion in the previous year, supported
by increased IFA usage of the new Quilter platform.
– AuMA for continued operations increased by 13% during
the year to close at £111.8 billion as a consequence of strong
net flows and £8.8 billion of positive market movement,
compared to £99.0 billion AuMA in prior year.
– Net flows as a percentage of opening AuMA is 4%, which
is double the 2% achieved in the prior year.
– Expenses were well managed and ended the year below
– As part of its review of 2021 performance, at a joint meeting
with the Board Risk Committee, the Committee considered
the impact of any material risk events that arose during the
year. In particular, taking advice from the Chief Risk Officer
and Board Risk Committee, the Committee considered the
impact of past business reviews of historic defined benefit
pension transfer advice, which resulted in provisions of
£12 million for customer remediation costs and professional
fees, which in turn reduced the profit component of the
STI scorecard.
– The Committee noted that the 2021 financial impact of
the customer remediation provisions reduced the Chief
Executive’s STI outcome by £93k and the Chief Financial
Officer’s STI outcome by £62k, and concluded that this was
an appropriate adjustment and that no additional risk-based
adjustment to Executive Directors’ STI was required.
market expectations.
– Good progress was made with strategic priorities; the safe
and secure delivery of our new UK Platform and streamlining
our business with the sale of Quilter International.
– We have continued to increase customer focus, and whilst
we have experienced some disruption following the final
UK Platform migration, core investment performance and
customer and adviser experience on the whole has
been positive.
Short-term incentive outcome
– Business performance has been robust. Our 2021 IFRS profit
result for STI purposes of £60 million was 69% of maximum
and accounted for 40% of the Executive Directors’ scorecard.
The STI target range for 2021 was set at a relatively wide
range – both on the upside and the downside – in recognition
of market uncertainty amid the ongoing impact of the
COVID-19 pandemic.
– Net flows as a percentage of opening AuMA was introduced
to the scorecard for the first time in 2021 to reflect its
importance as a lead indicator of business performance.
The outcome of 4% (£4.0 billion) equated to 43% of maximum
and accounted for 20% of the Executive Directors’ scorecard.
– The Company made good strategic progress in 2021, notably
on the completion of the UK Platform Transformation
Programme and the sale of Quilter International, which
completes the strategic reshaping of the perimeter of
our business.
– The risk management of the business and overall progress
against key customer outcome measures was positive,
notwithstanding some customer disruption following the
migration of the UK Platform which was closely managed
over the year.
– Overall this generated an STI award of 66% of maximum
(£886k) for the Chief Executive Officer and 69% of maximum
(£618k) for the Chief Financial Officer.
Long-term incentive outcome
– The performance period for the 2019 LTI award ended on
31 December 2021 and the award is due to vest on 25 March
2022, subject to a further two-year holding period.
– The performance conditions measure compound annual
profit growth from 2018 to 2021, and TSR relative to the
FTSE-250 (excluding investment trusts) from 2019 to 2021.
– The Committee considered carefully the impact of corporate
activity during the performance period and determined an
approach which appropriately reflected underlying
performance. Specifically, the Committee decided to exclude
the earnings of Quilter Life Assurance and Quilter
International, net of stranded costs, from the EPS CAGR
calculation, neutralise the impact of Quilter’s share buyback
programme and increase the target CAGR range. The full
calculation is set out on pages 137 to 138 of the Report. This
approach was considered an appropriate way to measure the
performance of the ongoing business and is also consistent
with the treatment of the 2018 LTI award as disclosed in the
2020 Report.
– Awards will vest on 25 March 2022 with an outcome of
56% of maximum for the Executive Directors, as detailed
in the Report.
– In respect of the 2018 LTIP award, the Committee exercised
discretion to allow vested options to be exercised on vesting
in order to avoid a technical issue whereby the Executive
Directors would be unfairly disadvantaged by not being
eligible to receive dividends or dividend equivalents on
exercised options during the holding period. This treatment
was determined on an exceptional basis in accordance with
the terms of the Directors’ Remuneration Policy in force
at the time, and aligns the treatment of their awards with
the wider workforce and market practice. This Committee
required the net-of-tax shares to be held by corporate
nominee during the post-vesting holding period to preserve
its effectiveness.
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Quilter Annual Report 2021
Remuneration Policy
– The Committee conducted a thorough review of the Policy,
whilst considering corporate governance best practice,
regulatory requirements including future IFPR impacts and
latest market developments to ensure the Policy continues
to encourage and reward growth of shareholder value and
promotes the long-term sustainable success of the Company.
– The new Policy is an evolution of the current version, which
remains fit for purpose and aligned with best practice.
– The next phase of the Company’s strategy is guided by four
strategic priorities and the application of the new Policy is
proposed to evolve to become more clearly aligned to these,
as set out below.
– The main changes to the way we propose to apply the Policy
in 2022 are to the LTI metrics; adding operating margin and
ESG measures, whilst also changing the methodology of EPS
growth from compound annual growth rate to a cumulative
measure. We will also increased the weighting of net flows
as a percentage of opening AuMA within the STI scorecard
for 2022.
– There are no changes proposed to the remuneration
structure or opportunity at threshold, target and maximum.
– The Committee has decided to remove the opportunity to
grant an exceptional LTI award of up to 400% of salary, above
the normal Policy maximum of 200% of salary, that previously
existed, in consideration of current market practice.
– The Policy also formally includes the post-cessation
shareholding requirement for Executive Directors’ previously
introduced in 2020.
– We approached more than 50% of the share register for
feedback on the Policy, which was gratefully received and has
been reflected in the final proposals.
– The new Policy will be put to a shareholder vote for formal
approval at the 2022 AGM.
Alignment to strategic priorities
The application of the Policy has evolved to align management incentives to the four strategic priorities of the Company, as set out
in the chart below.
How we create value for our stakeholders
Our strategic
priorities
Grow with our
clients and
advisors
Enhance
efficiency
Embed digital
Be the
responsible
wealth manager
Net flows as a %
of opening AuMA
IFRS profit
Part of personal
element of the
scorecard,
informed by
relevant KPIs
Diverse
representation
Colleague
engagement
How we align our
incentive schemes
Short-term
incentive
Long-term
incentive
Customer
outcomes
EPS growth
Relative TSR
Operating
margin
EPS growth
Relative TSR
Operating
margin
Responsible
investing
Carbon intensity
of own
operations
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Considerations for the year ahead
We continue to monitor executive remuneration developments
within the industry and the regulatory landscape, to ensure
that remuneration supports the alignment of executive and
shareholder interests and is consistent with the prudent risk
management of the business.
The Committee considered the overall remuneration
arrangements for the Executive Directors for 2022 in
accordance with the Policy. Key points are as follows:
– there will be no increase to the Executive Directors’ salaries
at the 1 April 2022 review date, and base salaries were also
not increased at the April 2021 or 2020 review;
– the structure, performance metrics and target and
maximum award levels of the STI awards in respect of 2022
will remain unchanged, however the weighting of net flows
within the scorecard will be increased;
– the structure, target and maximum award levels of the LTI
grants in 2022 will also remain unchanged. However, the
performance metrics will be updated to include operating
margin and ESG measures, as well as a change to the EPS
growth methodology from compound annual growth rate
to cumulative; and
– there will be no increase in fees for the current Board Chair
or Non-executive Directors’ for 2022.
Board Remuneration Committee report
continued
Key areas of Committee focus
Inclusion, diversity and the gender pay gap
A key priority for the Company is the continued commitment
to an inclusive culture and the equality and diversity of our
workforce. The Inclusion and Diversity agenda is led by Paul
Feeney. Further details can be found in the Responsible
Business report on pages 46 to 47. During 2021 the Company
made progress across several areas, including:
– on-boarded a Head of Diversity, Inclusion and Talent
Acquisition, a new role dedicated to our inclusion, diversity
and wellbeing priorities and supported by a new Inclusion
and Diversity Steering Committee, comprised of Quilter
Executive Committee members;
– updated our talent programme to ensure we can identify,
track and support individuals of under-represented ethnicities
and gender in progressing their careers in Quilter; and
– continued to evolve our recruitment processes to ensure
we market roles, shortlist and select candidates on a fully
diverse and inclusive basis.
For 2021 we have reported a median gender pay gap of 29%
and a median bonus gap of 53%. Whilst our pay gaps have
reduced since Gender Pay Gap Reporting was introduced
five years ago, we still have much further to go. Further details
regarding our gender pay gap figures can be found on pages
46 to 47 of the Responsible Business report.
The Committee is focused on ensuring that pay arrangements
across the Group reflect our diversity and inclusion ambitions.
In 2022, the Committee has decided to include new diversity
and Inclusion measures within the personal measures of the
STI scorecard for both Executive Directors, including specific
targets set for diversity and culture goals.
Employee voice
Paul Matthews and Tazim Essani, Independent Non-executive
Directors of Quilter and members of the Remuneration
Committee, are responsible for reflecting the employee voice
in the Boardroom and engaged directly with our Employee
Forum during 2021 to gain valuable insight on employee views
pertaining to corporate strategy, change management and
culture. Further details on the progress made during the
year can be found in the Governance in action report
on pages 88 to 89.
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Quilter Annual Report 2021
Directors’ Remuneration Policy
The following Policy is subject to formal approval by shareholders
at the 2022 AGM. It is intended that the Policy will apply for
three years from that date.
The previous Policy has been in place since the Company listed
in 2018 (taking effect from the first AGM in May 2019). In line
with the usual cycle, the Company is therefore due to seek
shareholder approval for a renewed Policy at the forthcoming
AGM. This has provided an opportunity for the Committee
to reflect on the current Policy to ensure it continues to be
appropriate. Overall, the Committee concluded that the current
Policy continues to align with market practice, remains fit-for-
purpose and operates as intended. It is therefore tabling only
minor changes for the 2022 Remuneration Policy.
In determining the new Remuneration Policy, the Committee
followed a rigorous process. The Committee discussed the
detail of the Policy over a series of meetings throughout 2021.
Input was sought from the management team, including the
risk function. The Company also undertook a significant
engagement exercise with our key shareholders, whose input
helped guide the Committee’s thinking. Conflicts of interest
were suitably mitigated throughout the review process, and
external perspective and market insight was provided by our
independent advisors. The Committee also assessed the Policy
against the principles of clarity, simplicity, risk management,
predictability, proportionality and alignment to culture, as set
out in the Corporate Governance Code 2018.
The key drivers of our Remuneration Policy:
Alignment to culture
– to align the interests of the Executive Directors, senior executives and employees with the
long-term interests of shareholders and strategic objectives of the Company;
– to incorporate incentives that are aligned with and support the Group’s business strategy,
align executives to the creation of long-term shareholder value, and promote the long-term
sustainable success of the Company for the benefit of all stakeholders, within a framework
that is sufficiently flexible to adapt as our strategy evolves;
– to reinforce a strong performance culture, across a wide range of individual performance
measures, including behaviours, risk management, customer outcomes and the development
of the Company’s culture in line with its values over the short and long term;
– to ensure that remuneration practices are consistent with and encourage the principles
of gender neutrality, equality, inclusion and diversity; and
– to align management and shareholder interests through building material share ownership
over time.
– to clearly communicate our Remuneration Policy and reward outcomes to all stakeholders.
– to ensure that our Remuneration Policy is transparent and easily understood; and
– to operate simple and clear remuneration structures across the Company.
– to provide a balanced package between fixed and variable pay, and long and short-term
elements, to align with the Company’s strategic goals and time horizons whilst encouraging
prudent risk management; and
– to ensure reward processes are compliant with applicable regulations, legislation and market
practice, and are operated within the bounds of the Board’s risk appetite.
– to set robust and stretching performance targets which reward exceptional performance; and
– to set remuneration within the limits established under the Remuneration Policy.
– to attract, retain and motivate the Executive Directors and senior employees by providing total
reward opportunities which, subject to individual and Group performance, are competitive
within our defined markets both in terms of quantum and structure for the responsibilities
of the role; and
– to consider wider employee pay when determining that of our Executive Directors.
Clarity
Simplicity
Risk
Predictability
Proportionality
Remuneration Policy for Executive Directors
The tables on the following pages summarise the key components of Executive Director remuneration arrangements, which form
part of the Policy, subject to shareholder approval.
Quilter Annual Report 2021
119
Strategic ReportGovernance ReportFinancial statementsOther information Directors’ Remuneration Policy
continued
Fixed elements of pay
Base salary
Benefits
Purpose and link to strategy
Essential to attract and retain Executive Directors with the
calibre, personal skills and attributes to develop, lead and
deliver the Group’s strategy.
Purpose and link to strategy
Benefits are provided to Executive Directors to attract and
retain the best talent for the business and to ensure that the
total package is competitive in the market.
Operation
Base salaries are normally paid in equal monthly instalments
during the year and reviewed annually with increases usually
effective 1 April. In reviewing base salaries the Committee
takes into account a number of factors, including:
– Group and individual performance;
– the skills, experience and level of responsibilities of the
Executive Director and his/her market value;
– the scope, nature and size of the role;
– levels of increase across the wider employee population;
and
– affordability, economic factors, external market data,
business and personal performance.
The Committee considers the direct and indirect impacts
of any base salary increases on total remuneration.
Maximum opportunity
There are no prescribed maximum salary levels, but any
salary increases will normally be in line with percentage
increases across the wider employee population.
In specific circumstances, the Committee may award
increases above this level, for example:
– where the base salary for a new recruit or promoted
Executive Director has been set at a lower level to allow
the individual to progress into the role over time;
– to reflect a material increase in the size or scope of an
individual’s role or responsibilities;
– where a change is deemed necessary to reflect changes
in the regulatory environment; and
– where the size, value or complexity of the Group warrants
a higher salary positioning.
Performance metrics
Individual and Company performance will be taken into
account in determining any salary increases.
Proposed changes to application for 2022
No change in approach.
Operation
The Committee’s policy is to provide Executive Directors with
a market competitive level of benefits taking into consideration
benefits offered to other employees in the UK.
Benefits currently provided to Executive Directors include:
– private medical insurance;
– life assurance; and
– income protection.
The usual approach for benefit provisions for Executive
Directors is to be consistent and operated in line with the
rest of the organisation. Specific benefit provisions are
subject to regular review in line with market practice and
may be subject to change from time to time.
In line with other Quilter employees, Executive Directors
can access discounted Company products and are eligible
to participate in the Company’s voluntary benefits which
they fund themselves, sometimes through salary sacrifice.
Executive Directors are eligible for other benefits that are
introduced for the wider workforce on broadly similar terms.
They are eligible to participate in the UK all-employee share
plans on the same terms as other employees, including the
Company’s Share Incentive Plan and Sharesave Plan.
Where the Committee considers it appropriate, other benefits
may be provided, for example, but not limited to, situations
involving recruitment or relocation for a defined period.
Any reasonable business-related expenses (including tax
thereon if determined to be a taxable benefit) can be
reimbursed.
Maximum opportunity
In line with other employees, there is no maximum monetary
level for benefits as this is dependent on the individual’s
circumstances, market practice and the cost to the Company.
Performance metrics
There are no performance conditions.
Proposed changes to application for 2022
No change in approach.
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Quilter Annual Report 2021
Pension
Purpose and link to strategy
To provide a market-competitive contribution towards
retirement benefits that helps to attract and retain the best
talent for the business.
Operation
Executive Directors are eligible to receive employer
contributions to the Company’s pension plan (which is a
defined contribution plan) or a cash allowance in lieu of
pension benefits, or a combination. Contributions and/or
a cash alternative are paid monthly.
Maximum opportunity
The maximum benefit will normally be capped at a level
comparable to the benefit available to the wider workforce.
This is currently 10% of base salary.
Performance metrics
There are no performance conditions.
Proposed changes to application for 2022
No change in approach.
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Directors’ Remuneration Policy
continued
Short-term incentives (“STI”)
Purpose and link to strategy
The STI plan is designed to align remuneration with
performance against financial and non-financial business plan
targets and personal goals, within the Group’s risk appetite
and taking into consideration the Company’s culture and
values, on an annual basis.
Malus and clawback provisions apply to both cash and
deferred portions of the STI awards as described in further
detail in ‘Risk adjustments, malus and clawback’ on page 126.
Maximum opportunity
The maximum STI opportunity for Executive Directors is set
at 200% of base salary for stretch performance.
Performance metrics
The STI plan uses a balanced scorecard of performance
measures, which are aligned with the key strategic priorities
of the Group and designed to deliver sustainable shareholder
value.
Performance is usually measured based on a mix of financial,
non-financial, strategic and personal targets. The splits
between the performance measures and relative weighting
of the targets are reviewed by the Committee at the start of
each year and set out in the Annual Report on Remuneration.
The majority of any annual bonus is subject to financial
measures, with at least 50% of the scorecard reflecting
financial performance.
When determining the outcome of the performance
measures, the Committee will seek the advice of the Chief
Risk Officer and the Board Risk Committee to ensure all
relevant risk factors are identified and the bonus pool
and/or individual awards adjusted accordingly.
Specific measures, targets and weightings will be set by the
Committee annually and disclosed on a retrospective basis.
Proposed changes to application for 2022
The weighting of net flows as a percentage of opening
AuMA will be increased from 20% to 25% for 2022, with the
weighting of IFRS profit reduced accordingly from 40% to
35% to reflect the importance of net flows as a key growth
driver. The weighting of the non-financial aspect of the
scorecard will remain unchanged at 40%, which is made
up of risk management (10%), customer outcomes (10%)
and strategic personal performance (20%).
A portion of any award is deferred and delivered in shares
to aid retention, encourage long-term shareholding, a
considered risk-based environment and align the executive
and shareholder interests.
Operation
Performance targets and weightings are normally reviewed
and set annually by the Committee taking into account
business plans and the Company’s risk appetite. Pay-out
levels are determined by the Committee following the year
end, based on performance against objectives.
STI awards are funded from the overall Group bonus pool,
which is approved each year by the Committee.
STI pay-out for threshold performance is set at 25% of
maximum, on-target performance is set at 50% of maximum
and maximum is set at 100%.
Overall pool funding and individual outcomes are also subject
to risk adjustment after the Committee’s consideration of a
comprehensive report from the Chief Risk Officer and in
conjunction with the Board Risk Committee in relation to the
nature and incidence of risk events and an overall assessment
of risk management relative to the Board’s risk appetite.
At least 50% of any STI awarded to an Executive Director is
normally deferred in the form of conditional awards under the
Share Reward Plan, which vests annually in equal annual
instalments over a three-year period subject to the rules of
the Share Reward Plan. Where required by regulation, deferral
will be increased to ensure compliance with regulatory
deferral levels for all variable pay.
Vested awards:
– may be subject to a post-vesting holding period in line with
regulatory requirements, during which vested shares may
not normally be exercised or sold other than to settle any
tax liability arising; and
– must be exercised within ten years of the grant date.
Dividend equivalents may accrue on deferred awards during
the deferral period and are normally paid in the form of
shares or, exceptionally, cash to the Executive Directors upon
vesting, calculated on an assumed reinvested basis.
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Quilter Annual Report 2021
Long-term incentives (“LTI”)
Purpose and link to strategy
To incentivise and reward Executive Directors for achieving
superior long-term business performance that creates
shareholder value and maximises sustainable
shareholder returns.
Operation
LTI awards are made under the Quilter plc Performance Share
Plan (“PSP”). Awards are normally granted annually as nil cost
options, which are subject to performance conditions. Awards
normally vest after three years, subject to the achievement
of performance conditions and continued employment.
Performance is measured based on a mix of financial and
non-financial targets. The splits between the performance
measures and relative weighting of the targets are reviewed
by the Committee at the start of each performance period
and set out in the Annual Report on Remuneration. The
targets are subject to review and possible amendment
for future plan cycles.
Vested awards:
– are subject to a minimum post-vesting holding period
of two years;
– may be exercised in full at vesting but vested shares may
not be sold during the holding period other than to settle
any tax liability arising; and
– must be exercised within ten years of the grant date.
The Committee may shorten the minimum holding period
in exceptional circumstances provided it is not to participants’
advantage, such as a situation where the vesting date is
delayed and the holding period is shortened, to maintain
the original release date no earlier than the fifth anniversary
of grant.
Dividend equivalents accrue during the vesting period and
are released on the vesting date, or date of exercise of the
vested option. These will normally be delivered in the form
of shares on an assumed reinvested basis.
LTI awards are subject to malus and clawback provisions as
described in further detail in ‘Risk adjustments, malus and
clawback’ on page 126.
Maximum opportunity
The maximum annual value of a PSP award for any Executive
Director is an award over Company shares with a face value
of 200% of base salary at the date of grant.
Performance metrics
Performance measures are selected by the Committee for
the relevant plan cycle prior to the beginning of the relevant
performance period. Measures are designed to align with
the Group’s strategic priorities of delivering sustainable
returns to shareholders over the long term and promoting
the long-term sustainable success of the Company for the
benefit of all stakeholders.
Performance is measured based on a mix of financial and
non-financial targets. The splits between the performance
measures and relative weighting of the targets are reviewed
by the Committee at the start of each performance period
and set out in the Report. The majority of any award will be
subject to financial measures.
For each performance metric, a threshold and stretch
level of performance is set. At threshold, 25% of the relevant
element vests rising on a straight-line basis to 100% for
attainment of levels of performance between threshold
and maximum targets.
When determining the outcome of the performance
measures, the Committee will seek the advice of the Chief
Risk Officer and the Board Risk Committee to ensure all
relevant risk factors are identified and the award outcomes
adjusted accordingly. The Committee also has discretion
to reduce award outcomes to nil if required, via a risk
management assessment based on a report of risk
exposures, or to reflect financial underperformance
not adequately reflected in the financial measures.
Proposed changes to application for 2022
For the grant of PSP awards in 2022, it is proposed to
introduce additional performance metrics to the EPS
growth and relative TSR measures that have comprised the
performance conditions for prior awards. In line with the
Company’s strategic priorities regarding growth, efficiency
and being a responsible wealth manager, the Committee
proposes to add operating margin, responsible investment
and environmental measures to the LTI scorecard. It is also
proposed to amend the calculation methodology for EPS
growth from compound annual growth rate to cumulative
EPS. Relative TSR would remain subject to the same
methodology as present. Further details regarding these
changes and the weightings and targets for 2022 are set
out on page 139 in the Report.
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Directors’ Remuneration Policy
continued
Shareholding requirement
including post-cessation
Purpose and link to strategy
To align Executive Directors’ interests with those
of shareholders.
Operation
The Group operates a mandatory shareholding policy under
which Executive Directors are required to build up and
maintain a shareholding in the Company with a value at least
equal to 300% of base salary. Executive Directors are
expected to meet the requirement within five years of the
Company’s Listing date or, for newly appointed Executive
Directors, within five years of appointment if later.
At least 50% of any shares vesting under Quilter’s share plans
(on a net-of-tax basis) are expected to be retained until the
shareholding requirements are met. Vested and unvested
(net of tax) awards under the Share Reward Plan are included
in the calculation of a Director’s shareholding for this purpose.
Vested awards no longer subject to performance conditions
(net of tax) under the PSP are also included.
Executive Directors are normally required to hold shares for
at least two years following cessation of their appointment at
the lower of the minimum shareholding requirement of 300%
of base salary or the value of shares held at the point of
departure (if the Executive Director is still in the five-year
accumulation period).
Any shares purchased by an Executive Director from the open
market (i.e. separate to shares originally awarded under a
Company share plan) will be excluded from the post-cessation
shareholding requirement. However, only 25% of the value of
such purchased shares will count towards the minimum
shareholding requirement during employment. This applies
to shares purchased after the date the post-cessation policy
came into effect, in January 2020.
For any good leaver, unvested share awards that may be
permitted to be retained shall vest on their original vesting
date(s) and remain subject to post-vesting holding periods
post-termination, in accordance with the relevant share
plan rules.
The Committee has discretion to make adjustments to the
shareholding and post-cessation shareholding requirement
in exceptional circumstances.
Proposed changes to application for 2022
No change in approach.
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Quilter Annual Report 2021
Legacy arrangements
Executive Directors may be eligible to receive any relevant
payment from any award or other remuneration arrangements
made prior to the approval of the Policy (or prior to appointment
to the Board) or that are in line with the previous Policy. Details
of any such payments will be set out in the Report as they arise
as required.
Payment of statutory entitlements and settlement of claims
The Company may pay any statutory entitlements, to which
a Director is entitled, or settle or compromise any claims made
in connection with the employment of a director where the
Committee considers such claims to have a reasonable prospect
of success and that it is in the best interests of the Company
to do so.
Performance measures
The 2022 performance measures selected for the STI plan and
PSP have been chosen by the Committee to align with the Group’s
strategic priorities and are consistent with the key performance
indicators in relation to the operation of the business. Targets
are set annually taking into account a number of internal and
external reference points including: the level of performance
that is achievable over a sustained period of time; historic
performance and internal forecasts of future performance;
market expectations and any guidance provided to the market;
and the Company’s agreed risk appetite.
Committee scope for discretion
The Committee will operate the STI plan (including the Share
Reward Plan) and the PSP according to their respective rules
and the policy set out above. The Committee, consistent with
market practice, retains discretion in a number of areas relating
to the operation and administration of these plans.
These include (but are not limited to) the following:
– who participates in the plans;
– the timing of award grants and/or payments;
– the size of an award and/or a payment (within the limits set
out in the Policy table above);
– the choice and weighting of performance metrics (in accordance
with the statements made in the Policy table above);
– in exceptional circumstances, determining that any share-
based award (or any dividend equivalent) shall be settled
(in full or in part) in cash;
– discretion relating to the measurement of performance
in the event of a change of control or restructuring;
– determination of a good leaver (in addition to any specified
categories) for incentive plan purposes based on the rules
of each plan and the appropriate treatment in such
circumstances;
– determining the extent of payment or vesting of an award
based on the assessment of any performance conditions,
including discretion as to the basis on which performance
is to be measured if an award vests in advance of normal
timetable (on cessation of employment as a good leaver
or on the occurrence of a corporate event) and whether (and
to what extent) pro-rating shall apply in such circumstances;
whether (and to what extent) malus and/or clawback shall
apply to any award;
– adjustments required in certain circumstances (e.g. rights
issues, corporate restructuring, on a change of control and
special dividends);
– the ability to adjust existing performance conditions for
exceptional events so that they can still fulfil their original
purpose whilst being no less stretching; and
– the discretion to adjust vesting outcomes to take account of
overall performance and the wider stakeholder experience.
While the Committee anticipates that any such discretion would
normally result in a reduction, the Committee reserves the right
to make an upwards adjustment if considered appropriate.
Quilter Annual Report 2021
125
Strategic ReportGovernance ReportFinancial statementsOther information Clawback may be applicable where:
– the results or accounts or consolidated accounts of any
company, business unit or undertaking in which the Executive
Director worked or works or for which he or she was or is
directly or indirectly responsible are found to have been
materially incorrect or misleading;
– there is any material failure of risk management at a Group,
or business unit level and/or loss from business written, due
in whole or in part, to a failure to observe risk management
policies in effect at that time;
– there is evidence of Executive Director gross misconduct
or it is discovered that the Executive Director’s employment
could have been summarily terminated or there is evidence
of Executive Director misbehaviour or material error;
– the Executive Director participated in or was responsible for
conduct that resulted in significant losses for the Company
and/or for any company, business or undertaking in which
he/she worked;
– the Executive Director failed to meet appropriate standards
of fitness and propriety, in accordance with any regulatory
rules or principles, internal policies or reasonable
expectations as determined by the Committee in its absolute
discretion;
– the Company or any company, business or undertaking
in which the Executive Director worked or works or which
he/she was or is directly responsible has suffered a material
downturn in its financial performance which the Committee
considers to justify the application of clawback;
– corporate failure of the Company or any Group Company; or
– any other circumstances similar in nature to those described
above where the Committee consider adjustments should
be made.
The Committee is supported in its decision making in this area
by the Board Risk and Board Audit Committees and the Quilter
Risk function.
Directors’ Remuneration Policy
continued
Risk adjustments, malus and clawback
All variable pay arrangements operated by the Group are subject
to malus and clawback provisions. The Committee may, in its
absolute discretion, determine to reduce the number of shares
before they are released (malus), impose further conditions on
the vesting or exercise of an award or, alternatively, at any time
within five years of an award being made, the Committee may
require the Executive Director to transfer to the Company a
number of shares or a cash amount (clawback).
Malus may be applied where:
– the results or accounts or consolidated accounts of any
company, business unit or undertaking in which the Executive
Director worked or works or for which he or she was or is
directly or indirectly responsible are found to have been
materially incorrect or misleading;
– an error in the calculation of the Executive Director’s bonus
in respect of which any deferred bonus award was made;
– there is any material failure of risk management at a Group,
or business unit level and/or loss from business written, due
in whole or in part, to a failure to observe risk management
policies in effect at that time;
– there is evidence of Executive Director gross misconduct or it
is discovered that the Executive Director’s employment could
have been summarily terminated, or there is reasonable
evidence of Executive Director misbehaviour or material error;
– the behaviour by the Executive Director resulted or is likely to
result in serious reputational damage to the Company or has
or is likely to bring, the Company into disrepute in any way;
– the Executive Director participated in or was responsible for
conduct that resulted in significant losses for the Company
and/or for any company, business or undertaking in which
he/she worked;
– the Executive Director failed to meet appropriate standards
of fitness and propriety, in accordance with any regulatory
rules or principles, internal policies or reasonable expectations
as determined by the Committee in its absolute discretion;
– the Company or any company, business or undertaking in
which the Executive Director worked or works or which he/she
was or is directly responsible has suffered a material downturn
in its financial performance which the Committee considers
to justify the application of malus;
– corporate failure of the Company or any Group Company; and
– any other circumstances similar in nature to those described
above where the Committee consider adjustments should
be made.
126
Quilter Annual Report 2021
Remuneration policy for other employees
The general principles of the Policy are broadly applied
throughout the Group and are designed to support recruitment,
motivation and retention as well as to reward high performance
in a framework of approved risk management.
The structure of total remuneration packages for the Executive
Directors and for the broader employee population is similar,
comprising of salary, pension and benefits and eligibility for
a discretionary STI award based on a combination of Company
and personal performance in the financial year. The level of STI
opportunity is determined by role and responsibility.
All employees are subject to the Company’s deferral policy,
which applies above a certain threshold of annual incentive
award or such other amount as may be required in accordance
with regulatory requirements. Deferred bonuses are granted
in the form of a conditional award of shares in Quilter under
the Share Reward Plan, or for portfolio managers in Quilter
Investors in their own funds and vest no faster than annually,
over three years in equal parts.
Executive Directors and other selected senior executives
participate in the PSP to aid retention and motivate the delivery
of long-term growth in shareholder value and to align their
interests with those of shareholders. As a result of this more
limited participation, a greater proportion of the Executive
Director’s potential pay is subject to performance and therefore
‘at risk’ than compared to the broader employee population.
Annual base pay increases for the Executive Directors are
normally limited to the average base pay increase for the wider
employee population unless there are exceptional circumstances
such as a change in role or salary progression for a newly
appointed director.
The provision of pension contributions for the Executive
Directors is consistent with the wider workforce.
Recruitment policy
The remuneration package for a new director will be established
in accordance with the Company’s approved Policy subject to
such modifications as set out below.
Salary and pension levels for Executive Directors will be set
in accordance with the Policy, considering the experience and
calibre of the individual and his or her existing remuneration
package. Where it is appropriate to offer a lower salary initially,
a series of increases to the desired salary positioning may be
made over subsequent years subject to individual performance
and development in the role. Benefits will be limited to those
outlined in the Policy, with relocation assistance provided where
appropriate. Where provided, relocation assistance will normally
be for a capped amount and/or limited time.
The structure of variable elements will be in accordance with
the Company’s approved Policy detailed above. The maximum
variable pay opportunity will be set out in the Policy table.
Different performance measures may be set initially during the
year of joining to take into account the responsibilities of the
individual and the point when he or she joined the Board. An LTI
award can be made shortly following an appointment (assuming
the Company is not in a closed period).
The Committee may buy out incentive awards a new hire has
forfeited on joining the Group, if it considers the cost can be
justified and is in the best interests of the Company. Any buy-out
award would take into account timing and expected value (e.g.
likelihood of meeting any performance criteria) of the forfeited
awards and be structured, to the extent possible, to take into
account other key terms (e.g. vesting schedules and
performance conditions) of the awards which are being replaced.
The Committee retains the discretion to rely on the exemption
under LR 9.4.2 of the Listing Rules to make such an award, or to
utilise any other incentive plan operated by the Group. The aim
of any such award would be to ensure that as far as possible,
the expected value and the structure of the award will be no
more generous than the amount forfeited.
Where an Executive Director is appointed from within the
Group, any legacy arrangements would be honoured in line with
the original terms and conditions as long as these do not cause
a material conflict with the Policy.
For an overseas appointment, the Committee will have
discretion to offer cost-effective benefits and pension provisions
which reflect local market practice and relevant legislation.
Fees for a new Chair or Non-executive Director will be set in line
with the Policy.
Executive Directors’ service agreements
All Executive Directors enter into service agreements with the
Company. The service agreements are of indefinite duration,
subject to termination by either party on six months’ notice.
Where a longer notice period is required to recruit an executive,
a notice period of up to 12 months may be offered for an initial
period. The agreement contains terms typical for a senior
executive, including entitlement to a salary, pension contribution,
other core benefits including annual holiday entitlement, and
eligibility for consideration of annual short-term and LTI awards
in accordance with the Remuneration Policy. The Executive
Directors are also entitled to reimbursement of reasonable
business expenses incurred by him/her in the performance
of his/her duties and will be eligible for cover under any director
or officer insurance the Company has in place from time to time.
Service contracts are available for inspection at the Company’s
registered office.
Quilter Annual Report 2021
127
Strategic ReportGovernance ReportFinancial statementsOther information Directors’ Remuneration Policy
continued
Termination of office policy
If the employment of an Executive Director is terminated, any compensation payable will be determined by reference to the terms
of the service agreement in force at the time. As variable pay awards are not contractual, treatment of these awards is determined
by the relevant plan rules. Bad leavers are not entitled to any payment. The Committee may structure any compensation payments
beyond the contractual notice provisions in the contract in such a way as it deems appropriate as set out in the table below and
taking into account the best interests of the Company.
Details
– In certain cases, Executive Directors will not be required to work their
notice period and may be put on garden leave or granted pay in lieu
of all or part of their notice period (“PILON”). PILON may be paid
monthly or in a lump sum depending on circumstances.
– Holiday does not accrue when PILON is paid. During a period of
garden leave, holiday that has accrued is deemed to have been taken
during the garden leave.
– Executive Directors will be subject to annual re-election at the AGM.
– Delivered in line with normal Policy and timeline, including the
application of deferral into shares.
– LTI awards continue to the normal vesting date for good leavers1
unless (exceptionally) the Committee applies discretion to accelerate
the vesting to the termination date. In each case, the number of
shares released shall be based on the achievement of performance
conditions over the performance period (or curtailed performance
period, if applicable). The number of shares that vest would typically
be calculated on a pro rata basis, based on time served during the
vesting period.
– Deferred annual incentive share awards for good leavers1 continue
to the normal vesting date unless the Committee applies discretion
to accelerate the vesting to the termination date.
– Any post-vesting retention periods on share awards for good leavers
continue to apply as normal.
– Terms are subject to the signing of a settlement agreement.
Policy element
Notice
Normally six months’ notice.
Treatment of annual incentive awards
Annual incentive awards will be made to good leavers (see below)
based on an overall assessment of corporate and personal
performance and (normally) pro-rated for the period worked
in the performance year of termination.
Treatment of unvested legacy LTI and deferred annual incentive
share awards
All awards lapse except for good leavers.
Compensation for loss of office
Settlement agreements may provide for, as appropriate:
– Incidental costs related to the termination, such as legal fees
for advice on the settlement agreement.
– Provision of outplacement services.
– Payment in lieu of accrued, but untaken, holiday entitlements.
– Exit payments in relation to any legal obligation or damages
arising from such obligation.
– Settlement of any claim arising from the termination.
– Continuation or payment in lieu of other incidental benefits.
– In the case of redundancy, in line with the Company operated
enhanced redundancy policy.
1Subject to further adjustments which may be applied to discretionary good leavers. An executive will be treated as a good leaver under certain circumstances such as death,
illness, injury, disability, redundancy, retirement, their employing company ceasing to be a Group Company or any other circumstances at the discretion of the Committee.
Prior arrangements
The Committee reserves the right to make any remuneration payments and payments for loss of office notwithstanding that they
are not in line with the terms of the Policy where the terms of the payment were agreed:
– before this Policy came into effect, provided in the case of any payment whose terms were agreed before this Policy became
effective, either (a) the remuneration payment or payment for loss of office was permitted under the Company’s former Policy
at the time of agreement or (b) the agreement was before the former Policy entered into effect; or
– at a time when the relevant individual was not a Director of the Company and in the opinion of the Committee the payment was
not in consideration for the individual becoming a Director of the Company.
128
Quilter Annual Report 2021
Change of control policy
STI awards may continue to be paid in respect of the full
financial year pre and post change of control, or a pro-rated STI
award may be paid in respect of the portion of the year that has
elapsed at the point of change of control. Exceptionally the
Committee may exercise its discretion to waive pro-rating.
All the Company’s employee share plans contain provisions
relating to a change of control. In the event of a change of
control, outstanding awards and options may be lapsed and
replaced with equivalent awards over shares in the new
company, subject to Committee discretion. Alternatively,
outstanding awards and options may vest and become
exercisable on a change of control, subject to the assessment
of performance at that time and pro-rating of awards, in
accordance with the rules of the Company share plans and
terms of awards.
External appointments
Subject to prior clearance by the Board, an Executive Director is
permitted to hold one external non-executive directorship of a
listed company and is entitled to retain any fees paid for doing so.
Compliance with regulatory requirements
The Policy is compliant with current regulatory requirements,
namely the PRA and FCA Remuneration Codes that apply to the
Company. Remuneration arrangements will operate in line with
the PRA and FCA Remuneration Codes, as amended from time
to time.
The Committee may make minor amendments to this Policy
(for regulatory, exchange control, tax or administrative
purposes, to correct clerical errors or to take account of a
change in legislation) without obtaining shareholder approval
for that amendment.
Illustration of the application of the Policy
Our aim is to ensure that superior rewards are only paid for exceptional performance, with a substantial proportion of Executive
Directors’ remuneration payable in the form of variable, performance-related pay. The graphics below illustrate the Executive
Directors’ fixed remuneration and how much they could earn for target and maximum performance for 2022.
In developing the scenarios, the following assumptions have been made:
Fixed remuneration
Consists of 2021 base salary plus the value of benefits in 2021 and a 10% pension contribution or allowance.
On-target
Based on value of fixed remuneration plus the potential value that the Executive Director could earn for on-target performance:
– annual variable element paying out at 50% of maximum; and
– long-term incentive element (under PSP) paying out at 50% of maximum.
The assumptions noted for ‘on-target’ performance are provided for illustration purposes only.
Maximum
In addition to fixed remuneration, includes the potential value under the Share Reward Plan and PSP that the Executive Director
could earn for maximum performance.
Share price growth
Assuming share price growth of 50% to the maximum long-term incentive outcome, total remuneration would be:
Chief Executive Officer (£’000)
Chief Financial Officer (£’000)
2,103
32%
32%
36%
On-target
3,453
39%
39%
22%
Maximum
5000
4000
3000
2000
1000
0
4,128
49%
33%
18%
50% share
price growth
5000
4000
3000
2000
1000
0
753
100%
Fixed
remuneration
Fixed remuneration
Short-term incentive
Long-term incentive
502
100%
Fixed
remuneration
Fixed remuneration
Short-term incentive
Long-term incentive
1,402
32%
32%
36%
On-target
2,302
39%
39%
22%
Maximum
2,752
49%
33%
18%
50% share
price growth
Quilter Annual Report 2021
129
Strategic ReportGovernance ReportFinancial statementsOther information Directors’ Remuneration Policy
continued
How the views of employees are taken into account
Pay and employment conditions generally in the Group will
be considered when setting Executive Directors’ remuneration.
Though currently the Company does not consult with
employees specifically in determining Executive Director
remuneration, the Board has appointed Paul Matthews and
Tazim Essani (both are members of the Committee) as the
designated Non-executive Directors responsible for ensuring
the “employee voice” is heard at Board level on matters
including executive remuneration and alignment to the wider
workforce. This role extends to a range of issues that matter
to employees and includes inputs from annual employee
engagement and culture surveys, meetings with employee
forums/representatives and a report to the Board.
The Committee receives regular updates on overall pay and
conditions in the Group, including (but not limited to) changes in
base pay and the incentive schemes in operation, as well as pay
ratio data. The Committee also has oversight of the all-employee
share plans which Executive Directors and all other Group
employees can participate in on the same terms and conditions.
Statement of consideration of shareholder views
The Committee recognises that Director remuneration is an
area of particular interest to our shareholders and in setting
and considering changes to remuneration, it is critical that
we listen to, and take into account, their views.
The Committee considers shareholder feedback received in
relation to the AGM each year at its first meeting following the
AGM. This feedback, as well as any additional feedback received
during any other meetings with shareholders, is then considered
as part of the Group’s annual review of the implementation of
the Remuneration Policy. We also regularly engage with our
largest shareholders to ensure we understand the range of
views which exist on remuneration issues.
The Committee engaged with key shareholders in the
development of this Policy during 2021. These discussions were
productive and their feedback was taken into account in the
finalisation of the policy. The Committee were pleased that many
shareholders were supportive of the approach the Committee
has taken in maintaining consistency with, and making only
minimal changes to, the pay approach in the existing policy. In
developing the new Policy, the Committee has also considered
the guidelines from the main shareholder bodies and regulatory
requirements, as well as prevailing market practice.
Non-executive Directors
The following table sets out the key elements of remuneration and policy for Non-executive Directors:
Approach and link
to strategy
Operation
Fees for the Chair and Non-executive Directors are set at an appropriate level to attract individuals of the highest
calibre with relevant commercial and other experience to develop, monitor and oversee the Group’s strategy.
Fee levels take into account:
– the time commitment required to fulfil the role;
– the duties and responsibilities associated with the role; and
– external fee reference points and typical practice from relevant FTSE and other comparable competitor organisations.
The Chair receives an all-inclusive annual fee which is reviewed periodically by the Committee.
All Non-executive Directors receive a basic annual fee. Additional fees may be payable to:
– the Senior Independent Director;
– the Chairs of the Board Audit, Risk, Technology and Operations, Remuneration and Corporate Governance
and Nominations Committees1; and
– other members of the Board Audit, Risk, Technology and Operations, Remuneration and Corporate Governance
and Nominations Committees.
Additional fees to reflect the extra responsibilities and additional time commitment required from Non-executive Directors
for chairmanship or membership of subsidiary boards. If there is a temporary yet material increase in the time commitments
for Non-executive Directors, the Board may pay extra fees on a pro rata basis to recognise the additional workload.
Fee levels are reviewed annually by the Chair and Executive Directors. The Chair’s fee is reviewed annually by the Committee.
No individual may participate in the approval of his or her own fees.
Neither the Chair nor other Non-executive Directors are eligible for any performance-related remuneration or a pension
contribution. They do not receive any benefits but they may be reimbursed or paid directly by the Company for the cost
of any reasonable and properly documented business expenses incurred in carrying out their duties which are deemed
taxable by the relevant tax authority (including any personal tax due on such expenses).
1The Board Corporate Governance and Nominations Committee is chaired by the Chair who receives an all-inclusive annual fee.
Details of current fees are set out in the Annual Report on Remuneration.
Proposed changes to application for 2022
No change in approach.
130
Quilter Annual Report 2021
Letters of appointment for Non-executive Directors
All Non-executive Directors have a letter of appointment with
the Company for an initial period of three years, subject to
annual reappointment at the AGM. Appointments may be
terminated with three months’ notice. The appointment letters
for the Chair and Non-executive Directors provide that no
compensation is payable on termination, other than accrued
fees and expenses. All Directors submit themselves for
re-election at the AGM each year. Service contracts and letters
of appointment are available for inspection at the Company’s
registered office. The service contract policy for a new
appointment will be on similar terms as existing Executive
Directors, with the facility to include a notice period of no more
than three months.
Details of the Chair’s and Non-executive Directors’ terms
of appointment are set out in the table:
Non-executive Director
Glyn Jones
Rosie Harris
Moira Kilcoyne
George Reid
Ruth Markland
Paul Matthews
Tim Breedon
Tazim Essani
Chris Samuel
Effective date of
appointment
7 November 2016
3 April 2017
31 December 2016
8 February 2017
25 June 2018
8 August 2018
1 June 2020
9 March 2021
1 July 2021
Termination of office policy
Non-executive Directors
– Three months’ notice period.
– Appointed for an initial three-year term.
– Normally expected to serve two three-year terms, subject
to annual re-election at the AGM.
– A third term (of up to three years, or longer in exceptional
circumstances) may be offered on a year-by-year basis after
completion of the first two terms.
Quilter Annual Report 2021
131
Strategic ReportGovernance ReportFinancial statementsOther information
Annual Report on Remuneration
Audited
Content within an ‘Audited’ tab indicates that all the
information is audited.
Application of the Policy in 2022
Content within a shaded box indicates that the information
is planned for implementation in 2022.
The Report sets out how the Policy of the Company has been applied in 2021 and how the Committee intends to apply the Policy
going forward. An advisory shareholder resolution to approve this Report will be proposed at the AGM.
The table below sets out the single figure of remuneration for the full financial year 2021 together with 2020 comparator figures.
Audited
Executive Director
2021
Paul Feeney
Mark Satchel
2020
Paul Feeney
Mark Satchel
Base salary
£’000
Benefits
£’000
Pension1
£’000
STI
£’000
LTI2
£’000
Total
£’000
675.0
450.0
675.0
450.0
10.2
7.1
7.5
5.9
67.5
45.0
67.5
45.0
886.0
618.0
–
–
880.6
587.0
875.1
282.0
2,519.3
1,707.1
1,625.1
782.9
Total
Fixed
£’000
Total
Variable
£’000
752.7
502.1
750.0
500.9
1,766.6
1,205.0
875.1
282.0
1Pension includes contributions made under the Group defined contribution pension scheme plus, where applicable, amounts received as a pension allowance.
2LTI is a vesting value determined as a result of the achievement of performance measures or targets relating to the performance period ending on 31 December of the
relevant financial years. These relate to the PSP (see pages 137 to 138). The value is calculated using the average share price over the final three-month period of the year
ending 31 December 2021, which is £1.4728. The actual vesting date is 25 March 2022 and the actual value will be reflected in next year’s Report. The amount of this figure,
which includes share dividend equivalents, attributable to share price appreciation is valued at £46,958 for Paul Feeney and £31,306 for Mark Satchel as at 31 December 2021.
The 2020 LTI value has been updated to reflect the share price on the actual vesting date, 16 April 2021, which was £1.6550.
Components of the single figure
There were no increases to Executive Director base salaries at the 1 April 2021 review date, and unlike the wider workforce there
are no increases to Executive Directors base salaries planned for the 1 April 2022 review date.
Audited
Executive Director
Paul Feeney
Mark Satchel
Annual base salary
as at 1 April 2021
£’000
675.0
450.0
Total base salary
paid in 2021 for
qualifying services
£’000
675.0
450.0
Total base salary
effective 1 April 2022
£’000
675.0
450.0
Benefits
Benefits include life assurance, private medical cover and income protection.
Life
assurance
£’000
Medical
£’000
Income
protection
£’000
3.5
2.3
3.1
2.2
1.1
1.1
1.4
1.1
5.6
3.7
3.0
2.6
Audited
Name
2021
Paul Feeney
Mark Satchel
2020
Paul Feeney
Mark Satchel
Benefits for 2022
No changes to the approach.
132
Quilter Annual Report 2021
Pension
Pension includes contributions made under the Group defined contribution pension scheme and/or amounts received as cash
in lieu of pension contributions due to the impact of HMRC limits. The pension provisions of Executive Director appointments are
aligned to the pension arrangements of the wider workforce, which is currently set at 10% of base salary.
Audited
Name
2021
Paul Feeney
Mark Satchel
2020
Paul Feeney
Mark Satchel
Pension for 2022
No changes to the approach.
Cash in lieu
of pension
contribution
£’000
Contribution
to pension
scheme
£’000
Total
contribution
£’000
67.5
41.3
67.5
39.2
–
3.7
–
5.8
67.5
45.0
67.5
45.0
2021 STI awards
For the purpose of determining the 2021 STI outcome, the Committee assessed the performance of the business and the individuals
by reference to a balanced scorecard of IFRS Profit (40%), net flows as a percentage of opening AuMA (20%), Customer/Risk (20%)
and Strategic Personal performance objectives (20%) in line with the Policy.
The summary below reflects the Committee’s assessment of performance for the year ended 31 December 2021, before
consideration of any adjustment for material risk events.
Group financial achievement
Audited
Group financial performance measures
Weighting as
% of total STI
opportunity
Threshold
(25% of max)
Target1
(44% of max)
Stretch2
(50% of max)
Maximum
(100%)
Outcome
Outcome as
% of max
IFRS profit before tax
(excluding amortisation, policyholder tax adjustments,
business disposal impacts and one-off items)2
69%
1In recognition of market uncertainty due to the ongoing impact of the COVID-19 pandemic, the Committee approved a wider target range than normal. The Committee decided
that business plan achievement would generate an outcome lower than 50% of maximum in consideration of absolute profit expectations relative to pre-pandemic levels, with
management required to outperform plan by 24% to achieve a target outcome of 50% of maximum, with a super-stretch target set at more than double the target profit to
achieve maximum.
2IFRS profit for the continuing business only.
£47m
£82m
£11m
£60m
£38m
40%
Quilter Annual Report 2021
133
Strategic ReportGovernance ReportFinancial statementsOther information Annual Report on Remuneration
continued
IFRS profit reconciliation
In determining the outcome of the profit metric shown above, the Committee considered the impact of key business
transformation costs on IFRS profit and approved a discretionary downward adjustment to IFRS profit for STI purposes to ensure it
reflected a fair and reasonable outcome for the overall performance achieved. The adjustments are detailed in the schedule below,
which provides a reconciliation between reported profit, the STI target and STI outcome.
Audited
2021 profit reconciliation
Adjusted profit before tax (before financing costs)
Debt financing costs
Adjusted profit before tax (after financing costs)
UK Platform Transformation Programme (“PTP”)1
Optimisation1
Quilter Life Assurance decommissioning costs
Managed Separation costs
Customer remediation2
IFRS profit before tax on a continuing basis (excluding amortisation,
policyholder tax adjustments, business disposal impacts and one-off items)
Reported profit
STI target
STI outcome
£138m
(£10m)
£128m
(£28m)
(£22m)
(£1m)
(£2m)
(£7m)
£110m
(£10m)
£100m
(£28m)
(£30m)
(£1m)
(£3m)
–
£138m
(£10m)
£128m
(£28m)
(£30m)
(£1m)
(£2m)
(£7m)
£68m
£38m
£60m
1Optimisation costs were lower than the plan expectation for the year due to the timing of delivery and costs are still expected to be incurred at a later date. As such,
the Committee approved an adjustment to these amounts to remove the benefit of below-plan spend in the outcome.
2The customer remediation costs relate to an increase in estimated customer redress and professional fees for historic DB to DC pension transfer advice.
Net flows as a percentage of opening AuMA
2021 is the first-year net flows as a percentage of opening AuMA has been included in the scorecard, and represents a maximum
of 20% of the total STI opportunity. This is aligned to the Group’s KPIs and is calculated by assessing the full year’s net flows, which
is made up of gross inflows less gross outflows, divided by the opening AuMA excluding discontinued operations as at 1 January 2021.
The below table details the performance and outcome:
Audited
Performance condition
Net flows
Opening AuMA1
Weighting as
% of total STI
opportunity
Threshold
(25% of max)
Target
(50% of max)
Maximum
(100% of max)
£2.9bn
£97.3bn
£4.4bn
£97.3bn
£6.8bn
£97.3bn
Outcome
£4.0bn
£97.3bn
Outcome as a
% of max
43.2%
Net flows as a percentage of opening AuMA
1Opening AuMA was restated by £1.7 billion to £99.0 billion during the year, after the Committee approved the target, to include the intra-group eliminations relating to Quilter
International since the business area is no longer part of the Group.
4.1%
3.0%
7.0%
4.5%
20%
134
Quilter Annual Report 2021
Group risk and customer performance achievement
Key Group non-financial objectives represented a maximum of 20% of the total STI opportunity. The risk measure assesses the
effectiveness of risk management at an overall corporate level for each of the Executive Directors. For the Customer element of the
scorecard, performance was assessed against key risk and performance indicators covering customer strategy and governance,
product and proposition, customer experience, advice, suitability and customer on-boarding and post-advice servicing as
measured by the Company’s Customer Strategic Risk Appetite Principles (“SRAP”), as well as a qualitative assessment of broader
customer focus. Performance commentary is given in the table below.
Audited
Customer and Risk
Performance measures
Risk Management
Framework
Effectiveness
Risk Management
Framework
Effectiveness
Executive Director
Paul Feeney
Weighting as
% of total STI
opportunity
10%
Outcome as
% of max
75%
Key achievements in the year
– Strong tone from the top promoting an effective risk culture.
– Chaired the Executive Risk Forum and ensured it remained
focused on the key risks facing the business.
– Appropriate balance between risk reduction, revenue
generation and cost management evidenced through project
prioritisation and focus.
– Open and pro-active engagement with regulators.
– Established and led joint executive oversight committee with
FNZ to manage customer experience and regulatory risks
post-migration of the UK Platform.
Mark Satchel
10%
– Solid risk focus through the capital management forum and
75%
Customer Outcomes
Paul Feeney and
Mark Satchel
10%
deputy chair of the Executive Risk Forum.
– Continued constructive engagement with the second line,
seeking opinions and challenge on key decisions.
– Good balance of challenge on financial performance and cost
control to appropriately manage risks and issues.
– Strong risk considerations in strategy and planning, with key
risk considerations given due prominence.
– Proactive and open engagement with the FCA, PRA and the
various Quilter International regulators.
– Strong progress made on strategic customer initiatives and
evidence of a positive culture to address customer needs.
– The Quilter Investment Platform final migration delivered
a safe and successful transition of customers’ investments,
however customer experience deficiencies and increased
regulated complaints were experienced following migration.
– Quilter Investors’ Assessment of Value project has driven
customer outcome improvements with discretionary
customer plans at the forefront.
– Strong performance against core customer metrics
for Quilter Cheviot with client feedback rating favourable
to the peer group benchmark.
– Investment performance in our flagship Cirilium, Income
and WealthSelect ranges delivered positive returns, whilst
performance against comparators was mixed.
61%
Quilter Annual Report 2021
135
Strategic ReportGovernance ReportFinancial statementsOther information Annual Report on Remuneration
continued
Strategic personal performance – achievement
Personal objectives represented a maximum of 20% of total STI opportunity. A performance commentary is given in the table below.
Audited
Executive
Director
Paul Feeney
Weighting as
% of total STI
opportunity
20%
Mark Satchel
20%
Overview
Key achievements in the year
Outcome as
% of max
80%
Objectives for 2021 were
focused on the strategic
development of the business
to maximise future growth
potential, improve the
control environment, provide
responsible leadership and
drive an inclusive culture,
whilst achieving strong core
business performance and
creating value for
shareholders.
Objectives were to deliver
on the outcome of the Quilter
International strategic review,
lead our Optimisation goals,
deliver strong cost discipline
across the business, whilst
achieving strong core
business performance
and creating value for
shareholders.
– A strong year leading the strategic transformation of Quilter
into a simpler, UK-centric wealth manager poised to deliver
strong growth and sustainable returns, with the completion
of the Platform Transformation Programme and sale of
Quilter International marking the culmination of a three-year
journey from the Company’s Listing in 2018.
– Improved control environment, with use of better
management information and close attention to risk to drive
performance and pre-empt issues. Whilst the post-migration
platform stabilisation period was longer and more disruptive
than hoped, instituted effective oversight to mitigate risks and
improve customer experience.
– Made progress on embedding ESG into the advice and
investment process as we build towards becoming a leading
responsible wealth manager.
– Strong leadership in relation to key stakeholders – our people,
customers, regulators and shareholders – amid a second year
of unprecedented social and economic disruption caused by
the COVID-19 pandemic.
– An exceptional year managing the sale of Quilter International
95%
for a price of £481 million with the sale process executed
professionally and expediently.
– Leading preparations for the proposed capital return to
shareholders of £350 million and successfully managed the
share buyback programme following the sale of Quilter Life
Assurance, which concluded in early 2022 and delivered
a further £375 million capital return to shareholders.
– Driven very strong cost containment across the business,
with expenses lower than plan expectations in almost all
areas.
– Optimisation programme has realised benefits ahead of plan
and within overall budget, with a further £45 million of cost
savings targeted as part of the next phase of business
simplification.
– Delivered significant operational improvements, with the
general ledger rationalisation project substantially concluded
in 2021.
– Provided very strong leadership and engagement with all
stakeholders, including the investor community, leading
a successful Capital Markets Day in November 2021.
As part of the review, the Committee considered whether the overall STI outcomes were appropriate in the context of overall
business performance and individual strategic/personal objectives, and whether any exceptional risk events occurred which,
in the Committee’s opinion, may have materially affected the STI outcome. The Committee, jointly with the Board Risk Committee,
also considered an annual risk report and the recommendations of the Chief Risk Officer. In respect of the incidence and materiality
of any risk issues arising during the year and an overall assessment of risk management relative to the Board’s risk appetite and risk
culture across the business.
The Committee noted that several past business reviews into historic defined benefit pension transfer advice were initiated in 2021
and resulted in total provisions of £12 million for estimated customer remediation costs and professional fees, £7 million of which
relates to advice provided by Lighthouse prior to the acquisition of the business and £5 million of which is included in adjusted
profit before tax. The impact of these costs within the profit component of the annual scorecard was to reduce the Chief Executive
Officer’s STI outcome by £92,571 (a reduction of 9%) and the Chief Financial Officer’s STI outcome by £61,714 (a reduction of 9%).
The Committee concluded that the 2021 financial impact of the customer remediation provisions was appropriately reflected
in the 2021 STI outcomes and no further adjustment was necessary.
136
Quilter Annual Report 2021
Deferral policy
In line with our Policy, 50% of the Executive Directors’ 2021 STI awards will be deferred into a conditional award of ordinary shares
under the Share Reward Plan and will vest in equal annual instalments over a three-year period, subject to continued employment
and malus and clawback provisions in accordance with the rules of the Share Reward Plan.
Audited
Executive Director
Paul Feeney
Mark Satchel
£’000
886.0
618.0
Total
% of salary
131%
137%
Deferred bonus
% of salary
66%
69%
£’000
443.0
309.0
To be paid in cash
% of salary
66%
69%
£’000
443.0
309.0
STI for 2022
In line with our Policy, both Executive Directors are eligible to receive STI awards up to 200% of base salary. Performance will
be based on a combination of Group financial targets as well as strategic (including customer and risk measures) and personal
measures. The personal measures will include a specific target on diversity and culture.
The weighting of net flows as a percentage of opening AuMA will be increased from 20% to 25% for 2022, with the weighting of
IFRS profit reduced accordingly from 40% to 35% to reflect the importance of net flows as a key growth driver. The weighting of
the non-financial aspect of the scorecard will remain unchanged at 40%, which is made up of risk management (10%), customer
outcomes (10%) and strategic personal performance (20%).
Actual targets for 2022 have not been disclosed due to commercial sensitivity. These targets will be disclosed in the 2022 Report.
Vesting of 2019 LTI awards
On 31 December 2021, the 2019 LTI awards granted under the PSP reached the end of their performance period. These awards will
vest on 25 March 2022, with the vested shares subject to a further two-year post-vesting holding period. The performance conditions
which applied to the 2019 LTI award and the performance achieved are set out below.
Audited
Performance condition
EPS CAGR (2018-21)3
Relative TSR5
Weighting
(25% vesting)
(100% vesting)
Threshold1
Maximum1
70%
30%
6%4
Median
17%4
Upper
quartile
Performance
Achieved2
11.5%
80 out of 176
companies6
Award Outcome
Weighted
Percentage of
Award Vesting
43.81%
12.65%
56.46%
1Straight-line interpolation between points.
2The Committee adjusted the EPS CAGR performance condition to reflect the sales of Quilter Life Assurance and Quilter International.
3Adjusted EPS, pre-dividend excluding amortisation and goodwill.
4The Committee adjusted the EPS CAGR threshold and maximum targets from 5-11% to 6-17% to reflect an expectation of higher growth excluding discontinued operations.
This had the effect of increasing the level of challenge in the targets, and reducing the outcome for the EPS metric for 2018-21 from 100% to 62%.
5Ranking relative to the constituents of the FTSE-250 excluding Investment Trusts.
6Quilter achieved TSR of 27% over the period and was ranked 80th out of 176 companies. Median TSR was 17% and upper quartile TSR was 59% which equates to 42%
of maximum for the TSR element.
To ensure that performance could be fairly and consistently assessed against the performance conditions and the outcome
appropriately reflective of performance achieved, the Committee, supported by independent expert advice, considered the impact
of the sale of Quilter Life Assurance, which completed on 31 December 2019, and the sale of Quilter International, which completed
on 30 November 2021. Consistent with the treatment of the 2018 awards, the Committee decided to exclude Quilter Life Assurance
and Quilter International profits, adjusted for certain stranded costs, from the base year of the Adjusted Profit-based EPS CAGR
calculation to ensure the earnings growth was measured on a like-for-like basis between the end year and the base year. The
Committee also fixed the share count in both years to neutralise the benefit of a reduction in share count over the period resulting
from the share buyback programme funded by the proceeds from the sale of Quilter Life Assurance. Finally, the Committee
reassessed the target CAGR range to reflect an expectation of higher growth excluding discontinued operations and concluded
on increasing the EPS CAGR threshold and maximum targets from 5-11% to 6-17%. This had the effect of increasing the level
of challenge in the targets, and reducing the outcome for the EPS metric for 2018-21 from 100% to 62%.
Quilter Annual Report 2021
137
Strategic ReportGovernance ReportFinancial statementsOther information Annual Report on Remuneration
continued
Audited
Performance condition
Adjusted Profit (before tax)1
less Quilter Life Assurance profit
plus Quilter Life Assurance stranded costs
less Quilter International profit
plus Quilter International stranded costs
Revised Adjusted Profit (before tax)
Revised Adjusted Profit (after tax)
Weighted average number of shares (million)2
Adjusted EPS (pence)
Adjusted Profit CAGR (2018-21)
2018
£m
233
(57)
(13)
(51)
(10)
102
90
1,684
5.4
2021
£m
138
–
–
–
–
138
125
1,684
7.4
Outcome
11.5%
1Pre-dividend excluding amortisation and goodwill.
2Share count in the base year of 1,833 million has been adjusted to match the lower share count in the measurement year to neutralise any benefit arising from a reduction
in share count on the basis that the earnings of Quilter Life Assurance (the proceeds of which funded the share buyback programme) have been excluded from the calculation.
The Committee also considered whether the performance had been achieved within the Company’s agreed risk appetite and the
impact of any risk events during the performance period and concluded that no further discretionary adjustment to the outcome
was required.
As a result of the 2019 LTI awards vesting at 56.5%, the Executive Director outcomes are as follows:
Audited
Executive Director
Paul Feeney
Mark Satchel
Number of
shares granted
953,524
635,683
Share-settled
dividend
equivalents
105,477
70,317
% of Awards
vesting
Number of
shares vesting
Value of shares
vesting (£000)1
56.46%
56.46%
597,912
398,608
880.6
587.0
1Deemed value based on the average share price of the final three-month period ended 31 December 2021 of £1.4728, the actual value will be based on the share price when
the awards vest on 25 March 2022. The amount of this figure, which includes share dividend equivalents, attributable to share price appreciation is valued at £46,958 for Paul
Feeney and £31,306 for Mark Satchel as at 31 December 2021.
LTI awards granted in 2021
Executive Directors are eligible to participate in the PSP, which is an LTI plan. The awards granted in 2021 are subject to the
following performance conditions:
Audited
Performance condition
Adjusted EPS CAGR (2020-22)2
Relative TSR3
1Straight-line interpolation between points.
2Pre-dividend excluding amortisation and goodwill.
3Ranking relative to the constituents of the FTSE-250 excluding Investment Trusts.
Weighting
(25% vesting)
(100% vesting)
Threshold1
Maximum1
70%
30%
8%
20%
Median Upper quartile
At the end of the three-year performance period, the Committee will critically assess whether the formulaic vesting outcome
produced by the criteria is justified. To do this, the Committee will look at several factors, including whether the result is reflective
of underlying performance and has been achieved within the Company’s agreed risk appetite. If such considerations mean that
the formulaic outcome of the vesting schedule is not felt to be justified, then the Committee can exercise downward discretion.
The following LTI awards were granted in respect of the 2021 performance year:
Audited
Executive
Director
Form of award
Date of award
Paul Feeney
Mark Satchel
Nil cost options
Nil cost options
8 April 2021
8 April 2021
Basis of award
(% of salary)
200%
200%
Share price
at the date
of grant
£1.6780
£1.6780
Nil cost options
awarded
Face value
of award1
% vesting at
threshold
804,529
536,353
£1,350,000
£900,000
25%
25%
Performance
2021–2023
2021–2023
1The face value of the award figure is calculated by multiplying the number of shares awarded by the closing share price on the day before the award was granted, of £1.6780.
138
Quilter Annual Report 2021
LTI awards to be granted in 2022
The Committee intends to grant awards to the Executive Directors in March 2022 over nil cost options under the PSP with a face
value at grant of 200% of base salary. The LTI scorecard has been updated for 2022 to align with the Company’s strategic
priorities over the next performance period.
The EPS growth component of the LTI will be reduced from a 70% weighting to 40% and the methodology changed from CAGR
(three-year ‘point-to-point’ measure) to cumulative EPS, which will better reward sustainable performance over the period as all
years will contribute to the result. The TSR component of the LTI will be reduced from a 30% weighting to 25% and will continue
to be assessed relative to the FTSE-250 excluding investment trusts.
In addition, an operating margin measure will be introduced in line with the Company’s previously stated target to improve
its operating margin relative to peers, with a weighting also of 25%. The final 10% of the LTI scorecard will be based on ESG
measures to support the Company’s strategic priority to become the responsible wealth manager, with 7.5% weighted on
responsible investing and 2.5% on reducing the carbon intensity of the Company’s own operations. The responsible
investing component will be based on the UN-backed Principles for Responsible Investment (“PRI”) Framework, the world’s
leading independent benchmark for responsible investing. Quilter will be scored against the PRI’s 5-star rating system across
four modules, covering investment and stewardship policy, fund manager selection and monitoring and asset class-specific
assessments for listed equity and fixed income. This will provide a quantifiable, independent and externally verifiable measure
of relative performance in this strategically important area.
The full scorecard is shown below:
2022 LTIP Performance Metrics
Earnings per share
– Cumulative Adjusted EPS 2022-24 (pre-dividend excluding
amortisation and goodwill)
Operating margin
– 2024 pre-tax Adjusted Profit divided by total net fee revenue
Total shareholder return
– Ranking relative to the constituents of the FTSE-250 excluding
ESG2
investment trusts
– Carbon intensity of Quilter’s operations (tonnes of carbon
dioxide (tCO2e) per full-time employee/contractor)
– Responsible investing (Principles for Responsible Investment
(“PRI”) aggregate modules rating)3
Weighting %
Threshold1
(25% vesting)
Maximum1
(100% vesting)
40%
25%
25%
2.5%
7.5%
24.6p
37.0p
27.5%
32.5%
Median
of index
Upper quartile
of index
2,050
1,650
12 stars
20 stars
1Straight-line interpolation between threshold and maximum.
2Given ESG is an emerging area of focus for the Committee, we will keep the approach to measuring ESG progress under review and may make adjustments to the metrics
or weightings for future awards.
3If the score for any module is less than 3 stars, it will not count towards the total.
All-employee share plans
In 2021, the Company invited all employees, including Executive Directors, to enter the Save As You Earn (“SAYE”) scheme. The
scheme allows employees to save up to a maximum of £500 across all savings contracts on a monthly basis for either a three- or
five-year term, at the end of the savings period, employees have the option to purchase Company shares at a discounted option
price, which was set at the beginning of the scheme. This year’s scheme commenced on 1 July 2021 with an option price of
131 pence.
Neither Paul Feeney or Mark Satchel have entered into this year’s scheme as they have already utilised their maximum savings
capacity by entering into the 2019 savings contract at a monthly savings amount of £500 each. In 2019, Paul Feeney entered into
a five-year savings contract, providing an option at maturity over 24,000 Quilter shares and Mark Satchel entered into a three-year
savings contract, providing an option at maturity over 14,400 Quilter shares.
Quilter Annual Report 2021
139
Strategic ReportGovernance ReportFinancial statementsOther information Annual Report on Remuneration
continued
Non-executive Director total remuneration
The total remuneration for the Non-executive Directors is set out in the table below. Non-executive Directors are not entitled to
any benefits, pension or pension equivalents, or awards under any of the equity plans. All Non-executive Directors have a service
contract with a three-months’ notice period and an initial three-year term from appointment, subject to annual re-election at the
AGM, as detailed in the Policy. For 2021, the regular fees were paid at the following rate:
Annual fees (Quilter Board)
Chair
Basic annual fee
Additional fees:
Senior Independent Director
Chairs of Board Audit, Risk, Remuneration and Technology and Operations Committee
Members of the above Committees
Members of the Board Corporate Governance and Nominations Committee
Fees (Subsidiary Boards):
Chair of Subsidiary Boards
Board Member of Quilter Financial Planning (“QFP”), Quilter Investors (“QI”), Quilter Cheviot (“QC”)
Board Member of Quilter International (“International”)
Members of the Subsidiary Board Committees
2021 fee
£375,000
£65,000
£20,000
£25,000
£10,500
£5,500
£80,000
£45,000
£35,000
£5,000
Audited
Non-executive
Director
Board and Committee
membership
Glyn Jones
Board (C), CGN (C), R
Rosie Harris
BAC, BRC (C), BTOC
Moira Kilcoyne BRC, BTOC (C)
George Reid
BAC (C), BRC, BTOC
Ruth Markland2 SID, BAC, CGN, R (C)
Paul Matthews3 BRC, R, WED
Tim Breedon
Tazim Essani4
Chris Samuel5
CGN, BRC, R
BAC, R
BRC, BTOC
Board Committee key:
Board = Board
BAC = Board Audit Committee
R = Board Remuneration Committee
BRC = Board Risk Committee
(C) = Chair
Subsidiary Board
and Committee
membership
QC Board and GARC
member
QIP1 Chair
International Board
member
QFP Board and GARC
member
QI Chair
QFP Chair
Fees for
2021
£’000
375.0
111.0
100.5
111.0
126.0
86.0
91.5
64.8
43.0
Subsidiary
Board fees
£’000
–
50.0
–
80.0
32.1
Total for
2021
£’000
375.0
161.0
100.5
191.0
158.1
71.5
157.5
80.0
–
136.5
171.5
64.8
179.5
Fees for
2020
£’000
375.0
111.0
100.5
111.0
120.7
82.1
53.3
–
–
Subsidiary
Board fees
£’000
–
50.0
–
81.7
35.0
Total for
2020
£’000
375.0
161.0
100.5
192.7
155.7
50.4
132.5
23.8
–
87.5
77.1
–
87.5
SID = Senior Independent Director
BTOC = Board Technology and Operations Committee
CGN = Board Corporate Governance and Nominations Committee
WED = Workforce Engagement Director
GARC = Governance, Audit and Risk Committee
1Quilter Investment Platform (“QIP”) business area.
2Ruth Markland resigned from the Quilter International Board with effect from 30 November 2021.
3Paul Matthews is in receipt of a temporary uplift in his Quilter Financial Planning Limited fees with effect from 1 January 2021, which reflects the additional time commitment
currently required in the business area.
4Tazim Essani was appointed to the Remuneration Committee with effect from 9 March 2021 and the Audit Committee with effect from 1 September 2021.
5Chris Samuel was appointed as Chair of Quilter Financial Planning Limited with effect from 8 April 2020. Chris was appointed to the Board with effect from 1 July 2021.
He is in receipt of a temporary uplift in his Quilter Financial Planning Limited fees with effect from 1 January 2021, which reflects the additional time commitment currently
required in the business area.
140
Quilter Annual Report 2021
TSR performance graphic over the period since Admission
£
150
120
90
60
Jun 2018
Dec 2018
Jun 2019
Dec 2019
Jun 2020
Dec 2020
Jun 2021
Dec 2021
Quilter
FTSE-250 excluding Investment Trusts
The graph above shows the Company’s TSR performance versus the FTSE-250 excluding Investment Trusts over the period ended
31 December 2021. The FTSE-250 has been chosen as the Company is a member of that index.
Group Chief Executive Officer pay
The table below contains the Chief Executive Officer’s annual remuneration since the Company listed in 2018:
Financial year
2021
2020
2019
2018
Name
Paul Feeney
Paul Feeney
Paul Feeney
Paul Feeney
Total remuneration
£’000
Annual bonus as
% of maximum
LTIP vesting as
% of maximum
2,519.3
1,487.3
1,896.3
2,778.9
66%
0%
79%
93%
56.5%
48.7%
n/a
n/a
Percentage change in Directors’ remuneration compared to the average employee
The table below sets out the percentage change in salary or fee and STI between the Executive Directors and average employee
from 2020 to 2021. The annual change in salary is based on the salary of permanent UK employees as at 31 December 2020 and
31 December 2021, and the annual change in STI excludes employees that are not eligible for bonus.
The annual increase of the Executive Directors’ STI is inflated following their recommendation to waive their 2020 STI outcomes
due to the wider impact of COVID-19 on the business and employees. The annual increase in the average employee salary reflects
a change to the overall profile of the workforce following the launch of the new UK Platform, with fewer, relatively lower paid
operational roles required than in the past. This has led to an increase in average salary per employee in 2021.
As Executive Directors’ benefits are aligned to other UK employees, the analysis of movement in average benefits was not
considered practical or meaningful and therefore not included in the below comparison. Further detail of Executive Directors’
benefits can be found on page 132 of this Report.
Remuneration
outcome
Average
employee
Executive Directors
Chief
Executive
Officer
Chief
Financial
Officer
Independent Non-executive Directors
Glyn
Jones
Ruth
Markland
Rosie
Harris
George
Reid
Moira
Kilcoyne
Paul
Matthews
Tim
Breedon
2021
Salary/fees
STI
2020
Salary/fees
STI
5%
78%
5%
(49%)
0%
100%
0%
100%
0%
(100%)
0%
(100%)
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
0%
n/a
Quilter Annual Report 2021
141
Strategic ReportGovernance ReportFinancial statementsOther information
Annual Report on Remuneration
continued
Chief Executive Officer pay ratio
The table below sets out the ratio between the Chief Executive Officer’s total remuneration and the median, 25th and 75th
percentile of the total remuneration of full-time equivalent UK employees.
Total remuneration
Year
2021
2020
2019
Salary
Year
2021
2020
2019
Method
25th percentile
Median
75th percentile
25th percentile
Median
75th percentile
Option A
Option A
Option B
74:1
55:1
62:1
49:1
36:1
39:1
27:1
21:1
27:1
33,963
29,663
30,478
51,399
45,349
48,486
93,358
78,368
69,114
Pay ratio
All employees £
Method
25th percentile
Median
75th percentile
25th percentile
Median
75th percentile
Option A
Option A
Option B
27:1
28:1
28:1
18:1
19:1
18:1
11:1
11:1
14:1
25,000
24,000
24,333
37,600
36,350
37,001
63,325
61,000
48,667
Pay ratio
All employees £
Total remuneration includes salary, benefits, pension, short-term incentives and any value vested from long-term incentives during
the year. As some 2021 STI amounts across the wider workforce are subject to change until after the publication of this report, the
total remuneration may not be exact. However, any STI changes are expected to be minimal and it is unlikely the pay ratios will
change significantly once the STI amounts are determined. The 2020 total remuneration ratios above have been updated to reflect
the actual STI and LTI amounts paid. Our Chief Executive Officer has a higher proportion of variable pay in total remuneration,
which is the main factor driving the difference in the ratios between salary and total remuneration.
From the three options disclosed in the regulations regarding the methodology to identify the employees at median, 25th and 75th
percentiles for comparison between those and the Chief Executive Officer, we recognise that the most precise method, and therefore
often referred to as the preferred method, is Option A, which calculates the single figure for each UK employee. We have adopted
Option A from 2020 and intend to continue reporting under this method in future years.
The year-on-year salary variances at each quartile reflect the reduction and change in profile of our workforce following the launch
of our new platform in early 2021 and the sale of Quilter Life Assurance at the end of 2019, in addition to the adoption of Option A
methodology from 2020. The year-on-year total remuneration variances are largely due to the recommendation of the Chief Executive
Officer to receive zero STI for 2020 due to the impact of the COVID-19 pandemic on the business and its employees in 2020.
Gender pay gap
The Company reported a median gender pay gap of 29% and a median bonus gap of 53% for 2021. The results reflect the under-
representation of women in senior roles, which we recognise is a systemic issue facing the wealth management industry and will
require ongoing, multi-year efforts to resolve. Further details regarding our gender pay gap figures can be found on pages 46 to 47
of the Responsible Business report.
142
Quilter Annual Report 2021
Relative importance of spend on pay
The following table sets out the profit, dividends and overall spend on pay in the years ended 31 December 2021 and 31 December
2020:
Adjusted profit before tax1 (£m)
Dividends2 (£m)
Employee remuneration costs1,3 (£m)
2021
138
90
290
2020
108
78
250
% Change
28%
15%
16%
1On a continuing business basis and therefore excludes Quilter International. Including Quilter International, adjusted profit before tax is £188 million in 2021 and £168 million
in 2020, and employee remuneration costs are £329 million in 2021 and £291 million in 2020. Adjusted profit before tax is included in the above table as the Company considers
it an important Key Performance Indicator.
2In 2020, the Company paid an Interim Dividend of 1.0 pence and a Final Dividend of 3.6 pence. For the 2021 financial year, the Company paid an Interim Dividend of 1.7 pence and
recommend a Final Dividend of 3.9 pence.
3Employee remuneration costs represent the underlying employee costs within the adjusted profit view for Quilter, excluding the impact of one-off items.
Executive Directors’ shareholding and interests in Quilter share plans
The table below shows the Executive Directors’ interests in Company share plans which will vest in future years subject to
performance and/or continued service at 31 December 2021 together with any additional interests in shares held beneficially
by the Executive Directors outside of Group share schemes. The share price at 31 December 2021 was £1.4850.
During the period 31 December 2021 to 9 March 2022, there were no exercises or dealings in the Company’s share awards
by the Directors.
Audited
Performance condition
Paul Feeney
Mark Satchel
Scheme interests at 31 December 2021
Legally owned
(shares)
Subject to SIP
(shares)
Subject to SAYE
(options)
Deferred STI and
other awards not
subject to
performance
conditions
(shares)
Subject to
performance
conditions under
the LTIP (shares)
1,170,414
694,718
793
1,586
24,000
14,400
472,282
300,137
3,066,186
2,044,124
Quilter Annual Report 2021
143
Strategic ReportGovernance ReportFinancial statementsOther information Annual Report on Remuneration
continued
Executive Directors’ shareholding requirements
In line with the Policy, each Executive Director is required to acquire and maintain a shareholding equivalent to 300% of base salary
(including shares beneficially held by the individual or his/her spouse), the net of tax value of unvested share interests within
Company share plans which are not subject to performance conditions and 25% of the value of beneficially held shares purchased
by the individual or his/her spouse since the post-cessation shareholding policy came into effect.
As at 31 December 2021, Mark Satchel does not satisfy the minimum shareholding requirement but has up to five years from the
date of his appointment (13 March 2024) to achieve the minimum.
Audited
Name
Paul Feeney
Mark Satchel
Value1
£’000
Multiple of
base salary
2,093.5
1,259.8
310%
280%
1Includes the estimated net value of unvested share awards which are not subject to performance conditions. The calculation is based on the average share price of the final
three-month period ended 31 December 2021 of £1.4728. The actual value will be based on the share price when the awards vest.
Directors’ personal holding and beneficial share interests
As at 31 December 2020 and 31 December 2021, the Executive and Non-executive Directors held the following legal and beneficial
interests in ordinary shares:
Audited
Name
Paul Feeney
Mark Satchel
Glyn Jones
Rosie Harris
Moira Kilcoyne
George Reid
Ruth Markland
Paul Matthews
Tazim Essani
Tim Breedon
Chris Samuel
31 December
2021
31 December
2020
1,171,207
696,304
800,000
17,241
34,482
20,689
20,689
30,000
–
–
20,000
650,340
655,392
800,000
17,241
34,482
20,689
20,689
30,000
–
–
–
During the period 31 December 2021 to 9 March 2022, there were no other changes to the interests in shares held by the Directors
as set out in the table above.
144
Quilter Annual Report 2021
Payments within the year to past Directors
During 2021, there were no payments made to any past Directors.
Payment for loss of office
During 2021, there were no payments made to any Directors for loss of office.
External directorships
The table below sets out external directorships held by the Executive Directors.
Executive Directors
External directorships held
Paul Feeney
Mark Satchel
None
None
Fees received
and retained
–
–
External advisers
On 19 April 2021, Deloitte were appointed as our new independent remuneration advisers following a thorough RFP process.
On 31 March 2021, Alvarez & Marsal (“A&M”) were stood down as the Committee’s independent remuneration adviser.
During 2021, Deloitte provided advice covering the redesign of the evolved Policy, and both firms provided advice covering annual
remuneration report and policy disclosures, market practice and incentive design. Deloitte also support the Group with risk
advisory, tax compliance and consulting services, whilst A&M have no other connection with the Company. As part of the
procurement and contracting process, appropriate safeguards were put in place to ensure no conflict of interest arises.
The Committee is satisfied that the advice received from both Deloitte and A&M is objective and independent, and the firms are a
member of the Remuneration Consultants Group, whose voluntary code of conduct is designed to ensure objective and independent
advice is given to Committees. The total fees paid in respect of remuneration advice during 2021 are as follows:
Name
Alvarez Marsal
Deloitte
Key areas of advice received
Annual remuneration Report and Policy disclosure, market practice, incentive design
Policy review, application, disclosures, governance and market practice
Total fees 2021
£30,192
£60,375
Statement of shareholder voting
During the Company’s AGM in May 2021, a resolution to approve the Directors’ Remuneration Report was moved and the votes
from shareholders cast For was 97%, and 3% Against. Total votes Withheld were 31,260,900, which is 1.79% of issued share capital.
A resolution to approve the previous Directors’ Remuneration Policy was moved during the Company’s first AGM in May 2019;
the votes from shareholders cast For was 97%, and 3% Against. Total votes Withheld were 7,803,013, which is 0.41% of issued share
capital. The next resolution to approve the new Policy, which is detailed within this Report, will be in May 2022.
The Company did not receive a significant percentage of votes Against the resolutions at the 2021 AGM or prior years.
Quilter Annual Report 2021
145
Strategic ReportGovernance ReportFinancial statementsOther information Directors’ Report
The Directors present their report
for the financial year ended
31 December 2021
Cautionary statement
This Annual Report has been prepared for, and only for, the
members of the Company, as a body, and no other persons.
The Company, its Directors, employees, agents or advisers
do not accept or assume responsibility to any other person
to whom this document is shown or into whose hands it may
come and any such responsibility or liability is expressly
disclaimed. By their nature, the statements concerning the
risks and uncertainties facing the Group in this Annual Report
involve uncertainty since future events and circumstances can
cause results and developments to differ materially from those
anticipated. The forward-looking statements reflect knowledge
and information available at the date of preparation of this
Annual Report and the Company undertakes no obligation
to update these forward-looking statements. Nothing in this
Annual Report should be construed as a profit forecast.
Corporate governance statement
The information that fulfils the requirements of the corporate
governance statement for the purposes of the FCA’s Disclosure
Guidance and Transparency Rules (“DTRs”) can be found in the
governance section of the Annual Report on pages 76 to 145
(all of which forms part of this Directors’ Report) and in this
Directors’ Report.
Information included in the Strategic Report
The Company’s Strategic Report is on pages 1 to 75 and includes
the following information that would otherwise be required to
be disclosed in this Directors’ Report:
Subject matter
Page reference
Likely future developments in the business
Engagement with employees
Engagement with suppliers, customers and others
Employment of disabled persons
Greenhouse gas emissions, energy consumption and
energy efficiency action
Financial risks
19
45 to 47
42 to 53
46
48 and 49
69
Information to be disclosed under Listing Rule 9.8.4R
Subject matter
Details of long-term incentive schemes
Director waivers of emoluments
Shareholder waivers of dividends
Shareholder waivers of future dividends
Page reference
112 to 145
114
146
146
Financial instruments and risk management
The information relating to financial instruments and financial
risk management objectives and policies can be found on
pages 172 to 174, 200 and 201, and 227 to 234.
Branches
During 2021, in addition to its offices in the UK, the Group has
operated branches in Ireland, Jersey, Hong Kong, Singapore and
the United Arab Emirates.
Profit and dividends
Statutory profit after tax from continuing operations for 2021
was £23 million (2020: £13 million).
The Directors have recommended a final dividend for the
financial year ended 31 December 2021 of 3.9 pence per
Ordinary Share which will be paid out of distributable reserves,
subject to approval by shareholders at the 2022 Annual
General Meeting. Further information regarding the dividend,
including key dates, can be found at plc.quilter.com/dividends.
On 11 August 2021 the Board declared an interim dividend of
1.7 pence per Ordinary Share. The interim dividend was paid
on 20 September 2021 to shareholders on the UK and South
African share registers on 3 September 2021.
Shares are held in the Quilter Employee Benefit Trust (“EBT”)
and the Equiniti Share Plans Trust (“ESPT”) in connection with
the operation of the Company’s share plans. Dividend waivers
are in place for those shares that have not been allocated
to employees.
Directors
The names of the current Directors of the Company, along with
their biographical details, are set out on pages 82 to 84 and are
incorporated into this report by reference. Changes to
Directors during the year are set out below:
Name
Role
Effective date of appointment
Tazim Essani
Non-executive Director
9 March 2021
Chris Samuel
Non-executive Director
1 July 2021
Details of the Directors’ interests in the share capital of the
Company are set out in the Annual Report on Remuneration
on page 144.
The powers given to the Directors are contained in the
Company’s Articles of Association and are subject to relevant
legislation and, in certain circumstances, including in relation to
the issuing or buying back by the Company of its shares, subject
to authority being given to the Directors by shareholders in
general meeting. The Articles of Association also govern the
appointment and replacement of Directors. The Board has the
power to appoint additional Directors or to fill a casual vacancy
amongst Directors. Any such Director only holds office until the
next AGM and may offer themselves for election.
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Quilter Annual Report 2021
Articles of Association
The Articles of Association may be amended in accordance with
the provisions of the Companies Act 2006 by way of a special
resolution of the Company’s shareholders. The information
below sets out the provisions in the Articles of Association
in force as at the date of this report.
Share capital and control
The Company has Ordinary Shares in issue, representing 100%
of the total issued share capital as at 31 December 2021 and as
at 4 March 2022 (the latest practicable date for inclusion in this
report). Details regarding changes in the Company’s share
capital can be found in note 25 of the financial statements on
page 211. The rights attaching to the shares are set out in the
Articles of Association and are summarised below.
Voting rights of members
On a show of hands, every member or authorised corporate
representative present has one vote and every proxy present
has one vote except if the proxy has been duly appointed by
more than one member and has been instructed by (or
exercises his discretion given by) one or more of those
members to vote for the resolution and has been instructed by
(or exercises his discretion given by) one or more other of those
members to vote against it, in which case a proxy has one vote
for and one vote against the resolution. On a poll, every
member present in person or by proxy has one vote for every
share of which he is a holder. In the case of joint holders, the
vote of the person whose name stands first in the register of
members and who tenders a vote is accepted to the exclusion
of any votes tendered by any other joint holders.
Unless the Board decides otherwise, a member shall not be
entitled to vote, either in person or by proxy, at any general
meeting of the Company in respect of any share held by him
unless all calls and other sums presently payable by him in
respect of that share have been paid.
Transfers
Save as described below, the Ordinary Shares are freely
transferable.
A member may transfer all or any of his shares in any manner
which is permitted by any applicable statutory provision and
is from time to time approved by the Board. The Company shall
maintain a record of uncertificated shares in accordance with
the relevant statutory provisions.
A member may transfer all or any of his certificated shares
by an instrument of transfer in any usual form, or in such other
form as the Board may approve. The instrument of transfer
shall be signed by or on behalf of the transferor and, except in
the case of a fully paid share, by or on behalf of the transferee.
The Board may, in its absolute discretion, refuse to register any
instrument of transfer of any certificated share which is not
fully paid up (but not so as to prevent dealings in listed shares
from taking place on an open and proper basis) or on which the
Company has a lien. The Board may also refuse to register any
instrument of transfer of a certificated share unless it is left at
the registered office, or such other place as the Board may
decide, for registration, accompanied by the certificate for the
shares to be transferred and such other evidence (if any) as the
Board may reasonably require to prove title of the intending
transferor or his right to transfer shares; and it is in respect
of only one class of shares. If the Board refuses to register a
transfer of a certificated share it shall, as soon as practicable
and in any event within two months after the date on which
the instrument was lodged, give to the transferee notice of the
refusal together with its reasons for refusal. The Board must
provide the transferee with such further information about
the reasons for the refusal as the transferee may reasonably
request. Unless otherwise agreed by the Board in any
particular case, the maximum number of persons who may
be entered on the register as joint holders of a share is four.
Variation of rights
If at any time the share capital is divided into different classes
of shares, the rights attached to any class (unless otherwise
provided by the terms of issue) may, whether or not the
Company is being wound up, be varied with the consent in
writing of the holders of three-fourths in nominal value of the
issued shares of that class or with the sanction of a special
resolution of the holders of the shares of that class.
Exercisability of rights under an employee share scheme
An EBT operates in connection with certain of the Group’s
employee share plans (“Plans”). The Trustee of the EBT may
exercise all rights attaching to the shares in accordance with
their fiduciary duties other than as specifically restricted in the
relevant Plan governing documents. The Trustee of the EBT has
informed the Company that their normal policy is to abstain
from voting in respect of the Quilter shares held in trust. The
Trustee of the Quilter Share Incentive Plan (“SIP”) will vote as
directed by SIP participants in respect of the allocated shares
but the Trustee will not otherwise vote in respect of the
unallocated shares held in the SIP Trust.
Purchase of own shares
Throughout 2021, Quilter has continued to conduct the
£375 million share buyback programme (the “Buyback”), first
announced on 11 March 2020 to distribute to shareholders
the net surplus proceeds arising from the sale of Quilter
Life Assurance. At the AGMs held in May 2020 and May 2021,
shareholders passed resolutions to authorise the Company
to purchase up to 10% of the Company’s issued Ordinary
Share capital in the 12-month period following each AGM.
Conduct of the Buyback
Number of Ordinary
Shares purchased
Total
consideration
paid
Average
price paid per
share
Percentage of
the issued
share capital1
118,282,047
£152,963,992
128,141,834
£195,593,129
17,704,132
£26,437,862
£1.2932
£1.5264
£1.4933
6.22%
7.18%
0.99%
Year
2020
2021
2022
1Calculated based on the total number of shares in issue at the beginning of each
financial year.
Quilter Annual Report 2021
147
Strategic ReportGovernance ReportFinancial statementsOther information Directors’ Report
continued
Shares bought back on the JSE were purchased pursuant to
contingent purchase contracts with each of (a) J.P. Morgan
Equities South Africa Proprietary Limited and (b) Goldman Sachs
International, which were approved by shareholders at the 2020
and 2021 AGMs. The contracts enable the Company to buy back
its shares on the JSE in similar fashion and subject to the same
overall limits as on-market purchases on the LSE. The shares
acquired under the Buyback were cancelled upon acquisition.
The Group is also party to a number of supplier agreements
that may be terminated upon a change of control of the
Company, including following a takeover bid. In many cases,
whether this may apply depends on the identity or
characteristics of the new controller. This may result in the
provision of certain services and software licences being
terminated early.
The Buyback completed on 27 January 2022, with £375 million
returned to shareholders. Further information on the Buyback
can be found on page 211.
Return of capital relating to the sale of Quilter International
As announced on Wednesday 9 March 2022, Quilter intends
to return £328m of the net proceeds of the sale of Quilter
International as a return of capital through a B share scheme
accompanied by a share consolidation, whilst retaining £90m to
fund planned Business Simplification. Full details of the B share
scheme and share consolidation will be provided in the Circular
and Notice of General Meeting that will be posted to
shareholders on or around Wednesday 6 April 2022. The
General Meeting to seek shareholder approval for the B share
scheme and share consolidation will be held at the conclusion
of the AGM on Thursday 12 May 2022.
Significant agreements (change of control)
All the Company’s share plans contain provisions relating
to a change of control. In the event of a change of control,
outstanding awards and options may be lapsed and replaced
with equivalent awards over shares in the new company,
subject to the Board Remuneration Committee’s discretion.
Alternatively, outstanding awards and options may vest and
become exercisable on a change of control subject, where
appropriate, to the assessment of performance at that time
and pro-rating of awards.
Short-term incentive (“STI”) awards may continue to be paid in
respect of the full financial year pre and post change of control,
or a pro-rated STI award may be paid in respect of the portion
of the year that has elapsed at the point of change of control.
Exceptionally, the Board Remuneration Committee may exercise
its discretion to waive pro-rating.
On a change of control, including following a takeover bid,
the Company is required to enter into negotiations in good faith
with the lenders under the Group’s Revolving Credit Facility in
respect of any changes to its terms. If after such negotiations no
agreement has been reached, the Revolving Credit Facility would
be cancelled and existing drawdowns would become repayable.
Directors’ indemnities
Qualifying third-party indemnity provisions (as defined by
section 234 of the Companies Act 2006) were in force during
the course of the financial year ended 31 December 2021 for
the benefit of the then Directors and, at the date of this report,
are in force for the benefit of the Directors in relation to certain
losses and liabilities which they may incur (or have incurred) in
connection with their duties, powers and office. In addition, the
Company maintains Directors’ and Officers’ Liability Insurance
which gives appropriate cover for legal action brought against
its Directors.
Major shareholders
As at 31 December 2021, the Company had been notified,
in accordance with Rule 5 of the FCA’s DTRs, of the following
holdings of voting rights in its Ordinary Share capital:
Name of shareholder
Coronation Asset
Management (Pty) Ltd
Equiniti Trust (Jersey)
Limited2
Public Investment
Corporation of the Republic
of South Africa
Number of
voting rights
attaching to
Quilter shares
% interest in
voting rights
attaching to
Quilter shares1
Nature of
holding
notified
249,195,745
15.02%
Direct
69,283,197
3.91%
Direct
211,940,550
12.73%
Direct
1The percentage of voting rights detailed above was calculated at the time of the
relevant disclosures made in accordance with Rule 5 of the FCA’s DTRs.
2These shares are held by Equiniti Trust (Jersey) Limited in its capacity as trustee
of the Quilter Employee Benefit Trust.
As at 4 March 2022, the latest practicable date for inclusion
in this report, the following voting rights had been notified,
in accordance with Rule 5 of the FCA’s DTRs:
Name of shareholder
Coronation Asset
Management (Pty) Ltd
Equiniti Trust (Jersey)
Limited2
Ninety One UK Ltd
Public Investment
Corporation of the
Republic of South Africa
Number of
voting rights
attaching to
Quilter shares
% interest in
voting rights
attaching to
Quilter shares1
Nature of
holding
notified
245,647,533
14.99%
Direct
69,283,197
82,416,634
3.91%
5.01%
Direct
Indirect
216,870,050
13.19%
Direct
1The percentage of voting rights detailed above was calculated at the time of the
relevant disclosures made in accordance with Rule 5 of the FCA’s DTRs.
2These shares are held by Equiniti Trust (Jersey) Limited in its capacity as trustee
of the Quilter Employee Benefit Trust.
148
Quilter Annual Report 2021
Information provided to the Company by major shareholders
pursuant to the FCA’s DTRs is published via a Regulatory
Information Service and is available at
plc.quilter.com/investor-relations.
Donations
Quilter does not make monetary donations or gifts in kind
to political parties, elected officials or election candidates.
Accordingly, no such donations were made in 2021. However,
the Directors are seeking to renew the Company’s and its
subsidiaries’ authority to make political donations not exceeding
£50,000 in aggregate at the 2022 AGM. This is for the purposes
of ensuring that neither the Company nor its subsidiaries
inadvertently breach Part 14 of the Companies Act 2006 by
virtue of the relevant definitions being widely drafted. Further
information is available in the 2022 Notice of AGM.
Directors’ responsibility statements
The Directors are responsible for preparing the Annual Report
and the Parent Company and consolidated financial statements
in accordance with applicable law and regulations.
The Directors consider that the Annual Report and Accounts,
taken as a whole, are fair, balanced and understandable and
provides the information necessary for shareholders to assess
the Company’s and the Group’s position and performance,
business model and strategy.
Each of the Directors in office as at the date of this report, whose
names are listed on pages 82 to 84, confirms that, to the best
of his or her knowledge:
– the consolidated financial statements, which have been
prepared in accordance with International Financial Reporting
Standards as endorsed by the United Kingdom, give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the Company and the Group; and
– the Strategic Report and Directors’ Report include a fair
review of the development and performance of the business
and the position of the Company and the Group, together
with a description of the principal risks and uncertainties
that they face.
For further information on the comprehensive process followed
by the Board in order to reach these conclusions please refer
to the Board Audit Committee report on pages 96 to 101.
Disclosure of information to Auditors
Each person who is a Director of the Company as at the date
of approval of this report confirms that:
a) so far as the Director is aware, there is no relevant audit
information of which the Company’s Auditors are unaware; and
b) the Director has taken all the steps that he or she ought to
have taken as a Director in order to make him/herself aware
of any relevant audit information and to establish that the
Company’s Auditors are aware of that information.
Independent Auditors
The Directors are recommending the reappointment of
PricewaterhouseCoopers LLP as the Company’s statutory
auditors at the 2022 AGM.
AGM
The 2022 AGM of Quilter plc will be held at Senator House,
85 Queen Victoria Street, London EC4V 4AB on
Thursday 12 May 2022 at 11:00am (UK time). Details of the
business to be transacted at the 2022 AGM, along with details
of how you can ask questions and join the meeting, are included
in the Quilter plc 2022 Notice of AGM which can be found on
our GM Hub at plc.quilter.com/gm. In light of the ongoing risk
to public health posed by COVID-19, we will continue to do
all we can to take responsible precautions to help protect the
wellbeing of each other. We will monitor the UK Government
guidelines and update our GM Hub if the guidance changes.
By order of the Board
Patrick Gonsalves
Company Secretary
9 March 2022
Quilter Annual Report 2021
149
Strategic ReportGovernance ReportFinancial statementsOther information Index to the consolidated financial statements
For the year ended 31 December 2021
Group Consolidated Financial Statements
151 Statement of Directors’ responsibilities
152 Auditors’ report
161 Consolidated income statement
162 Consolidated statement of comprehensive income
163 Consolidated statement of changes in equity
164 Consolidated statement of financial position
165 Consolidated statement of cash flows
Basis of Preparation and Significant Accounting Policies
166 1: Basis of preparation
167 2: New standards and amendments to standards, and
interpretations adopted by the Group
168 3: Future standards, amendments to standards, and
interpretations not early-adopted in these financial statements
168 4: Significant changes in the year
168 5: Significant accounting policies
Notes to the Consolidated Financial Statements
178 6: Business combinations
182 7: Alternative performance measures (“APMs”)
186 8: Segmental information
189 9: Details of revenue
190 10: Details of expenses
192 11: Tax
194 12: Earnings per share
195 13: Dividends
196 14: Goodwill and intangible assets
198 15: Property, plant and equipment
199 16: Loans and advances
199 17: Financial investments
200 18: Derivative financial instruments – assets and liabilities
200 19: Categories of financial instruments
201 20: Fair value methodology
207 21: Structured entities
208 22: Trade, other receivables and other assets
208 23: Contract costs
209 24: Cash and cash equivalents
211 25: Share capital, capital redemption reserve
and merger reserve
211 26: Share-based payments
214 27: Investment contract liabilities
215 28: Provisions
219 29: Tax assets and liabilities
221 30: Borrowings and lease liabilities
222 31: Trade, other payables and other liabilities
223 32: Contract liabilities
223 33: Post-employment benefits
226 34: Master netting or similar arrangements
226 35: Contingent liabilities
227 36: Commitments
227 37: Capital and financial risk management
234 38: Fiduciary activities
234 39: Related party transactions
235 40: Events after the reporting date
Appendices
236 A: Other accounting policies
238 B: Related undertakings
Financial Statements of the Company
240 Financial statements
243 Notes to the Company financial statements
150
Quilter Annual Report 2021
Statement of Directors’ responsibilities
in respect of the Annual Report and the financial statements
Responsibility statement of the Directors in respect
of the Annual Report and financial statements
We confirm that to the best of our knowledge:
– the financial statements, prepared in accordance with the applicable
set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole; and
– the Strategic Report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face.
We consider that the Annual Report, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Group’s position and performance, business
model and strategy.
Signed on behalf of the Board
Paul Feeney
Chief Executive Officer
9 March 2022
Mark Satchel
Chief Financial Officer
The Directors are responsible for preparing the Annual Report and the
Group and Parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that law,
the Directors have prepared the Group and Parent Company financial
statements in accordance with UK-adopted international accounting
standards. Additionally, the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules require the Directors to prepare the
Group financial statements in accordance with international financial
reporting standards as adopted by the United Kingdom.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and Parent Company and of the profit
or loss of the Group for that period. In preparing the financial statements,
the Directors are required to:
– select suitable accounting policies and then apply them consistently;
– state whether, for the Group and Company, applicable UK-adopted
international accounting standards have been followed, subject to any
material departures disclosed and explained in the financial
statements;
– make judgements and estimates that are reasonable and prudent; and
– prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the Group and Parent Company will
continue in business.
The Directors are also responsible for safeguarding the assets of the
Group and Parent Company and hence for taking reasonable steps for
the prevention and detection of fraud and irregularities.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group’s and the Parent
Company’s transactions and disclose with reasonable accuracy at any
time the financial position of the Group and Parent Company and enable
them to ensure that the financial statements and the Directors’
Remuneration report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the
Parent Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Quilter Annual Report 2021
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Strategic ReportGovernance ReportFinancial statementsOther information Independent auditors’ report to the members of Quilter plc
Report on the audit of the financial statements
Opinion
In our opinion, Quilter plc’s Group financial statements and Company
financial statements (the “financial statements”):
– give a true and fair view of the state of the Group’s and of the
Company’s affairs as at 31 December 2021 and of the Group’s profit
and the Group’s and Company’s cash flows for the year then ended;
– have been properly prepared in accordance with UK-adopted
international accounting standards; and
– have been prepared in accordance with the requirements of the
Companies Act 2006.
We have audited the financial statements, included within the Annual
Report, which comprise: the Consolidated statement of financial position
and Company statement of financial position as at 31 December 2021;
the Consolidated income statement, the Consolidated statement of
comprehensive income, the Consolidated statement of changes in equity,
the Consolidated statement of cash flows, the Company statement of
cash flows and the Company statement of changes in equity for the year
then ended; and the notes to the financial statements, which include
a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Board Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the
audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements in
the UK, which includes the FRC’s Ethical Standard, as applicable to listed
public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in Note 10, we have provided no non-audit
services to the Company or its controlled undertakings in the period
under audit.
Our audit approach
Context
We were appointed as auditors by the Directors on 19 May 2020,
therefore this is our second year of involvement. In planning for our audit
of the Quilter plc Group (“the Group”) for the current year, we met with
the Board Audit Committee and members of management across the
business, to discuss and understand significant changes during the year,
and to understand their perspectives on associated business risks. We
used this insight, in addition to our experience from the previous year’s
audit approach, when forming our views regarding the business updates,
as part of developing our audit plan and when scoping and performing
our audit procedures. Due to the sale of Quilter International in the
current year, we considered the presentation and disclosure of the sale
of Quilter International to be a significant risk and therefore this has been
included as a key audit matter for the current year.
Overview
Audit scope
– At 31 December 2021, the Group comprised two operating segments
together with head office activities, each of which contain several
reporting components. We conducted audit testing over eleven
components in total, which we selected based on their financial
significance to the consolidated results.
– Six components were subject to an audit of their complete financial
information (including one component within the disposed of Quilter
International business unit).
– Specific audit procedures were also performed on certain balances
and transactions in respect of a further five components.
– Taken together, the procedures we performed over the five continuing
significant components provided us with coverage of over 79% of total
revenue and 93% of adjusted profit.
– We have also considered the potential impact of climate change related
factors in our audit, including challenging management on its
assessment of how climate change related risks and opportunities
impact the financial statements.
Key audit matters
– Sale of Quilter International (Group)
– Compensation provisions (Group)
– Goodwill impairment assessment (Group)
– Impairment assessment of investments in subsidiaries (Parent)
Materiality
– Overall Group materiality: £6,769,500 (2020: £7,918,000) based on 1%
of total revenue excluding investment return (2020: based on 5% of
adjusted profit before tax from continuing operations).
– Overall Company materiality: £32,490,000 (2020: £31,000,000) based
on 1% of total assets.
– Performance materiality: £5,077,000 (2020: £5,938,500) (Group) and
£24,367,500 (2020: £23,250,000) (Company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were
addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The sale of Quilter International is a new key audit matter this year. The
impact of COVID-19 and the valuation of Level 3 assets, which were key
audit matters last year, are no longer included because of the effects and
related impact of COVID-19 measures now being considered as part of the
business as usual operations of the Group, and the value of Level 3 assets
is immaterial in the current year. Otherwise, the key audit matters below
are consistent with last year.
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Key audit matter
How our audit addressed the key audit matter
Sale of Quilter International (Group)
Refer to page 98 of the Board Audit Committee Report
and note 6 to the Group financial statements.
The sale of Quilter International is a significant one-off
transaction for the business with a number of related
disclosure requirements. These disclosures contain
judgemental areas, namely:
– the presentation of the direct costs relating
to the sale;
– the appropriateness of the inclusion of certain
provisions related to the sale within the results
from discontinued operations; and
– the sale of Quilter International results in stranded
costs within the Group. There is judgement used in
determining the calculation of such costs that are
shown within the continuing operations in both
the current and prior years.
Although the overall profit on disposal appears within
one line of the income statement, we have focussed
on confirming the presentation of these judgemental
areas within the disclosure notes.
We have reviewed all relevant disclosures within the financial statements to ensure they are
consistent with testing performed and are in line with the requirements of IFRS 5.
We have tested the costs of disposal included within the calculation of profit on disposal
to confirm that these are directly related to the process of selling the business. We have
also reviewed the methodology used to allocate the appropriate amount of goodwill to the
disposed business, which is included within the profit on disposal calculation, and found this
to be reasonable.
Separately we have tested the costs recognised within discontinued operations in relation
to provisions for future costs associated with the sale. We have confirmed that, whilst these
costs remain in the Group, it is correct to recognise them within the result from discontinued
operations as they are a direct impact of the disposal. Our testing included agreeing the
estimated future costs to supporting documentation (such as contractual agreements)
as well as ensuring the Group is committed to these costs at the balance sheet date,
in accordance with the requirements of IAS 37.
We have reviewed managements methodology for calculating the stranded centrally
incurred costs in the prior and current years to be included within the continuing operations.
We have agreed that any costs that are not being treated as stranded have transferred to
the purchaser on sale of the business, and are therefore appropriate to include within
discontinued operations.
Finally, we have read the statements made in the annual report in relation to the sale and we
have confirmed that these are consistent with the disclosures presented within the financial
statements, and our knowledge of the transaction gained throughout the audit.
Quilter Annual Report 2021
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Report on the audit of the financial statements continued
Key audit matter
How our audit addressed the key audit matter
Compensation provisions (Group)
Refer to page 98 of the Board Audit Committee Report
and Note 28 of the financial statements.
The Group held a number of provisions totalling
£93 million at 31 December 2021 (2020: £77 million),
including £41 million (2020: £42 million) relating to
customer redress. The most significant redress
provision related to unsuitable advice provided by
Lighthouse to British Steel Pension Scheme members
who transferred from that scheme to a Defined
Contribution scheme.
Additional provisions have also been recognised for
other instances of potentially unsuitable advice in
relation to Defined Benefit to Defined Contribution
pension scheme transfers.
Judgement is required to be applied in considering
whether or not a provision should be recognised in the
context of IAS 37 as well as determining the estimate of
redress as differing levels of customer information may
be available at the balance sheet date.
Where detailed information is available key
assumptions impacting the estimates include the
actuarial valuations of defined benefit obligations
and an estimation of the current value of assets held
by customers. Where such detailed information is not
available to perform specific calculations, judgement
is required in estimating provisions by developing
an expectation of redress through analysis of
recent experience.
We have assessed and challenged the Group’s methodology and the assumptions applied
in arriving at the provisions. The Group’s provision is based on calculations and judgements
provided by their expert (for the purposes of the Lighthouse provisions, this is also the S.166
skilled person). We assessed the competence and objectivity of management’s expert.
In demonstrating professional scepticism we obtained information from and had
discussions directly with management’s expert, utilised our internal experts to review the
work performed by management’s expert on a sample basis and checked the accuracy of
the calculations provided by management with the data obtained directly from their expert.
In relation to the provision for Lighthouse British Steel Pension Scheme transfers, we
checked the provision recognised to formal offer letters made by the skilled person on a
sample basis, as well as testing a sample of payments made by the year end. This reflected
the majority of this provision. For the remaining customers, we reviewed management’s
estimate of provision which was based on the application of redress to transfer value
assumptions as evidenced through the formal offer letters made. Where instances of nil
redress were noted as customers had opted out or did not respond, we inspected
underlying evidence to support this position.
For other provisions, where specific individual calculations of redress were available,
we checked that the amount recognised was consistent with that communicated by
management’s expert and on a sample basis reviewed the application of methodology
through our internal expert review. Where individual calculations were not available,
we assessed the suitability of the redress to transfer value assumptions applied by
management in valuing the provisions in the context of their relative accuracy in previous
estimations. We also tested the transfer values to supporting evidence.
We read management’s disclosure in relation to this provision in the context of the
requirements of IAS 37 and considered the suitability of the sensitivities disclosed. In
relation to the completeness of defined benefit to defined contribution redress provisions:
– We considered management’s accounting policy and recognition criteria in the context
of the requirements of IAS 37;
– Reviewed the listing of complaints as at year end for any evidence of material omissions
of similar cases;
– Read the output of internal reviews over suitability performed by management;
– Read any relevant correspondence with regulators in relation to unsuitable advice
for DB to DC transfers; and
– Discussed with management where cases of potentially unsuitable advice for DB to DC
schemes had been internally identified and considered whether a provision should be
recognised in the context of IAS 37 and our materiality.
Management’s expert will be calculating the actual redress payable to individual customers
on a case by case basis. Therefore the final redress payable may be materially different to
the amount recognised as at 31 December 2021 as a result of market movements as well
as due to accessing more up to date information which may not be available at the balance
sheet date. We are satisfied that the methodology applied by management in the context
of IAS 37 in estimating redress provisions did not result in a material misstatement.
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Key audit matter
How our audit addressed the key audit matter
We checked that the cash flow forecasts used by management in the assessment of goodwill
impairment were consistent with the approved three year business plan. We evaluated the
historical accuracy of the cash flow forecasts, including a comparison of the current year
actual results with the full year 2021 figures included in the prior year forecast. For certain
key assumptions which underpinned the forecast performance, such as growth of assets
under management in the business plan period, we corroborated these against external
market data where available. We challenged management on the inclusion of certain cash
flows where these looked to include future enhancements (such as revenues from new
products) or future restructuring activity. We found that the forecasts have been completed
on a basis consistent with prior years, except for the insurance entity, and were an
appropriate basis upon which management could base their conclusions. For the remaining
insurance entity in the Group, following the disposal of Quilter International, the basis of the
cash flow forecast was changed from a Solvency II own funds basis to a cash flow model that
is consistent with the remaining Group. We have reviewed this change in methodology and
confirmed this is in line with the requirements of IAS 36. In addition we have confirmed that
this does not result in a materially different result from if the prior year methodology were
to be used. Neither method would result in a potential impairment and therefore we
concluded that there was no management bias associated with this change.
We considered the appropriateness of performing the impairment assessment at the
operating segment level. This included consideration of how the financial information of the
business is presented to the Chief Operating Decision Maker. This was re-assessed in 2021
due to the introduction of the new operating segments. We determined that the
performance of the impairment review on an operating segment level remains appropriate.
We engaged our internal valuation specialists to independently calculate a reasonable range
for both the discount rate and long term growth rate assumptions used within the value in
use calculations. We found the discount rate assumption to be more conservative than our
expected range, while the long term growth rate was slightly above our expected amount.
However, sensitivity analyses and reperformance of the calculation using our independent
assumptions confirms that no impairment would be required.
We obtained and understood management’s sensitivity calculations over the impairment
assessment, as well as performing further sensitivity scenarios ourselves. We determined
that the impairment assessment was not highly sensitive to any of the key assumptions,
being the discount rate and the forecast growth (including the long term growth rate) of cash
flows. For each operating segment we calculated the degree to which these assumptions
would need to move before an impairment was triggered. We discussed the likelihood of
such a movement with management and agreed with their conclusion that there was no
reasonable possible change that would give rise to an impairment.
Goodwill impairment assessment (Group)
Refer to page 98 of the Board Audit Committee Report
and note 14 to the Group financial statements.
The goodwill balance of £306 million (2020: £356 million)
is subject to an annual impairment review. No impairment
charge has been recorded by management against the
goodwill balance in the current year. The £50 million
reduction in goodwill from prior year relates to the sale
of Quilter International.
Judgement is used to determine the appropriate
level at which to perform the impairment assessment.
Management analyses discounted cash flows at the
operating segment level to calculate the value in use
for each operating segment as opposed to an individual
cash generating unit (“CGU”). In addition, the operating
segments have changed during the year and there
is an element of judgement involved in determining
the allocation of the existing goodwill between the
new segments.
In the prior year the value in use for unit-linked
insurance components of the Group was determined
by reference to the Solvency II regulatory own funds
position. Given the reduced number of life insurance
undertakings in the Group following the sale of Quilter
International, management has used consistent value
in use methodology across all components within the
Group in the current year impairment assessment.
All value in use calculations are now performed by
reference to the cash flows from the Board approved
business plan.
This has not been determined to be a significant audit
risk due to the large amount of headroom available
in the model. However, this has been an area of audit
focus due to the inherent subjectivity in the
assumptions used within the model, as well as the
changes that have occurred within the calculation
compared to the prior year.
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Report on the audit of the financial statements continued
Key audit matter
How our audit addressed the key audit matter
Impairment assessment of investments
in subsidiaries (Parent)
Refer to note 4 to the Parent Company financial
statements.
The Company holds investments in subsidiaries
of £2,130 million (2020: £2,254 million). Whilst these
eliminate on consolidation in the Group financial
statements, they are recorded in the Company
financial statements.
The impairment assessment leveraged management’s calculations for the Group goodwill
impairment assessment referred to above. The key judgement used by management in their
impairment assessment is the underlying assumption that the Company’s investments in
Quilter Holdings Limited and Quilter Investors represents the lowest level at which largely
independent cash inflows are generated. This assumption allows headroom to be
transferred between subsidiary entities.
We challenged management over this assumption on the basis that the business plan is
prepared at a more disaggregated level and requested management to provide us with
further analyses to demonstrate the significant degree of integration between the
businesses included in their defined cash generating unit. Given the changes in the
operating segments to High Net Worth and Affluent we have reassessed this judgement
in the current year and found that the cash flows between the subsidiary groups remain
interrelated. We have corroborated the explanations we received through discussion with
the relevant component audit teams and review of historic relevant correspondence with
the regulator identifying some of the interdependencies.
Management performed an impairment assessment,
utilising consistent methodology to that described
in the impairment of goodwill key audit matter above,
and concluded that an impairment of £124 million
was required.
For non-trading subsidiaries the fair value less costs to sell is deemed by management
to be represented by their net asset position. Due to the net asset position of one such
component decreasing within the year an impairment charge has been recognised
accordingly. We have agreed the accuracy of this calculation and corroborated the net
asset position to the year-end trial balance.
We have determined the impairment assessment over
the investments in subsidiaries to be a significant risk
in light of the identified impairment as well as the Group
market capitalisation being lower than the Company
equity value at the balance sheet date.
Overall, we are satisfied that there is sufficient evidence to support the basis of
management’s impairment assessment and therefore agree with the level of impairment
that has been recognised.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough
work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Company, the
accounting processes and controls, and the industry in which they operate.
Quilter plc has two operating segments which have changed from
the prior year. The Group now consists of High Net Worth and Affluent
operating segments together with head office activities. Within these
segments there are several reporting units, of which six are considered
financially significant due to their contribution to Group revenues, and
were subject to an audit of their complete financial information. In
addition, a further five reporting entities were in scope for specific audit
procedures, as these components contributed either towards a
significant risk area, or a significant proportion of certain financial
statement line items. Together with the procedures performed at the
Group level, including auditing the consolidation and financial statement
disclosures, taxation, and goodwill impairment assessment, this gave
us the evidence we needed for our opinion on the financial statements
as a whole.
A significant proportion of the Group’s trading is based in the UK resulting
in the majority of the audit procedures being performed locally by the
UK audit team. Of the eleven components we have performed audit
procedures over, one of these components was based outside the UK,
in the Isle of Man, and therefore we receive inter-firm reporting over the
financial information of this component from PwC Isle of Man. Due to the
sale of Quilter International during the current year (which accounts for
the majority of the Group’s non-UK trading) this reporting covers the
11 month period prior to sale, as well as the closing balance sheet as
at the end of November 2021.
We applied materiality of £404,465,000 to the classification of unit-linked
assets and liabilities in the consolidated statement of financial position,
the related line items in the consolidated income statement and related
notes, determined with reference to a benchmark of total assets, of which
it represents 1%. This included the unit-linked financial statement line
items within the Quilter International reporting component’s income
statement and closing balance sheet as at 30 November 2021. This
materiality was applied solely for our work on matters for which a
misstatement is likely only to lead to a reclassification between line items,
in accordance with FRC Practice Note 20 The audit of Insurers in the
United Kingdom.
The Group contains several regulated trading entities and is a regulated
insurance Group itself. Some activities are outsourced to third party
providers across the Group, such as investment and platform
administration. In respect of the outsourced service providers we were
able to gain appropriate audit evidence through a combination of
evaluating the providers’ published assurance reports on internal control
and performing substantive procedures.
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Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£6,769,500 (2020: £7,918,000).
Financial statements – Group
Financial statements – Company
£32,490,000 (2020: £31,000,000).
How we determined it
1% of total revenue excluding investment return (2020: based on 5% of adjusted
profit before tax from continuing operations).
1% of total assets.
Rationale for
benchmark applied
Based on the performance metrics used in the Annual Report, total revenue
is considered to be one of the primary measures used by shareholders in
assessing performance of the Group and is a generally accepted auditing
benchmark. Using a revenue based materiality is a development from the 2020
audit where adjusted profit was used. This is due to a number of significant
restructuring activities happening across the Group within the current year,
such as the sale of Quilter International and the continued cost transformation
programme. This has led to volatility in both adjusted profit and continuing
profit before tax. In response to this volatility, we consider it appropriate to base
our materiality on a benchmark referenced to continuing operations which
constitutes a reflective measure of the size and scale of the Group.
A benchmark of total assets has been
used as the Company’s primary
purpose is to act as a holding
Company with investments in the
Group’s subsidiaries, not to generate
operating profits and therefore a
profit based measure was not
considered appropriate.
For each component in the scope of our Group audit, we allocated a
materiality that is less than our overall Group materiality. The range of
materiality allocated across components was £1,900,000 to £6,329,000.
Certain components were audited to a local statutory audit materiality
that was also less than our overall Group materiality.
We use performance materiality to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use
performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% (2020: 75%) of overall materiality,
amounting to £5,077,000 (2020: £5,938,500) for the Group financial
statements and £24,367,500 (2020: £23,250,000) for the Company
financial statements.
– Obtained management’s estimated Solvency capital position and
evaluated these for consistency of available information and against
management’s own target capital ratios. We found that the Group
maintained internal targets for its Group Solvency Capital Requirement
(SCR) ratio, and is forecast to remain compliant with all external
regulatory capital requirements for the period covered by the going
concern assessment; and
– Confirmed compliance with the debt covenants of the Groups’
borrowings, and the forecast continued compliance for the duration
of the period covered by the going concern assessment.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s and the Company’s
ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In determining the performance materiality, we considered a number of
factors – the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls – and concluded that an amount
at the upper end of our normal range was appropriate.
In auditing the financial statements, we have concluded that the Directors’
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
We agreed with the Board Audit Committee that we would report to them
misstatements identified during our audit above £500,000 (Group audit)
(2020: £500,000) and £1,624,500 (Company audit) (2020: £1,550,000) as
well as misstatements below those amounts that, in our view, warranted
reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the Directors’ assessment of the Group’s and the
Company’s ability to continue to adopt the going concern basis of
accounting included:
– Obtained the Directors’ updated going concern assessment and
challenged the rationale for assumptions on growth of assets under
management/administration and asset returns using our knowledge
of Quilter’s business performance and corroborating to external
market evidence where available. Our assessment included reviewing
management’s stress testing and scenario analyses;
However, because not all future events or conditions can be predicted,
this conclusion is not a guarantee as to the Group’s and the Company’s
ability to continue as a going concern.
In relation to the Directors’ reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial
statements about whether the Directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect
to going concern are described in the relevant sections of this report.
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Report on the audit of the financial statements continued
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The Directors are responsible for the other information, which
includes reporting based on the Task Force on Climate-related Financial
Disclosures (“TCFD”) recommendations. Our opinion on the financial
statements does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise explicitly
stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also
considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the course of the audit, the Companies
Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit,
the information given in the Strategic Report and Directors’ Report for the
year ended 31 December 2021 is consistent with the financial statements
and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the Group and Company
and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and
Directors’ Report.
Directors’ remuneration
In our opinion, the part of the Annual Report on Remuneration to be
audited has been properly prepared in accordance with the Companies
Act 2006.
Corporate governance statement
The Listing Rules require us to review the Directors’ statements in relation
to going concern, longer-term viability and that part of the corporate
governance statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance
statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded
that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and
our knowledge obtained during the audit, and we have nothing material
to add or draw attention to in relation to:
– The Directors’ confirmation that they have carried out a robust
assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal
risks, what procedures are in place to identify emerging risks and
an explanation of how these are being managed or mitigated;
– The Directors’ statement in the financial statements about whether
they considered it appropriate to adopt the going concern basis of
accounting in preparing them, and their identification of any material
uncertainties to the Group’s and Company’s ability to continue to do so
over a period of at least twelve months from the date of approval of the
financial statements;
– The Directors’ explanation as to their assessment of the Group’s and
Company’s prospects, the period this assessment covers and why the
period is appropriate; and
– The Directors’ statement as to whether they have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of its assessment,
including any related disclosures drawing attention to any necessary
qualifications or assumptions.
Our review of the Directors’ statement regarding the longer-term viability
of the Group was substantially less in scope than an audit and only
consisted of making inquiries and considering the Directors’ process
supporting their statement; checking that the statement is in alignment
with the relevant provisions of the UK Corporate Governance Code;
and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the Group and
Company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our
knowledge obtained during the audit:
– The Directors’ statement that they consider the Annual Report, taken
as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the Group’s and
Company’s position, performance, business model and strategy;
– The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems; and
– The section of the Annual Report describing the work of the Board
Audit Committee.
We have nothing to report in respect of our responsibility to report when
the Directors’ statement relating to the Company’s compliance with the
Code does not properly disclose a departure from a relevant provision
of the Code specified under the Listing Rules for review by the auditors.
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Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Directors’ responsibility statements, the
Directors are responsible for the preparation of the financial statements
in accordance with the applicable framework and for being satisfied that
they give a true and fair view. The Directors are also responsible for such
internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Company or to cease operations,
or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the Group and industry, we identified that
the principal risks of non-compliance with laws and regulations related to
breaches of UK regulatory principles, such as those governed by the
Prudential Regulation Authority (“PRA”) and the Financial Conduct
Authority (“FCA”), and unsuitable or prohibited business practices, and we
considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements such as
the Companies Act 2006 and Listing Rules. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined
that the principal risks were related to posting inappropriate journal
entries to either inflate revenue or reduce expenditure of the Group and
the Company, and management bias in accounting estimates and
judgemental areas of the financial statements, such as provisions. The
Group engagement team shared this risk assessment with the component
auditors so that they could include appropriate audit procedures in
response to such risks in their work. Audit procedures performed by the
Group engagement team and/or component auditors included:
– Discussions with the Board, management, internal audit, management
involved in the risk and compliance functions and the Group and
Company’s legal function, including consideration of known or suspected
instances of non-compliance with laws and regulation and fraud.
– Reviewing correspondence between the Group and the PRA and FCA
in relation to compliance with laws and regulations.
– Assessment of matters reported on the Group’s whistleblowing
register including the quality and results of management’s investigation
of such matters.
– Reviewing Board minutes as well as relevant meeting minutes, including
those of the Board Audit Committee, Board Remuneration Committee,
the Board Technology and Operations Committee and the Board
Risk Committee.
– Reviewing data regarding customer and policyholder complaints, the
Group’s and Company’s register of litigation and claims, internal audit
reports, compliance reports in so far as they related to non-compliance
with laws and regulations and fraud.
– Challenging assumptions made by management in accounting
estimates and judgements, in particular in relation to the impairment
assessments of goodwill and investments in subsidiaries, and the
valuation of the DB to DC compensation provisions described in the
related key audit matters.
– Identifying and testing journal entries, in particular any journal entries
posted with unusual account combinations, such as a credit to revenue
and a debit to the statement of financial position (other than to
expected accounts), which may be indicative of the overstatement
or manipulation of revenue.
– Designing audit procedures to incorporate unpredictability around
the nature, timing or extent of our testing.
– Detailed testing over the classification of costs allocated to business
transformation costs, which are considered as one-off and added back
to calculate the adjusted profit measure, in order to identify any
inappropriate classification which could be indicative of a material
manipulation of the adjusted profit measure.
There are inherent limitations in the audit procedures described above.
We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and
transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery or intentional misrepresentations,
or through collusion.
Our audit testing might include testing complete populations of certain
transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for
testing, rather than testing complete populations. We will often seek to
target particular items for testing based on their size or risk characteristics.
In other cases, we will use audit sampling to enable us to draw a
conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the
Company’s members as a body in accordance with Chapter 3 of Part 16 of
the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Quilter Annual Report 2021
159
Strategic ReportGovernance ReportFinancial statementsOther information Independent auditors’ report to the members of Quilter plc
Report on the audit of the financial statements continued
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
– we have not obtained all the information and explanations we require
for our audit; or
– adequate accounting records have not been kept by the Company, or
returns adequate for our audit have not been received from branches
not visited by us; or
– certain disclosures of Directors’ remuneration specified by law are not
made; or
– the Company financial statements and the part of the Annual Report
on Remuneration to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Board Audit Committee, we were
appointed by the Directors on 19 May 2020 to audit the financial statements
for the year ended 31 December 2020 and subsequent financial periods.
The period of total uninterrupted engagement is two years, covering the
years ended 31 December 2020 to 31 December 2021.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure
Guidance and Transparency Rule 4.1.14R, these financial statements will
form part of the ESEF-prepared annual financial report filed on the
National Storage Mechanism of the Financial Conduct Authority in
accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This
auditors’ report provides no assurance over whether the annual financial
report will be prepared using the single electronic format specified in the
ESEF RTS.
Mark Pugh
(Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
9 March 2022
160
Quilter Annual Report 2021
Consolidated income statement
For the year ended 31 December 2021
Income
Fee income and other income from service activities1
Investment return1
Other income
Total income
Expenses
Change in investment contract liabilities
Fee and commission expenses, and other acquisition costs1
Change in third-party interest in consolidated funds1
Other operating and administrative expenses
Finance costs
Total expenses
Profit on sale of subsidiary
Profit before tax from continuing operations
Tax expense attributable to policyholder returns
Profit/(loss) before tax attributable to equity holders from continuing operations
Income tax (expense)/credit
Less: tax expense attributable to policyholder returns
Tax credit attributable to equity holders
Profit after tax from continuing operations
Profit after tax from discontinued operations
Profit after tax
Attributable to:
Equity holders of Quilter plc
Earnings per Ordinary Share on profit attributable to Ordinary Shareholders of Quilter plc
Basic
From continuing operations (pence)
From discontinued operations (pence)
Basic earnings per Ordinary Share (pence)
Diluted
From continuing operations (pence)
From discontinued operations (pence)
Diluted earnings per Ordinary Share (pence)
1See notes 5(d) and 5(e) for details of changes to comparative amounts.
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
666
4,002
18
4,686
(3,293)
(61)
(599)
(636)
(14)
585
2,856
20
3,461
(2,272)
(52)
(461)
(651)
(16)
(4,603)
(3,452)
2
85
(73)
12
(62)
73
11
23
131
154
154
1.4
8.0
9.4
1.4
7.8
9.2
–
9
(36)
(27)
4
36
40
13
75
88
88
0.8
4.2
5.0
0.8
4.1
4.9
Notes
9(a)
9(b)
27
10(a)
10(b)
10(e)
6(a)
11(a)
11(a)
6(b)
12(b)
6(b)
12(b)
12(b)
6(b)
12(b)
The notes on pages 166 to 239 form an integral part of these consolidated financial statements.
Quilter Annual Report 2021
161
Strategic ReportGovernance ReportFinancial statementsOther information Consolidated statement of comprehensive income
For the year ended 31 December 2021
Profit after tax
Exchange losses on translation of foreign operations
Items that may be reclassified subsequently to income statement
Total other comprehensive income, net of tax
Total comprehensive income
Attributable to:
Continuing operations
Discontinued operations
Equity holders of Quilter plc
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
Notes
154
(1)
(1)
(1)
153
22
131
153
88
–
–
–
88
12
76
88
6(b)
The notes on pages 166 to 239 form an integral part of these consolidated financial statements.
162
Quilter Annual Report 2021
Consolidated statement of changes in equity
For the year ended 31 December 2021
31 December 2021
Notes
Balance at 1 January 2021
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends
Shares repurchased in the buyback
programme1
Release of merger reserve
Movement in own shares
Equity share-based payment transactions
Aggregate tax effects of items recognised
directly in equity
Total transactions with the owners of the
Company
Transfer to retained earnings
Balance at 31 December 2021
13
25
25(b)
26(e)
31 December 2020
Notes
Balance at 1 January 2020
Profit for the year
Total comprehensive income
Dividends
Shares repurchased in the buyback
programme1
Movement in own shares
13
25
Equity share-based payment transactions
26(e)
Dividend equivalents paid on vested
shares
Total transactions with the owners of
the Company
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
Share-based
payments
reserve
£m
Other
reserves
£m
Retained
earnings
£m
125
–
–
–
–
(9)
–
–
–
–
(9)
–
116
58
–
–
–
–
–
–
–
–
–
–
–
8
–
–
–
–
9
–
–
–
–
9
–
58
17
149
–
–
–
–
–
(124)
–
–
–
(124)
–
25
42
–
–
–
–
–
–
–
(1)
1
–
–
42
1
–
(1)
(1)
–
–
–
–
–
–
–
(1)
(1)
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
Share-based
payments
reserve
£m
Other
reserves
£m
Retained
earnings
£m
133
–
–
–
(8)
–
–
–
(8)
58
–
–
–
–
–
–
–
–
–
–
–
–
8
–
–
–
8
149
–
–
–
–
–
–
–
–
45
–
–
–
–
–
(3)
–
(3)
1
–
–
–
–
–
–
–
–
Total
share-
holders’
equity
£m
1,878
154
(1)
153
(89)
(204)
–
(20)
20
Total
share-
holders’
equity
£m
2,071
88
88
(81)
(179)
(44)
25
1,495
154
–
154
(89)
(204)
124
(20)
21
1,685
88
88
(81)
(179)
(44)
28
–
1
(168)
(292)
1
–
1,482
1,739
(2)
(2)
(278)
(281)
1,878
58
Balance at 31 December 2020
1On 11 March 2020, the Company announced a share buyback programme to purchase shares up to a maximum value of £375 million, in order to return the net surplus proceeds
to shareholders arising from the sale of Quilter Life Assurance which had the impact of reducing the share capital of the Company. During the year ended 31 December 2021, the
Company acquired 128.1 million shares (31 December 2020: 118.3 million) for a total consideration of £197 million (December 2020: £153 million) and incurred additional costs of
£3 million (31 December 2020: £4 million). The shares, which have a nominal value of £9 million (31 December 2020: £8 million), have subsequently been cancelled, giving rise to a
capital redemption reserve by the same value as required by the Companies Act 2006. At 31 December 2021, the committed remaining share buyback for which a legally binding
instruction had been provided by the Board, of £26 million (31 December 2020: £22 million, 31 December 2019: £nil), was accrued as a liability. The increase in the liability in the
year of £4 million (31 December 2020: £22 million) was recognised in retained earnings.
1,495
149
125
42
1
8
The notes on pages 166 to 239 form an integral part of these consolidated financial statements.
Quilter Annual Report 2021
163
Strategic ReportGovernance ReportFinancial statementsOther information Consolidated statement of financial position
At 31 December 2021
Assets
Goodwill and intangible assets
Property, plant and equipment
Investments in associated undertakings
Contract costs
Loans and advances
Financial investments
Deferred tax assets
Current tax receivable
Trade, other receivables and other assets
Derivative assets
Cash and cash equivalents
Total assets
Equity and liabilities
Equity
Ordinary Share capital
Ordinary Share premium reserve
Capital redemption reserve
Merger reserve
Share-based payments reserve
Other reserves
Retained earnings
Total equity
Liabilities
Investment contract liabilities
Third-party interests in consolidated funds
Provisions
Deferred tax liabilities
Current tax payable
Borrowings and lease liabilities
Trade, other payables and other liabilities
Contract liabilities
Derivative liabilities
Total liabilities
Total equity and liabilities
31 December
2021
£m
31 December
2020
£m
Notes
14
15
23
16
17
29(a)
29(c)
22
18
24
25(a)
25(a)
25(a)
25(b)
26
27
28
29(b)
29(c)
30
31
32
18
457
131
2
9
29
47,565
88
–
381
14
2,064
556
142
1
413
219
63,274
78
24
701
43
1,921
50,740
67,372
116
58
17
25
42
(1)
1,482
1,739
41,071
6,898
93
139
2
299
484
–
15
49,001
50,740
125
58
8
149
42
1
1,495
1,878
57,407
6,513
77
106
1
319
672
379
20
65,494
67,372
The financial statements on pages 161 to 239 were approved by the Board of Directors on 9 March 2022 and signed on its behalf by
Paul Feeney
Chief Executive Officer
Mark Satchel
Chief Financial Officer
The notes on pages 166 to 239 form an integral part of these consolidated financial statements.
164
Quilter Annual Report 2021
Consolidated statement of cash flows
For the year ended 31 December 2021
The cash flows presented in this statement cover all the Group’s activities (continuing and discontinued operations) and include flows from both
policyholder and shareholder activities. All cash and cash equivalents are available for use by the Group except for cash and cash equivalents
in consolidated funds (as shown in note 24). Cash flows for discontinued operations are shown separately in note 6(d).
Cash flows from operating activities
Cash flows from operating activities
Taxation paid
Total net cash from operating activities
Cash flows from investing activities
Net acquisitions of financial investments
Acquisition of property, plant and equipment
Acquisition of intangible assets
Acquisition of interests in subsidiaries1
Net proceeds/(payments) from the disposal of interests in subsidiaries
Total net cash used in investing activities
Cash flows from financing activities
Dividends paid to ordinary equity holders of the Company
Finance costs on external borrowings
Payment of interest on lease liabilities
Payment of principal of lease liabilities
Repurchase of shares
Repurchase and cancellation of shares2
Total net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash and cash equivalents
Notes
24(b)
15
14(a)
6(e)
13
10(e)
30(b)
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
3,103
(10)
3,093
(2,839)
(13)
–
(7)
218
(2,641)
(89)
(9)
(2)
(10)
–
(197)
(307)
145
1,921
(2)
1,473
(28)
1,445
(1,419)
(28)
(4)
(20)
(3)
(1,474)
(81)
(10)
(2)
(14)
(41)
(157)
(305)
(334)
2,253
2
Cash and cash equivalents at end of the year
1The acquisition of interests in subsidiaries balance of £7 million results from contingent consideration payments relating to historical acquisitions (31 December 2020:
£20 million).
2Repurchase and cancellation of shares are in respect of cash movements associated with the share buyback programme. Further details are included within the consolidated
statement of changes in equity.
2,064
24
1,921
The notes on pages 166 to 239 form an integral part of these consolidated financial statements.
Quilter Annual Report 2021
165
Strategic ReportGovernance ReportFinancial statementsOther information Basis of preparation and significant accounting policies
For the year ended 31 December 2021
General information
Quilter plc (the “Company”), a public limited company incorporated in England and Wales and domiciled in the United Kingdom (“UK”), together with
its subsidiaries (collectively, the “Group”) offers investment and wealth management services, long-term savings and financial advice through its
subsidiaries and associates primarily in the UK.
The address of the registered office is Senator House, 85 Queen Victoria Street, London, EC4V 4AB.
1: Basis of preparation
On 31 December 2020, IFRS as adopted by the European Union at that date was brought into UK law and became UK-adopted International Accounting
Standards, with future changes being subject to endorsement by the UK Endorsement Board. Quilter plc transitioned to UK-adopted International
Accounting Standards in its company and Group financial statements on 1 January 2021. This change constitutes a change in accounting framework.
However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework. The financial
statements of Quilter plc for the year ended 31 December 2021 have been prepared in accordance with UK-adopted International Accounting
Standards (“IFRS”) and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
These consolidated financial statements have been prepared on a historical cost basis, except for the revaluation of certain financial instruments,
and are presented in pounds sterling, which is the currency of the primary economic environment in which the Group operates.
The separate financial statements of the Company are on pages 240 to 249. The Company financial statements are prepared in accordance with the
Group’s accounting policies, other than for investments in subsidiaries, which are stated at cost less impairments in accordance with IAS 27 Separate
Financial Statements.
Going concern
The Directors have considered the resilience of the Group, its current financial position, the principal risks facing the business and the effectiveness
of any mitigating strategies which are or could be applied. This included an assessment of capital and liquidity over a three-year planning period
concluding that the Group can withstand a severe but plausible downside scenario for at least the next 12 months after the date of signing the 2021
financial statements. This assessment incorporated a number of stress tests covering a broad range of scenarios, including economic and market
shocks of up to 40% falls in equity markets, mass lapse events, new business growth scenarios and severe business interruption, equivalent to 1-in-50
and 1-in-200 year events. The Group took into consideration risks related to climate change as part of the assessment. As a result, the Directors believe
that the Group is well placed to manage its business risks in the context of the current economic outlook and has sufficient financial resources to
continue in business for a period of at least 12 months from the date of approval of these financial statements and continue to adopt the going concern
basis in preparing the financial statements.
Basis of consolidation
The Group’s consolidated financial statements incorporate the assets, liabilities and the results of the Company and its subsidiaries. Subsidiaries are
those entities, including investment funds, controlled by the Group. More information on how the Group assesses whether it has control over an entity
is provided in accounting policy 5(a). Subsidiaries are consolidated from the date the Group obtains control and are excluded from consolidation from
the date the Group loses control.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with Group policies.
All intercompany transactions, balances and unrealised surpluses and deficits on transactions between Group companies are eliminated on consolidation.
Liquidity analysis of the statement of financial position
The Group’s statement of financial position is in order of liquidity as is permitted by IAS 1 Presentation of Financial Statements. For each asset and liability
line item, those amounts expected to be recovered or settled after more than 12 months after the reporting date are disclosed separately in the notes
to the consolidated financial statements.
Critical accounting estimates and judgements
The preparation of financial statements requires management to exercise judgement in applying the Group’s significant accounting policies and
make estimates and assumptions that affect the reported amounts of net assets and liabilities at the date of the financial statements. The Board Audit
Committee reviews these areas of judgement and estimates and the appropriateness of significant accounting policies adopted in the preparation
of these financial statements.
Critical accounting judgements
The Group’s critical accounting judgements are detailed below and are those that management make when applying the significant accounting policies
and that have the most effect on the net profit and net assets recognised in the Group’s financial statements.
Discontinued operations
Management judgement was applied in the classification of Quilter International (disposed in November 2021) as a discontinued operation.
Management concluded that Quilter International represented a separate major line of business, being the Group’s only major cross-border business
and, as such, met the discontinued operations criteria. Accordingly, the Group restated prior year comparatives. Judgement was also applied in the
recognition of specific ongoing costs to the Group’s continuing operations that will remain in the business after the disposal of Quilter International.
See note 6 for further details.
166
Quilter Annual Report 2021
1: Basis of preparation continued
Critical accounting judgements continued
Recognition of provisions following the sale of Quilter International
Management exercised significant judgement in determining the accounting treatment for a number of provisions in respect of the sale of Quilter
International. The sale requires a series of business activities to be performed over the period of two to three years subsequent to the sale, resulting in
costs to separate the business from the Group. This includes separation from a significant number of IT systems and the migration of data. Provisions
have been established where costs are either contractual obligations resulting from the sale agreement or represent a constructive liability in respect
of ancillary work to separate the businesses. Significant judgement was required to assess whether the costs were directly attributable and incremental
to the sale and whether a legal or constructive obligation existed in order to recognise the provisions. See note 28 for further details.
Recognition of insurance recovery asset in respect of Lighthouse defined benefit pension advice
For Lighthouse DB to DC pension transfer advice provided, management has applied judgement in order to determine whether an asset can be
reasonably estimated, and the measurement of such asset, in relation to an insurance recovery under Lighthouse’s professional indemnity policies
(“PI Policies”). Under the PI Policies, Lighthouse is entitled, subject to the policy terms and limits, to be indemnified for claims and defence costs in
respect of legal liabilities arising in connection with Lighthouse’s DB pension transfer advice activities; however, at the current time the insurers
have not confirmed coverage for legal liabilities. See note 28 for further details.
Critical accounting estimates
The Group’s critical accounting estimates are shown below and involve the most complex or subjective assessments and assumptions, which have a
significant risk of resulting in material adjustments to the net carrying amounts of assets and liabilities within the next financial year. Management uses
its knowledge of current facts and circumstances and applies estimation and assumption setting techniques that are aligned with relevant actuarial and
accounting standards and guidance to make predictions about future actions and events. Actual results may differ from those estimates.
Provision for cost of defined benefit pension advice
A significant portion of the provision required for British Steel DB pension transfer redress was determined based upon calculations performed as part
of the skilled person review for cases upheld, and subsequent formal offers of redress payments made. An estimation of the remainder of the provision
required for cases where a formal offer has yet to be made was based upon those calculations and the suitability assessments of all cases performed
by the skilled person, which are nearing completion. The calculations per case where an offer has been made are based upon FCA guidelines and
modelling performed, and factors including pension transfer value, date of retirement, discount rate and inflation rate assumptions. An estimation
was determined on a similar basis for unsuitable pension advice related to schemes other than the British Steel Pension Scheme, using a methodology
which takes account of recent experience and applying a proportion of transfer value to determine redress payable as an indicative provision.
See note 28 for further details.
Measurement of deferred tax
The estimation of future taxable profits is performed as part of the annual business planning process, and is based on estimated levels of AuMA, which
are subject to a large number of factors including global stock market movements, related movements in foreign exchange rates and net client cash
flow, together with estimates of expenses and other charges. The business plan, adjusted for known and estimated tax sensitivities, is used to
determine the extent to which deferred tax assets are recognised. In general, the Group assesses recoverability based on estimated taxable profits
over a three-year planning horizon. Management has reassessed the sensitivity on the recoverability of deferred tax assets based on the latest forecast
cash flows. See note 29 for further details.
Other principal estimates
The Group’s assessment of goodwill and intangible assets for impairment uses the latest cash flow forecasts from the Group’s three-year business plan.
These forecasts include estimates relating to equity market levels and growth in AuMA in future periods, together with levels of new business growth,
net client cash flow, revenue margins, and future expenses and discount rates (see note 14). Management does not believe that the use of these
estimates has a significant risk of causing a material adjustment to the carrying amount of the assets within the next financial year.
2: New standards, amendments to standards, and interpretations adopted by the Group
There were no new standards or interpretations which became effective from 1 January 2021.
The following amendments to accounting standards became applicable for the current reporting period, with no material impact on the Group’s
consolidated results, financial position or disclosures:
Adopted by the Group from Amendments to standards
1 January 2021
Amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, IFRS 7 Financial
Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases – Interest Rate Benchmark Reform – Phase 2
1 April 2021
Amendments to IFRS 16 Leases – COVID-19-Related Rent Concessions beyond 30 June 2021
Quilter Annual Report 2021
167
Strategic ReportGovernance ReportFinancial statementsOther information Basis of preparation and significant accounting policies
For the year ended 31 December 2021 continued
3: Future standards, amendments to standards, and interpretations not early-adopted in these financial statements
Certain new standards, interpretations and amendments to existing standards have been published by the International Accounting Standards
Board (“IASB”) that are mandatory for the Group’s annual accounting periods beginning on or after 1 January 2022. The Group has not early adopted
these standards, interpretations and amendments, nor does the Group expect these to have a material impact on the Group’s consolidated
financial statements.
– IFRS 17 Insurance contracts
The IASB issued IFRS 17 Insurance Contracts in May 2017 and Amendments to IFRS 17 in June 2020. IFRS 17 will replace its interim predecessor, IFRS 4
Insurance Contracts. IFRS 17 is a comprehensive standard which provides a single accounting model for all insurance contracts. IFRS 17 will replace
a wide range of different accounting practices previously permitted, improving transparency and enabling investors and regulators to understand
and compare the financial position and performance of an insurer, irrespective of where they are based geographically. The standard, including
the June 2020 amendments, is yet to be endorsed by the UK Endorsement Board. The effective date of IFRS 17 is 1 January 2023.
The Group completed the sale of QLA to ReAssure on 31 December 2019 and Quilter International to Utmost Group on 30 November 2021.
Following these disposals, the impact of IFRS 17 is significantly reduced for the Group and therefore the impact of IFRS 17 is not expected
to be material.
4: Significant changes in the year
Disposal of Quilter International
On 30 November 2021, the Group completed the sale of Quilter International to Utmost Group for consideration of £481 million. Quilter International
has been classified as a discontinued operation and the comparative amounts in the Group’s financial statements have been restated accordingly.
Further details of the Group’s discontinued operations and assets and liabilities disposed of are included in note 6.
New segmentation
The Group determines and presents operating segments based on the information that is provided internally to the Group’s Chief Operating Decision
Maker (“CODM”). In assessing the Group’s operating segments, the CODM considered the nature of the services provided, product offerings, customer
bases, operating and distribution channels amongst other factors.
As part of the Group’s strategic ambitions to drive growth, and following the disposal of Quilter International, the CODM agreed to reorganise the Group
into two new client-focused segments: Affluent and High Net Worth. Affluent encompasses the financial planning businesses, Quilter Financial Planning,
the Quilter Investment Platform and Quilter Investors, the multi-asset investment solutions business. High Net Worth includes the discretionary fund
management business, Quilter Cheviot, together with Quilter Private Client Advisers. The new segments replace the segments reported in the 2020
Annual Report: Advice and Wealth Management and Wealth Platforms. Comparatives have been restated as appropriate to reflect the new segmentation.
5: Significant accounting policies
The Group’s significant accounting policies are described below. There have been no changes to the Group’s significant accounting policies as a result
of changes in accounting standards during the year. The accounting policies disclosed in these notes have been consistently applied throughout the
current and prior financial year.
5(a): Group accounting
Subsidiaries
Subsidiary undertakings are those entities (investees) controlled by the Group. The Group controls an investee if, and only if, the Group has all of the
following three elements of control:
– power over the investee;
– exposure or rights to variable returns from its involvement with the investee; and
– the ability to affect those returns through its power over the investee.
For operating entities, this usually arises with a shareholding in the entity of 50% or more. The Group also consolidates certain of its interests in
open-ended investment companies (“OEICs”), unit trusts, mutual funds and similar investment vehicles (collectively “investment funds”). Where,
as is often the case with investment funds, voting or similar rights are not the dominant factor in deciding who controls the investee, other factors
are considered in the control assessment. These are described in more detail below.
The Group continually assesses any changes to facts and circumstances to determine, in the context of the three elements of control listed above,
whether it still controls investees and is required to consolidate them.
Associates
Associates are entities in which the Group holds an interest and over which it has significant influence but not control and are accounted for using
the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the investee.
The Group has classified one entity, 360 Dot Net Limited, as an associate company in the prior and current year.
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5(a): Group accounting continued
Investment funds
The Group invests in a wide range of investment funds such as OEICs and unit trusts generally in respect of its unit-linked investment contracts
where investments are made to match the investment choices of its clients. For some of these funds, it also acts as fund manager. These funds invest
predominantly in equities, bonds, cash and cash equivalents. The Group holds interests in these investment funds mainly through the receipt of fund
management fees, in the case where the Group acts as fund manager, which provide a variable return based on the value of the funds under
management and other criteria, and in the case of third-party funds where fund performance has an impact on fund-based fees within unit-linked
investment contracts and other similar client investment products. Where the Group acts as fund manager it may also hold investments in the
underlying funds, through acquiring units or shares. Where these investments are held in unit-linked funds, the Group has a secondary exposure
to variable returns through the management fees that it deducts from unit-linked policyholders’ account balances. The Group’s percentage ownership
can fluctuate from day to day according to the Group’s participation in them as clients’ underlying investment choices change.
When assessing control of investment funds, the Group considers the purpose and design of the fund, the scope of its decision-making authority,
including its ability to direct relevant activities and to govern the operations of a fund so as to obtain variable returns from that fund and its ability to use
its power to affect these returns, both from the perspective of an investor and an asset manager. In addition, the Group assesses rights held by other
parties including substantive removal (“kick-out”) rights that may affect the Group’s ability to direct relevant activities.
On consolidation, the interests of parties other than the Group are classified as a liability in the Group’s statement of financial position and are
described as “Third-party interests in consolidated funds”. Such interests are not recorded as non-controlling interests (“NCIs”) as they meet the liability
classification requirement set out in IAS 32 Financial Instruments: Presentation. These liabilities are regarded as current, as they are repayable on demand,
although it is not expected that they will be settled in a short time period.
Business combinations
The Group is required to use the acquisition method of accounting for business combinations. Business combinations are accounted for at the date
that control is achieved (the acquisition date). The cost of a business combination is measured as the aggregate of the fair values (at the date of
exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Deferred
and contingent consideration relating to acquisitions is recognised as a liability on the date of acquisition.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are
recognised at their fair value at the acquisition date.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports
provisional amounts. Where provisional amounts are reported these are adjusted during the measurement period which extends up to a maximum of
12 months from the acquisition date. Additional assets or liabilities may also be recognised during this period, to reflect any new information obtained
about the facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets of the acquired entity
at the date of acquisition. Acquisition-related costs are expensed as incurred.
Upon disposal, the Group derecognises a subsidiary or disposal group on the date on which control passes. The consolidated income statement
includes the results of a subsidiary or disposal group up to the date of disposal. The difference between the proceeds from the disposal of a subsidiary
undertaking and its carrying amount as at the date of disposal, including the cumulative amount of any related exchange differences that are
recognised in the foreign currency translation reserve, is recognised in the consolidated income statement as the gain or loss on disposal of the
subsidiary undertaking.
Common control combinations
Merger accounting is used by the Group for common control combinations, which are transactions between entities that are ultimately controlled by
the same party or parties. This method treats the merged entities as if they had been combined throughout the current and comparative accounting
periods. Merger accounting principles for these combinations result in the recognition of a merger reserve in the consolidated statement of financial
position, being the difference between the nominal value of any new shares issued by the Parent Company for the acquisition of the shares of the
subsidiary and the subsidiary’s Net Asset Value (“NAV”). Such transactions attract merger relief under section 612 of the Companies Act 2006.
5(b): Fair value measurement
The Group uses fair value to measure the majority of its assets and liabilities. Fair value is a market-based measure and is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For a financial
instrument, the best evidence of fair value at initial recognition is normally the transaction price, which represents the fair value of the consideration
given or received.
Where observable market prices in an active market, such as bid or offer (ask) prices are unavailable, fair value is measured using valuation techniques
based on the assumptions that market participants would use when pricing the asset or liability. If an asset or a liability measured at fair value has a bid
or an offer price, the price within the bid-offer spread that is most representative of fair value is used as the basis of the fair value measurement.
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5: Significant accounting policies continued
5(b): Fair value measurement continued
The quality of the fair value measurement for financial instruments is disclosed by way of the fair value hierarchy, whereby Level 1 represents a quoted
market price for identical financial assets and liabilities, Level 2 financial assets and liabilities are valued using inputs other than quoted prices in active
markets included in Level 1, either directly or indirectly and Level 3 whereby financial assets and liabilities are valued using valuation techniques where
one or more significant inputs are unobservable.
Classifying financial instruments into the three levels outlined above provides an indication about the reliability of inputs used in determining fair value.
More information is provided in note 20.
5(c): Product classification
The Group’s life assurance contracts included in the Affluent segment are categorised as investment contracts, in accordance with the classification
criteria set out in the paragraph below.
Investment contracts
Investment contracts do not meet the IFRS definition of an insurance contract as they do not transfer significant insurance risk from the policyholder
to the insurer. Unit-linked investment contracts are separated into two components, being an investment management services component and a
financial liability. The financial liability component is designated at fair value through profit or loss (“FVTPL”) as it is managed on a fair value basis, and its
value is directly linked to the market value of the underlying portfolio of assets. The Group does not directly benefit economically from returns from the
assets held to match policyholder liabilities, apart from secondary exposure to future annual management fees that the Group expects to receive over
the life of the policy.
5(d): Fee income and other income from service activities
Fee income and other income from service activities represent the fair value of services provided, net of value added tax. Revenue is only recognised
to the extent that management is satisfied that it is highly probable that no significant reversal of the revenue recognised will be required when
uncertainties are resolved. In circumstances where refunds are expected on a portion of the income, including indemnity commission on policies sold,
an estimate of the reduction of revenue is made and charged to the income statement at the point of sale, based upon assumptions determined from
historical experience.
Premium-based fees
This relates to non-refundable fees taken on receipt of clients’ investments and recognised on receipt over the life of the contract, in line with the
performance obligation associated with the contract in respect of the administration of the underlying client records and client benefits. Where fees
are received, either at inception or over an initial period for services not yet provided, the income is deferred and recognised as contract liabilities on
the statement of financial position and released to the income statement as services are provided over the lifetime of the contract (see note 32 for
further information).
In addition, this also includes fees in respect of advice provided to clients when the advice has been provided to the client and the financial adviser’s
performance obligation has been fully delivered. Accordingly, fee income is recognised at the inception of the financial product sold.
Fund-based fees
This is periodic fee income based on the market valuation of the Group’s investment contracts. It is calculated and recognised on a daily basis in line
with the provision of investment management services.
For the year ended 31 December 2020, to correct a misclassification of fee rebates, the Group has reduced Fee and commission expenses, and other
acquisition costs by £9 million with a corresponding £9 million reduction in Fee income and other income from service activities. The comparative
figures for 2020 have been restated accordingly in the income statement and related notes in order to satisfy the presentational requirements of IFRS
with respect to revenue and expenditure. There is no impact on the Group’s profitability or net assets.
Fixed fees
This is periodic fee income which is fixed in value according to underlying contract terms and relates to the provision of services and transactional
dealing fees. It is recognised on provision of the transaction or service.
Surrender fees
Surrender fee income relates to client charges received on the surrender of an investment contract or insurance contract, which is based on the value
of the policy and recognised on surrender of the policy.
Other fee and commission income
This includes charges taken from unit-linked funds to meet future policyholder tax liabilities. Depending on the nature of the tax liability, the charges are
either recognised at the point a transaction occurs on the unit-linked fund, or annually. This also includes fee and commission income within
consolidated funds’ income statements.
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5(e): Investment return
Investment return comprises two elements (a) investment income and (b) realised and unrealised gains and losses on investments held at FVTPL.
Investment income
Investment income includes dividends on equity securities which are recorded as revenue on the ex-dividend date and interest income which is
recognised using the effective interest rate method which allocates interest and other finance costs at a constant rate over the expected life of the
financial instrument.
Realised and unrealised gains and losses
A gain or loss on a financial investment is only realised on disposal or transfer and represents the difference between the proceeds received,
net of transaction costs, and its original cost (or amortised cost). Unrealised gains or losses, arising on investments which have not been disposed
or transferred, represent the difference between carrying value at the year end and the carrying value at the previous year end or purchase value
(if this occurs during the year), less the reversal of previously recognised unrealised gains or losses in respect of disposals made during the year.
Gains and losses resulting from changes in both market value and foreign exchange on investments classified at FVTPL are recognised in the
consolidated income statement in the period in which they occur.
For the year ended 31 December 2020, to correct an understatement of revenue and expenditure in respect of third-party interests in consolidated
funds, the Group has increased investment return from consolidated funds by £21 million with a corresponding £21 million increase in the change
in third-party interests in consolidated funds expense. The understatement arose due to an omission in information provided by an external party.
The comparative figures for 2020 have been restated accordingly in the income statement and related notes in order to satisfy the presentational
requirements of IFRS with respect to revenue and expenditure. There is no impact on the Group’s profitability or net assets.
5(f): Premiums
Premiums receivable under insurance contracts are shown in the income statement gross of commission and exclude sales-based taxes and levies.
For regular (and recurring) premium contracts, receivables are recognised when payments are due. Premiums in respect of other insurance contracts
are recognised in the income statement when receivable, apart from premiums received in respect of unit-linked insurance contracts (see below).
Where policies lapse due to non-receipt of premiums, then all the related premium income accrued but not received from the date they are deemed
to have lapsed is offset against premiums.
Premiums received in respect of unit-linked insurance contracts are recognised when the corresponding liability to the policyholder is established.
For single premium business, this is the date from which the policy is effective.
5(g): Deferred acquisition costs and contract costs
Investment contracts
Incremental costs, including fee and commission expenses, that are directly attributable to securing either unit-linked investment contracts or other
asset management services are deferred and recognised as contract costs. Contract costs are linked to the contractual right to benefit from providing
investment management services; they are therefore amortised through the income statement consistent with the transfer to the customer of the
services to which the contract relates.
Insurance contracts
Incremental costs directly attributable to securing an insurance contract, such as initial commission and the costs of obtaining and processing such
business are deferred and a deferred acquisition cost (“DAC”) asset recognised, to the extent that they are expected to be recovered out of future margins.
Insurance DAC is amortised as an expense on a straight-line basis, adjusted for expected persistency, over the expected life of the contract, as the
services are provided (equal service provision assumed) but subject to a restriction whereby it is no longer than the period in which such costs are
expected to be recoverable out of future margins.
At the end of each reporting period, contract costs and DAC are reviewed for recoverability, by category of business, against future margins from the
related contracts. They are impaired in the income statement when they are no longer considered to be recoverable.
5(h): Investment contract liabilities
The majority of the Group’s investment contracts are unit-linked contracts. At inception, investment contract liabilities for unit-linked business are
classified as financial liabilities and measured at FVTPL. For these contracts, the fair value liability is equal to the total value of units allocated to the
policyholders, based on the bid price of the underlying assets in the fund. The FVTPL classification reflects the fact that the matching investment
portfolio that backs the unit-linked liabilities is managed, and its performance evaluated, on a fair value basis.
Contributions received on investment contracts are treated as policyholder deposits and credited directly to investment contract liabilities on the
statement of financial position, as opposed to being reported as revenue in the consolidated income statement. Withdrawals paid out to policyholders
on investment contracts are treated as a reduction to policyholder deposits, reducing the investment contract liabilities on the statement of financial
position, as opposed to being recognised as expenses in the consolidated income statement. This practice is known as deposit accounting.
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5: Significant accounting policies continued
5(i): Financial instruments (other than derivatives)
Financial instruments cover a wide range of financial assets, including financial investments, trade receivables and cash and cash equivalents and
certain financial liabilities, including investment contract liabilities, trade payables, and borrowings. Derivatives, which are also financial instruments, are
covered by accounting policy 5(k). Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group
becomes party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to receive cash
flows have expired or been forfeited by the Group. A financial liability is derecognised when the liability is extinguished.
The Group assesses the objective of a business model in which an asset is held at a portfolio level because this best represents the way the business
is managed and information is reported to management. The assessment considers the stated portfolio policies and objectives. The Group determines
its strategy in holding the financial asset, particularly considering whether the Group earns contractual interest revenue, for example to match the
duration of financial assets to the duration of liabilities that are funding those assets or to realise cash flows through the sale of the assets. The
frequency, volume and timing of sales in prior periods may be reviewed, along with the reasons for such sales and expectations about future sales
activity. These factors enable management to determine which financial assets should be measured at FVTPL.
Initial measurement
A financial asset (unless it is a trade receivable without a significant financing component that is initially measured at the transaction price) is initially
measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition.
Subsequent measurement
The classification of financial assets depends on (i) the purpose for which they were acquired, (ii) the business model in which the financial asset is
managed, and (iii) its contractual cash flow characteristics. Two categories are applicable to the Group’s financial assets: FVTPL and amortised cost. This
classification determines the subsequent measurement basis. The following accounting policies apply to the subsequent measurement of financial assets.
Measurement basis
Accounting policies
FVTPL
Amortised cost
These financial assets are subsequently measured at fair value. Net gains and losses, including interest and
dividend income, are recognised in profit or loss.
These financial assets are subsequently measured at amortised cost using the effective interest rate method.
The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and
impairments are recognised in profit or loss. Any gain or loss on de-recognition is recognised in profit or loss.
Amortised cost
A financial asset is measured at amortised cost if it meets both of the following conditions and unless recognised as FVTPL on initial recognition applying
the Fair Value Option (see below):
– the asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
– the contractual terms of the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount
outstanding on specified dates.
For the purposes of this assessment, principal is defined as the fair value of the financial asset on initial recognition. Interest is defined as consideration
for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other
basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.
All other financial assets that are not measured at amortised cost are classified and measured at FVTPL.
Financial investments
Derivative financial assets (the majority of which are as a result of the consolidation of funds, as described in note 5(a)) are classified and measured at
FVTPL. In addition, on initial recognition, the Group may irrevocably designate a financial asset at FVTPL that otherwise meets the requirements to be
measured at amortised cost, if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise (the Fair Value Option).
The Group’s interests in pooled investment funds, equity securities and debt securities are mandatorily at FVTPL, as they are part of groups of financial
assets which are managed and whose performance is evaluated on a fair value basis. These investments are recognised at fair value initially and
subsequently, with changes in fair value recognised in investment return in the consolidated income statement.
Fixed-term deposits with a maturity profile exceeding three months are categorised as financial investments and are measured at amortised cost.
The Group recognises purchases and sales of financial investments on trade date, which is the date that the Group commits to purchase or sell the
assets. The costs associated with investment transactions are included within expenses in the consolidated income statement.
Loans and advances
Loans with fixed maturities, including policyholder loans, are recognised when cash is advanced to borrowers or policyholders. Policyholder loans are
interest free and are mandatorily at FVTPL since they are taken from the policyholder’s unit-linked account and thereby matched to underlying
unit-linked liabilities held at FVTPL, which are unaffected by the transaction. Other loans and advances are carried at amortised cost using the effective
interest rate method. These assets are subject to the impairment requirements outlined below.
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5(i): Financial instruments (other than derivatives) continued
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits, money market collective investment funds and other short-term deposits with
an original maturity of three months or less.
Cash and cash equivalents held within money market collective investment funds are classified as FVTPL. All other cash and cash equivalents are
classified as amortised cost which means they are initially recognised at fair value and subsequently carried at amortised cost using the effective interest
method and are subject to the impairment requirements outlined below. The carrying amount of cash and cash equivalents, other than money market
collective investment funds which are measured at fair value, approximates to their fair value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. At inception,
investment contract liabilities for unit-linked business are recognised as financial liabilities and measured at FVTPL. Other financial liabilities, including
the Group’s borrowings and trade payables, are measured at amortised cost using the effective interest method.
Trade payables and receivables
Trade payables and receivables are classified at amortised cost. Due to their short-term nature, their carrying amount is considered to be the same
as their fair value.
Investments in subsidiaries
Parent Company investments in subsidiary undertakings are initially stated at cost. Subsequently, investments in subsidiary undertakings are stated at
cost less any provision for impairment. An investment in a subsidiary is deemed to be impaired when its carrying amount is greater than its estimated
recoverable amount, and there is evidence to suggest that the impairment occurred subsequent to the initial recognition of the asset in the financial
statements. All impairments are recognised in the Parent Company income statement as they occur.
Impairment of financial assets
The expected loss accounting model for credit losses applies to financial assets measured at amortised cost, but not to financial assets at FVTPL.
Financial assets at amortised cost include trade receivables, cash and cash equivalents (excluding money market collective investment funds which
are measured at fair value), fixed-term deposits and loans and advances.
Credit loss allowances are measured on each reporting date according to a three-stage expected credit loss (“ECL”) impairment model:
Performing financial assets:
Stage 1
From initial recognition of a financial asset to the date on which an asset has experienced a significant increase in credit risk relative to its initial
recognition, a stage 1 loss allowance is recognised equal to the credit losses expected to result from its default occurring over the earlier of the next
12 months or its maturity date (“12-month ECL”).
Stage 2
Following a significant increase in credit risk relative to the initial recognition of the financial asset, a stage 2 loss allowance is recognised equal to the
credit losses expected from all possible default events over the remaining lifetime of the asset (“Lifetime ECL”).
The assessment of whether there has been a significant increase in credit risk requires considerable judgement, based on the lifetime probability
of default (“PD”). Stage 1 and 2 allowances are held against performing loans; the main difference between stage 1 and stage 2 allowances is the time
horizon. Stage 1 allowances are estimated using the PD with a maximum period of 12 months, while stage 2 allowances are estimated using the PD over
the remaining lifetime of the asset.
Impaired financial assets:
Stage 3
When a financial asset is considered to be credit-impaired, the allowance for credit losses (“ACL”) continues to represent lifetime expected credit losses.
However, interest income is calculated based on the amortised cost of the asset, net of the loss allowance, rather than its gross carrying amount.
Application of the impairment model
The Group applies the ECL model to all financial assets that are measured at amortised cost:
– Trade receivables, to which the simplified approach prescribed by IFRS 9 is applied. This approach requires the recognition of a Lifetime ECL
allowance on day one and thereafter.
– Loans, cash and cash equivalents, and fixed-term deposits at amortised cost, to which the general three-stage model (described above) is applied,
whereby a 12-month ECL is recognised initially and the balance is monitored for significant increases in credit risk which would trigger the recognition
of a Lifetime ECL allowance.
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For the year ended 31 December 2021 continued
5: Significant accounting policies continued
5(i): Financial instruments (other than derivatives) continued
ECLs are a probability-weighted estimate of credit losses. ECLs for financial assets that are not credit-impaired at the reporting date are measured as
the present value of all cash shortfalls (i.e. the difference between the cash flows due in accordance with the contract and the cash flows that the Group
expects to receive). ECLs for financial assets that are credit-impaired at the reporting date are measured as the difference between the gross carrying
amount and the present value of estimated future cash flows. ECLs are discounted at the effective interest rate of the financial asset. The maximum
period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.
The measurement of ECLs considers information about past events and current conditions, as well as supportable information about future events
and economic conditions. The Group has implemented its impairment methodology for estimating the ACL, taking into account forward-looking
information in determining the appropriate level of allowance. In addition, it has identified indicators and set up procedures for monitoring for
significant increases in credit risk.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is credit-impaired
when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a
financial asset is credit-impaired includes events such as significant financial difficulty of the borrower or issuer, a breach of contract such as a default or
past due event or the restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider. The assumption that the
credit risk for balances over 30 days significantly increases has been rebutted on the basis that some balances will exceed 30 days in the normal course
of the settlement cycle, and therefore, there is no increase in the credit risk.
Presentation of impairment
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.
Write-offs
Loans and debt securities are written off (either partially or in full) when there is no realistic prospect of the amount being recovered. This is generally
the case when the Group concludes that the borrower does not have assets or sources of income that could generate sufficient cash flows to repay
the amounts subject to the write-off.
5(j): Contract assets
Contract assets are classified as non-financial. Due to their short-term nature, their carrying amount is considered to be the same as their fair value.
The expected loss accounting model for credit losses applies to contract assets. The Group applies the ECL model to contract assets, which are
measured at amortised cost. The simplified approach prescribed by IFRS 9 is applied to contract assets. This approach requires the recognition
of a Lifetime ECL allowance on day one and thereafter.
5(k): Derivatives
The only derivatives recognised in the Group’s statement of financial position are as a result of the consolidation of funds (described in note 5(a)).
Management determines the classification of derivatives at initial recognition and classifies derivatives as mandatorily at FVTPL. All derivatives are
carried as assets when their fair value is positive and as liabilities when their fair value is negative.
5(l): Employee benefits
Pension obligations
The Group operates two types of pension plans which have been established for eligible employees of the Group:
– Defined contribution schemes where the Group makes contributions to members’ pension plans but has no further payment obligations once
the contributions have been paid.
– Defined benefit plans which provide pension payments upon retirement to members as defined by the plan rules. The Group has funded these
liabilities by ring-fencing assets in trustee-administered funds.
Defined contribution pension obligation
Under a defined contribution plan, the Group’s legal or constructive obligation is limited to the amount it agrees to contribute to a pension fund
and there is no obligation to pay further contributions if the fund does not hold sufficient assets to pay benefits. Contributions in respect of defined
contribution schemes for current service are expensed in the income statement as staff costs and other employee-related costs when incurred.
Defined benefit pension obligation
A defined benefit pension plan typically defines the amount of pension benefit that an employee will receive on retirement. For these plans, the Group’s
defined benefit obligation is calculated by independent actuaries using the projected unit credit method, which measures the pension obligation as the
present value of estimated future cash outflows. The discount rate used is determined based on the yields for investment grade corporate bonds that
have maturity dates approximating to the terms of the Group’s obligations. Plan assets are measured at their fair value at the reporting date. The net
surplus or deficit of the defined benefit plan is recognised as an asset or liability in the statement of financial position and represents the present value
of the defined benefit obligation at the end of the reporting period less the fair value of the plan assets.
An asset is recognised only where there is an unconditional right to future benefits. The current and past service cost curtailments and settlements
are charged to other expenses in the income statement.
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5(l): Employee benefits continued
Remeasurements which comprise gains and losses as a result of experience adjustments and changes in actuarial assumptions, the actual return on
plan assets (excluding interest) and the effect of the asset ceiling are recognised immediately in other comprehensive income in the period in which they
occur. Remeasurements are not reclassified to the income statement in subsequent periods. Administration costs (other than the costs of managing
plan assets) are recognised in the income statement when the service is provided.
When the benefits of a plan are changed, or when a plan is curtailed, the portion of the changed benefit related to past service by employees,
or the gain or loss on curtailment, is recognised immediately in the income statement when the plan amendment or curtailment occurs.
Employee share-based payments
The Group operates a number of share incentive plans for its employees. These involve an award of shares or options in the Group (equity-settled
share-based payments). The Group has not granted awards under cash-settled plans in the current or prior year.
The Group’s incentive plans have conditions attached before the employee becomes entitled to the award. These can be performance and/or service
conditions (vesting conditions) or conditions that are often wholly within the control of the employee, for example where the employee has to provide
funding during the vesting period, which is then used to exercise share options (non-vesting condition).
Performance conditions may be market-based or non-market-based. Market-based performance conditions are those related to an entity’s equity,
such as achieving a specified share price or target based on a comparison of the entity’s share price with an index of share prices. Non-market
performance conditions are those related to an entity’s profit or revenue targets, an example of which would be Earnings per Share (“EPS”). Market-
based performance conditions and non-vesting conditions are taken into account when estimating the fair value of the share or option awards at the
measurement date. The fair value of the share awards or options is not adjusted to take into account non-market performance features. These are
taken into consideration by adjusting the number of equity instruments in the share-based payment measurement and this adjustment is made each
period until the equity instruments vest.
The fair value of share-based payment awards granted is recognised as an expense in the income statement over the vesting period which accords
with the period for which related services are provided by the employee. A corresponding increase in equity is recognised for equity-settled plans.
For equity-settled plans, the fair value is determined at grant date and not subsequently re-measured.
At each period end, the Group reassesses the number of equity instruments expected to vest and recognises any difference between the revised
and original estimate in the income statement with a corresponding adjustment to the share-based payments reserve in equity.
At the time the equity instruments vest, the amount recognised in the share-based payments reserve in respect of those equity instruments
is transferred to retained earnings.
5(m): Tax
Current tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date and
any adjustment to income tax payable in respect of previous years. Current tax is charged or credited to the income statement, except when it relates
to items recognised directly in equity or in other comprehensive income.
Deferred tax
Deferred taxes are calculated according to the statement of financial position method, based on temporary differences between the tax base of assets
and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is calculated at the tax rates that are expected to apply
in the period when the liability is settled or the asset is realised.
Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences can be utilised.
Deferred tax is charged or credited to the income statement, except when it relates to items recognised directly in equity or in other comprehensive
income. In certain circumstances, as permitted by accounting standards and guidance, deferred tax balances are not recognised. In particular, where
the liability relates to the initial recognition of goodwill, or transactions that are not a business combination and at the time of their occurrence affect
neither accounting nor taxable profit. Note 29 includes further detail of circumstances in which the Group does not recognise temporary differences.
Policyholder tax
Certain products are subject to tax on the policyholder investment returns. This ‘policyholder tax’ is an element of the Group’s total tax expense.
To make the tax expense more meaningful, tax attributable to policyholder returns and tax attributable to equity holders’ profits is shown separately.
The tax attributable to policyholder returns is the amount payable in the year plus the movement of amounts expected to be payable in future years.
The remainder of the tax expense is attributed to shareholders as tax attributable to equity holders’ profits.
Quilter Annual Report 2021
175
Strategic ReportGovernance ReportFinancial statementsOther information Basis of preparation and significant accounting policies
For the year ended 31 December 2021 continued
5: Significant accounting policies continued
5(n): Goodwill and intangible assets
The recognition of goodwill arises on the acquisition of a business and represents the premium paid over the fair value of the Group’s share of the
identifiable assets and liabilities acquired at the date of acquisition. Intangible assets include intangible assets initially recognised as part of a business
combination, purchased assets and internally generated assets, such as software development costs related to amounts recognised for in-house
systems development.
Goodwill and goodwill impairment
Goodwill arising on the Group’s investments in subsidiaries is shown as a separate asset, while that on associates, where it arises, is included within
the carrying value of those investments. Goodwill is recognised as an asset at cost at the date when control is achieved (the acquisition date) and is
subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to annual impairment reviews.
Goodwill is allocated to one or more cash-generating units (“CGUs”) expected to benefit from the synergies of the combination, where the CGU
represents the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or
groups of assets. Goodwill is reviewed for impairment at least annually, as a matter of course even if there is no indication of impairment, and whenever
an event or change in circumstances occurs which indicates a potential impairment. For impairment testing, the carrying value of goodwill is compared
to the recoverable amount. The recoverable amount is the higher of value-in-use and the fair value less costs of disposal. Any impairment loss is
recognised immediately in profit or loss and is not subsequently reversed.
On disposal of an operation within a group of CGUs to which goodwill has been allocated, the goodwill associated with that operation is included in the
carrying amount of the operation when determining the gain or loss on disposal. It is measured based on the relative values of the operation disposed
of and the portion of the CGU retained.
Intangible assets acquired as part of a business combination
Intangible assets acquired as part of a business combination are recognised where they are separately identifiable and can be measured reliably.
Acquired intangible assets consist primarily of contractual relationships such as customer relationships and distribution channels. Such items are
capitalised at their fair value, represented by the estimated net present value of the future cash flows from the relevant relationships acquired at the
date of acquisition. Brands and similar items acquired as part of a business combination are capitalised at their fair value based on a ‘relief from royalty’
valuation methodology.
Subsequent to initial recognition, acquired intangible assets are measured at cost less amortisation and any recognised impairment losses.
Amortisation is recognised at rates calculated to write off the cost or valuation less estimated residual value, using a straight-line method over their
estimated useful lives as set out below:
8 years
– Distribution channels
8-10 years
– Customer relationships
5 years
– Brands
The economic lives are determined by considering relevant factors such as usage of the asset, product life cycles, potential obsolescence, competitive
position and stability of the industry. The amortisation period is re-evaluated at the end of each financial year.
Internally developed software
There are a number of factors taken into account when considering whether internally developed software meets the recognition criteria in IAS 38
Intangible Assets. Where, for example, a third-party provider retains ownership of the software, this will not meet the control criterion in the standard
(i.e. the power to obtain benefits from the asset) and the costs will be expensed as incurred.
Where it is capitalised, internally developed software is held at cost less accumulated amortisation and impairment losses. Such software is recognised
in the statement of financial position if, and only if, it is probable that the relevant future economic benefits attributable to the software will flow to the
Group and its cost can be measured reliably.
Costs incurred in the research phase are expensed, whereas costs incurred in the development phase are capitalised, subject to meeting specific
criteria, as set out in the relevant accounting standards and guidance, the main one being that future economic benefits can be identified as a result
of the development expenditure. Amortisation is charged to profit or loss on a straight-line basis over the estimated useful lives of the relevant
software, which range between three and five years, depending on the nature and use of the software.
Subsequent expenditure
Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which
it relates. All other expenditure is expensed as incurred.
176
Quilter Annual Report 2021
5: Significant accounting policies continued
5(n): Goodwill and intangible assets continued
Impairment testing for intangible assets
For intangible assets with finite lives, impairment charges are recognised where evidence of impairment is observed. Indicators of impairment can
be based on external factors, such as significant adverse changes to the asset as part of the overall business environment and internal factors, such
as worse than expected performance reflected in the Group’s three-year Business Plan. If an indication of impairment exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). The recoverable amount is calculated as the higher of fair value
less costs to sell and value in use. If the recoverable amount of an intangible asset is estimated to be less than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense in the income statement immediately, unless the
relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an intangible asset is not
yet available for use, it is subject to an annual impairment test by comparing the carrying value with the recoverable amount. The recoverable amount
is estimated by considering the ability of the asset to generate sufficient future economic benefits to recover the carrying value.
5(o): Assets and liabilities held for sale and discontinued operations
Assets (and disposal groups) are classified as held for sale if their carrying amount is expected to be recovered through a sales transaction rather
than through continuing use. This condition is regarded as having been met only when the sale is highly probable and the asset (or disposal group) is
available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition
as a completed sale within one year of the date of classification. Assets and liabilities held for sale are presented separately in the consolidated
statement of financial position.
Assets and liabilities (and disposal groups) classified as held for sale are measured at the lower of their carrying amount and their fair value less costs to
sell. No depreciation or amortisation is charged on a non-current asset while classified as held for sale or while part of a disposal group classified as held
for sale.
The Group classifies areas of the business as discontinued operations where they have been disposed of or are classified as held for sale at the year
end, which either represent a separate major line of business or geographical area or are part of a plan to dispose of one or are subsidiaries acquired
exclusively with a view to resale.
When an asset (or disposal group) ceases to be classified as held for sale, the individual assets and liabilities cease to be shown separately in the
statement of financial position at the end of the year in which the classification changes. Comparatives are not restated. If the line of business was
previously presented as a discontinued operation and subsequently ceases to be classified as held for sale, profit and loss and cash flows of the
comparative period are restated to show that line of business as a continuing operation.
5(p): Provisions and contingent liabilities
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more probable than not that an
outflow of economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Provisions are
measured at management’s best estimate of the expenditure required to settle the obligation at the reporting date. Where the effect of the time value
of money is material, provisions are discounted and represent the present value of the expected expenditure. Provisions are not recognised for future
operating costs or losses.
The Group recognises specific provisions where they arise for the situations outlined below:
– Client compensation and related costs, when the Group compensates clients in the context of providing fair customer outcomes.
– Onerous contracts, when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting the
obligations under the contract.
– Corporate restructuring, only if the Group has approved a detailed formal plan and raised a valid expectation among those parties directly affected,
that the plan will be carried out either by having commenced implementation or by publicly announcing the plan’s main features. Such provisions
include the direct expenditure arising from the restructuring, such as employee termination payments but not those costs associated with the
ongoing activities of the Group.
– Legal uncertainties and the settlement of other claims.
– Property provisions, where the Group has an obligation to restore a property to its original condition at the end of the lease.
Contingent liabilities are possible obligations of the Group of which the timing and amount are subject to significant uncertainty. Contingent liabilities
are not recognised in the consolidated statement of financial position, unless they are assumed by the Group as part of a business combination. They
are, however, disclosed, unless they are considered to be remote. If a contingent liability becomes probable and the amount can be reliably measured
it is no longer treated as contingent and it is recognised as a liability.
Contingent assets, which are possible benefits to the Group, are only disclosed if it is probable that the Group will receive the benefit. If such a benefit
becomes virtually certain, it is no longer considered contingent and is recognised on the consolidated statement of financial position as an asset.
Quilter Annual Report 2021
177
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021
6: Business combinations
6(a): Business disposals
On 30 November 2021, the Group completed the sale of Quilter International to Utmost Group for consideration of £481 million. The Group has
recognised a profit on disposal of £89 million. Provisions established in respect of this disposal are shown in note 28. Separation, migration and
decommissioning expenses incurred as a result of the disposal of £19 million are included within Other operating and administrative expenses
in the discontinued operations income statement.
Profit/(loss) on sale of operations
Quilter International
Consideration received
Less: transaction costs
Net proceeds from sale
Carrying value of net assets disposed of
Goodwill allocated and disposed of
Recycling of foreign currency translation reserve
Profit on sale of Quilter International
Change in accrued expenses in relation to the Single Strategy business (sold in 2018) and QLA (sold in 2019)
Profit/(loss) on sale of operations before tax
Separation, migration and decommissioning costs
Profit/(loss) on disposal after separation, migration and decommissioning costs
Year ended
31 December
2021
£m
Quilter
International and
Single Strategy
business
Year ended
31 December
2020
£m
Quilter Life
Assurance and
Single Strategy
business
481
(17)
464
(324)
(50)
(1)
89
1
90
(19)
71
–
–
–
–
–
–
(1)
(1)
–
(1)
178
Quilter Annual Report 2021
6: Business combinations continued
6(a): Business disposals continued
In 2021, the Group also sold LighthouseCarrwood Limited generating a profit of £2 million which is not reflected in the table above as the former
subsidiary’s activities did not represent a major line of business and therefore is regarded as being part of the Group’s continuing operations.
Carrying value of net assets disposed of
Assets
Intangible assets
Property, plant and equipment
Contract costs
Loans and advances
Financial investments
Trade, other receivables and other assets
Cash and cash equivalents
Total assets
Liabilities
Investment contract liabilities
Provisions
Deferred tax liabilities
Current tax payable
Borrowings and lease liabilities
Trade, other payables and other liabilities
Contract liabilities
Total liabilities
Carrying value of net assets disposed
At 30 November
2021
£m
Quilter
International
2
11
383
175
23,836
228
253
24,888
24,058
2
2
1
11
114
376
24,564
324
Quilter Annual Report 2021
179
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
6: Business combinations continued
6(b): Discontinued operations – income statement
The Group’s discontinued operations principally relate to Quilter International, the sale of which completed on 30 November 2021.
Income
Gross earned premiums
Premiums ceded to reinsurers
Net earned premiums
Fee income and other income from service activities
Investment return
Other income
Total income
Expenses
Change in investment contract liabilities
Fee and commission expenses, and other acquisition costs
Other operating and administrative expenses
Finance costs
Total expenses
Profit/(loss) on sale of operations before tax1
Profit before tax attributable to equity holders from discontinued operations
Tax expense attributable to equity holders
Profit after tax from discontinued operations
Attributable to:
Equity holders of Quilter plc
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
Notes
9(a)
9(b)
27
6(a)
11(a)
1
(1)
–
169
1,816
1
1,986
(1,818)
(72)
(55)
–
(1,945)
90
131
–
131
131
1
(1)
–
206
1,061
–
1,267
(1,056)
(91)
(42)
(1)
(1,190)
(1)
76
(1)
75
75
Earnings per Ordinary Share on profit attributable to Ordinary Shareholders of Quilter plc
Basic – from discontinued operations (pence)
Diluted – from discontinued operations (pence)
4.1
1Loss on sale of operations before tax in the prior year relates to transaction and separation costs associated with the historical sales of the QLA and Single Strategy businesses.
4.2
8.0
7.8
12(b)
12(b)
£10 million of Other operating and administrative expenses (31 December 2020: £17 million) previously reported in Quilter International are now
presented within continuing operations, as costs of this nature did not transfer to Utmost Group (the acquirer) on disposal.
6(c): Discontinued operations – statement of comprehensive income
Profit after tax
Items that may be reclassified subsequently to profit or loss:
Exchange gain on translation of foreign operations
Total comprehensive income from discontinued operations
6(d): Discontinued operations – net cash flows
Total net cash flows from operating activities
Total net cash used in investing activities
Total net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
180
Quilter Annual Report 2021
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
131
–
131
75
1
76
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
276
(411)
(2)
(137)
126
(87)
(24)
15
6: Business combinations continued
6(e): Business acquisitions
There have been no material acquisitions during the year ended 31 December 2021 or the year ended 31 December 2020.
Contingent consideration arising from historical business acquisitions:
The table below details the movements in the contingent consideration balance during the current and prior year arising from the business acquisitions
in previous years.
Opening balance
Payments
Financing interest charge
Unused amounts reversed and other movements
Closing balance
31 December
2021
£m
31 December
2020
£m
16
(7)
1
(5)
5
39
(20)
2
(5)
16
Contingent consideration represents the Group’s best estimate of the amount payable in relation to each acquisition discounted to net present value.
The basis used for each acquisition varies but includes payments based on a percentage of the level of assets under administration, funds under
management and levels of ongoing fee income at future dates.
7: Alternative performance measures (“APMs”)
7(a): Adjusted profit before tax and reconciliation to profit after tax
Basis of preparation of adjusted profit before tax
Adjusted profit before tax is one of the Group’s alternative performance measures and represents the Group’s IFRS profit, adjusted for specific items
that management considers to be outside of the Group’s normal operations or one-off in nature, as detailed in note 7(b). Adjusted profit before tax
does not provide a complete picture of the Group’s financial performance, which is disclosed in the IFRS income statement, but is instead intended
to provide additional comparability and understanding of the financial results.
Affluent
High Net Worth
Head Office
Adjusted profit before tax
Reallocation of Quilter International costs
Adjusted profit before tax after reallocation
Adjusting items:
Impact of acquisition and disposal related accounting
Profit/(loss) on business disposals
Business transformation costs
Managed separation costs
Finance costs
Policyholder tax adjustments
Customer remediation
Total adjusting items before tax
Profit/(loss) before tax attributable to equity holders
Tax attributable to policyholder returns
Income tax (expense)/credit
Profit after tax2
1Discontinued operations includes the results of Quilter International.
2IFRS profit after tax.
Year ended 31 December 2021
Year ended 31 December 2020
Continuing
operations
£m
Discontinued
operations1
£m
Notes
111
56
(29)
138
(10)
128
(41)
2
(51)
(2)
(10)
(7)
(7)
(116)
12
73
(62)
23
50
–
–
50
10
60
–
90
(19)
–
–
–
–
71
131
–
–
131
6(b)
8(b)
7(b)(i)
6(a)
7(b)(ii)
7(b)(iii)
7(b)(iv)
7(b)(v)
7(b)(vi)
11(a)
11(a,b)
Total
£m
161
56
(29)
188
–
188
(41)
92
(70)
(2)
(10)
(7)
(7)
(45)
143
73
(62)
154
Continuing
operations
£m
Discontinued
operations¹
£m
105
39
(36)
108
(17)
91
(42)
–
(70)
–
(10)
9
(5)
(118)
(27)
36
4
13
60
–
–
60
17
77
–
(1)
–
–
–
–
–
(1)
76
–
(1)
75
Total
£m
165
39
(36)
168
–
168
(42)
(1)
(70)
–
(10)
9
(5)
(119)
49
36
3
88
Quilter Annual Report 2021
181
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
7: Alternative performance measures (“APMs”) continued
7(b): Adjusting items
In determining adjusted profit before tax, the Group’s IFRS profit before tax is adjusted for specific items that management considers to be outside
of the Group’s normal operations or one-off in nature. These are detailed below.
7(b)(i): Impact of acquisition and disposal related accounting
The recognition of goodwill and other acquired intangibles is created on the acquisition of a business and represents the premium paid over the fair
value of the Group’s share of the identifiable assets and liabilities acquired at the date of acquisition (as recognised under IFRS 3 Business Combinations).
The Group excludes any impairment of goodwill from adjusted profit as well as the amortisation and impairment of acquired intangible assets, any
acquisition costs, finance costs related to the discounting of contingent consideration and incidental items relating to past disposals.
The effect of these adjustments to determine adjusted profit are summarised below. All adjustments are in respect of continuing operations.
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
45
(5)
–
1
45
(4)
(1)
2
42
Amortisation of other acquired intangible assets
Fair value gains on revaluation of contingent consideration
Acquisition and disposal related income1
Unwinding of discount on contingent consideration
Note
14
Total impact of acquisition and disposal related accounting
1Acquisition and disposal related income in the year ended 31 December 2020 includes a £1 million credit for the acceleration of the discounting unwind following settlement
of a loan receivable from TA Associates that related to deferred consideration arising from the sale of the Single Strategy Asset Management business.
41
7(b)(ii): Business transformation costs
Business transformation costs include three key items: costs associated with the UK Platform Transformation Programme; Optimisation Programme
costs and business separation costs following disposal of Quilter International. For the year ended 31 December 2021, these costs totalled £70 million
(31 December 2020: £70 million) in aggregate, the principal components of which are described below:
UK Platform Transformation Programme – 31 December 2021: £28 million, 31 December 2020: £38 million
The Platform Transformation Programme commenced in 2017 to replace our UK Platform, significantly upgrading its functionality as well as ensuring
its underlying technology was brought up to modern standards, making it highly resilient and scalable to support business growth for the foreseeable
future. The last of three phased migrations completed successfully in February 2021 with all Quilter Investment Platform assets now live on the new
platform. The total lifetime costs of the programme are £202 million to 31 December 2021, and no further costs are expected.
Optimisation Programme costs – 31 December 2021: £22 million, 31 December 2020: £33 million
The Optimisation programme commenced in 2018 to provide closer business integration, creating central support, rationalising technology and
reducing third-party spend. It is due to be largely complete by mid-2022. Since inception, the programme has delivered £61 million of run-rate cost
savings with associated implementation costs of £81 million during this time, with the overall target of £65 million of run-rate benefits and associated
delivery cost of up to £91 million.
During 2021, the Group successfully deployed the new finance, HR and procurement modules as part of our general ledger consolidation and
modernisation activity. The Group continues to consolidate its technology estate and in particular the data centre, telephony and data reporting
solutions. In Quilter Financial Planning the streamlining and improvement in productivity of the business has delivered cost savings during the year.
Business separation costs following disposal of Quilter International – 31 December 2021: £19 million, 31 December 2020: £nil
The costs of business separation arise from the process to separate Quilter International’s infrastructure, which is complex and covers a wide range
of areas including people, IT systems, data and contracts facilities. A programme team has been established to ensure the transformation of these
areas to the acquirer. These provisions have been based on external quotations and estimations, together with estimates of the time required for
incremental resource costs to achieve the separation. The costs are predominantly expected to occur over a three-year period.
The most significant element of the provision is the cost of migration of IT systems and data to the acquirer. Work has taken place during 2021 in
preparation for migration. Calculation of the provision is based on management’s best estimate of the work required, the time it is expected to take,
the number and skills of the staff required and their cost, and the cost of related external IT services to support the work. In reaching these judgements
and estimates, management has made use of its past experience of previous IT migrations following business disposals, including the recent migration
of QLA.
Quilter Investors’ build out costs – 31 December 2021: £nil, 31 December 2020: £(1) million
The Group incurred build out costs to develop Quilter Investors as a separate business distinct from the Single Strategy business, which was sold on
29 June 2018. The build was substantially completed in 2019, resulting in the release of the remaining £1 million of the provision during 2020 which was
established to complete the build.
182
Quilter Annual Report 2021
7: Alternative performance measures (“APMs”) continued
7(b)(ii): Business transformation costs continued
Restructuring costs following disposal of Quilter Life Assurance – 31 December 2021: £1 million, 31 December 2020: £nil
Following the disposal of Quilter Life Assurance on 31 December 2019, the Group recognised £1 million for the cost of decommissioning IT systems
as the Transitional Service Agreement with ReAssure runs off.
7(b)(iii): Managed separation costs
For the year ended 31 December 2021, these costs were £2 million (31 December 2020: £nil) and relate to further rebranding of the Quilter business.
These one-off costs relating to the Group’s separation from Old Mutual have been excluded from adjusted profit on the basis that they relate to a
fundamental restructuring of the Group and are not representative of the operating activity of the Group.
7(b)(iv): Finance costs
The nature of much of the Group’s operations means that, for management’s decision-making and internal performance management, the effects
of interest costs on external borrowings are removed when calculating adjusted profit. For the year ended 31 December 2021, finance costs were
£10 million (31 December 2020: £10 million).
7(b)(v): Policyholder tax adjustments
For the year ended 31 December 2021, the total policyholder tax adjustments to adjusted profit is £(7) million (31 December 2020: £9 million).
Adjustments to policyholder tax are made to remove distortions arising from market volatility that can, in turn, lead to volatility in the policyholder
tax charge between periods. The recognition of the income received from policyholders (which is included within the Group’s income) to fund the
policyholder tax liability can vary in timing to the recognition of the corresponding tax expense, creating volatility to the Group’s IFRS profit/(loss) before
tax attributable to equity holders. For a further explanation of the impact of markets on the policyholder tax charge see note 11(a). Adjustments are also
made to remove policyholder tax distortions from other non-operating adjusting items.
7(b)(vi): Customer remediation
Lighthouse pension transfer advice provision – 31 December 2021: £7 million, 31 December 2020: £5 million
The provision for the potential redress of British Steel Pension Scheme cases and other DB to DC pension transfer cases has been increased by
£7 million in the year, which has been recognised in the income statement (31 December 2020: £5 million). This increase reflects the impact of
post-acquisition market and discount rate movements, together with further consideration of the cases where redress is potentially payable, as part
of the ongoing skilled person review. This has been excluded from adjusted profit on the basis that the advice activities to which the charge relates was
provided prior to the Group’s acquisition of the business. Further details of the provision are provided in note 28.
7(c): IFRS profit before tax from continuing operations (excluding amortisation, policyholder tax adjustments and other
one-off items)
For remuneration purposes, the Group uses IFRS profit before tax from continuing operations adjusted for specific items that management considers
to be outside of the Group’s normal operations or one-off in nature, as shown below. For further details refer to the Remuneration report (page 132)
and KPIs (page 28).
Year ended
31 December
2021
£m
Notes
Continuing
operations
£m
Discontinued
operations
£m
Year ended 31 December 2020
IFRS profit before tax (excluding amortisation, policyholder tax
adjustments and other one-off items)
Adjusted for the following:
Reallocation of Quilter International costs
Profit/(loss) on business disposals
Impact of acquisition and disposal related accounting
Policyholder tax adjustments
Quilter Investors’ build out costs
Profit before tax
6(b)
6(a)
7(b)(i)
7(b)(v)
7(b)(ii)
68
(10)
2
(41)
(7)
–
12
23
(17)
–
(42)
9
–
(27)
59
17
(1)
–
–
1
76
Total
£m
82
–
(1)
(42)
9
1
49
Quilter Annual Report 2021
183
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
7: Alternative performance measures (“APMs”) continued
7(d): Reconciliation of IFRS income and expenses to “Total net fee revenue” and “Operating expenses” within adjusted profit
This reconciliation shows how each line of the Group’s consolidated IFRS income statement is allocated to the Group’s APMs: Net management fees,
Total net fee revenue and Operating expenses, which are all defined on page 257 and form the Group’s adjusted profit before tax for continuing
operations. The IFRS income statement column in the table below, down to “Profit/(loss) before tax attributable to equity holders from continuing
operations”, reconciles to each line of the Group’s consolidated income statement. Allocations are determined by management and aim to show the
Group’s sources of profit (net of relevant directly attributable expenses). These allocations remain consistent from year to year to ensure comparability,
unless otherwise stated.
Year ended 31 December 2021
Income
Fee income and other income from service activities
Investment return
Other income
Total income
Expenses
Change in investment contract liabilities
Fee and commission expenses, and other acquisition costs
Change in third-party interest in consolidated funds
Other operating and administrative expenses
Finance costs
Total expenses
Profit on business disposal
Tax expense attributable to policyholder returns
Profit/(loss) before tax attributable to equity holders
from continuing operations
Adjusting items:
Impact of acquisition and disposal related accounting
Profit on business disposal
Business transformation costs
Managed separation costs
Finance costs
Customer remediation
Policyholder tax adjustments
Adjusting items
Adjusted profit before tax after reallocation
Reallocation of Quilter International costs3
Net mgmt.
fees1
£m
Other
revenue1
£m
Total net fee
revenue1
£m
Operating
expenses1
£m
Adjusted
profit before
tax
£m
Consol. of
funds2
£m
Consolidated
income
statement
£m
633
–
–
633
–
(52)
–
(15)
–
(67)
–
(73)
111
3,294
1
3,406
(3,293)
4
–
1
–
744
3,294
1
4,039
(3,293)
(48)
–
(14)
–
–
–
15
15
–
–
–
(602)
(14)
744
3,294
16
4,054
(3,293)
(48)
–
(616)
(14)
(78)
708
2
632
–
(13)
(599)
(20)
–
666
4,002
18
4,686
(3,293)
(61)
(599)
(636)
(14)
(3,288)
(3,355)
(616)
(3,971)
(632)
(4,603)
2
–
2
(73)
–
–
493
120
613
(601)
–
–
–
–
–
–
7
7
–
(2)
–
–
–
–
–
(2)
–
(2)
–
–
–
–
7
5
500
–
118
–
618
–
41
–
51
2
10
7
–
111
(490)
10
–
–
–
2
(73)
12
2
(73)
12
41
(2)
51
2
10
7
7
116
128
10
Adjusted profit before tax – continuing operations
1The APMs “Net Management Fees”, “Other revenue”, “Total net fee revenue” and “Operating expenses” are commented on within the Financial review.
2Consolidation of funds shows the grossing up impact to the Group’s consolidated income statement as a result of the consolidation of funds requirements, as described within
note 5(a) of the Group’s 2021 Annual Report. This grossing up is excluded from the Group’s adjusted profit.
3See note 6(b) for details of cost reallocations.
(480)
500
138
618
118
184
Quilter Annual Report 2021
7: Alternative performance measures (“APMs”) continued
7(d): Reconciliation of IFRS income and expenses to ‘Total net fee revenue’ and ‘Operating expenses’ within adjusted profit continued
Year ended 31 December 2020
Income
Fee income and other income from service activities3
Investment return3
Other income
Total income
Expenses
Change in investment contract liabilities
Fee and commission expenses, and other acquisition costs3
Change in third-party interest in consolidated funds3
Other operating and administrative expenses
Finance costs
Total expenses
Tax expense attributable to policyholder returns
Profit/(loss) before tax attributable to equity holders
from continuing operations
Adjusting items:
Impact of acquisition and disposal related accounting
Business transformation costs
Finance costs
Policyholder tax adjustments
Customer remediation
Adjusting items
Adjusted profit before tax after reallocation
Reallocation of Quilter International costs4
Net mgmt.
fees1
£m
Other
revenue1
£m
Total net fee
revenue1
£m
Operating
expenses1
£m
Adjusted
profit before
tax
£m
Consol. of
funds2
£m
Consolidated
income
statement
£m
552
–
–
552
–
(48)
–
(13)
–
(61)
(36)
113
2,279
2
2,394
(2,272)
(1)
–
(3)
–
665
2,279
2
2,946
(2,272)
(49)
–
(16)
–
–
–
14
14
–
–
–
(598)
(16)
665
2,279
16
2,960
(2,272)
(49)
–
(614)
(16)
(80)
577
4
501
–
(3)
(461)
(37)
–
585
2,856
20
3,461
(2,272)
(52)
(461)
(651)
(16)
(2,276)
(2,337)
(614)
(2,951)
(501)
(3,452)
–
(36)
–
(36)
–
–
(36)
(27)
455
118
573
(600)
(27)
–
–
–
(9)
–
(9)
–
–
–
–
–
–
–
–
–
(9)
–
(9)
446
–
118
–
564
–
42
70
10
–
5
127
(473)
17
42
70
10
(9)
5
118
91
17
Adjusted profit before tax – continuing operations
1The APMs “Net Management Fees”, “Other revenue”, “Total net fee revenue” and “Operating expenses” are commented on within the Financial review.
2Consolidation of funds shows the grossing up impact to the Group’s consolidated income statement as a result of the consolidation of funds requirements, as described within
note 5(a). This grossing up is excluded from the Group’s adjusted profit.
3See notes 5(d) and 5(e) for details of changes to comparative amounts.
4See note 6(b) for details of cost reallocations.
(456)
446
564
108
118
Quilter Annual Report 2021
185
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
8: Segmental information
8(a): Segmental presentation
The Group’s operating segments comprise High Net Worth and Affluent, which is consistent with the manner in which the Group is now structured
and managed. For all reporting periods, these segments have been classified as continuing operations in the income statement. Head Office includes
certain revenues and central costs that are not allocated to the segments.
Adjusted profit before tax is an alternative performance measure (“APM”) reported to the Group’s management and Board. Management and the
Board use additional APMs to assess the performance of each of the segments, including net client cash flows, assets under management and
administration, total net fee revenue and operating margin.
Consistent with internal reporting, income and expenses that are not directly attributable to a particular segment are allocated between segments
where appropriate. The Group accounts for inter-segment income and transfers as if the transactions were with third parties at current market prices.
Intra-group recharges in respect of operating and administration expenses within businesses disclosed as discontinued operations are not adjusted
for potential future changes to the level of remaining costs following the disposal of those businesses.
The segmental information in this note reflects the adjusted and IFRS profit measures for each operating segment as provided to management
and the Board. Income is analysed in further detail for each operating segment in note 9(a).
Continuing operations:
High Net Worth
This segment comprises Quilter Cheviot and Quilter Private Client Advisers.
Quilter Cheviot provides discretionary investment management predominantly in the United Kingdom with bespoke investment portfolios tailored
to the individual needs of high net worth customers, charities, companies and institutions through a network of branches in London and the regions.
Investment management services are also provided by operations in the Channel Islands and the Republic of Ireland.
Quilter Private Client Advisers provide financial advice for protection, mortgages, savings, investments and pensions.
Affluent
This segment is comprised of Quilter Investment Platform, Quilter Investors and Quilter Financial Planning.
Quilter Investment Platform is a leading investment platform provider of advice-based wealth management products and services in the UK, which
serves a largely affluent customer base through advised multi-channel distribution.
Quilter Investors is a leading provider of investment solutions in the UK multi-asset market. It develops and manages investment solutions in the form
of funds for the Group and third-party clients. It has several fund ranges which vary in breadth of underlying asset class.
Quilter Financial Planning is a restricted and independent financial adviser network including Quilter Financial Advisers and Lighthouse, providing
mortgage and financial planning advice and financial solutions for both individuals and businesses through a network of intermediaries. It operates
across all markets, from wealth management and retirement planning advice through to dealing with property wealth and personal and business
protection needs.
Head Office
In addition to the Group’s two operating segments, Head Office comprises the investment return on centrally held assets, central support function
expenses, central core structural borrowings and certain tax balances.
Discontinued operations:
Quilter International, which would have formed part of the Affluent operating segment, has been classified as a discontinued operation following
the Group’s announcement on 1 April 2021 of the disposal of the business and subsequent disposal on 30 November 2021. See note 6 for full details.
Comparative amounts for the year ended 31 December 2020 have been restated accordingly.
Quilter International is a cross-border business, focusing on high net worth and affluent local customers and expatriates in the UK, Asia, the Middle
East, Europe and Latin America.
186
Quilter Annual Report 2021
8: Segmental information continued
8(b)(i): Adjusted profit statement – segmental information for the year ended 31 December 2021
The table below presents the Group’s continuing operations split by operating segment, reconciling the segmented IFRS income statement
(to “Profit/(loss) before tax attributable to equity holders from continuing operations”) to adjusted profit before tax.
Operating segments
Notes
Affluent
£m
High
Net Worth
£m
Reallocation
of Quilter
International
costs1
£m
Head
Office
£m
Consolidation
adjustments2
£m
Consolidated
income
statement
£m
Income
Fee income and other income from service activities
Investment return
Other income
Segmental income
Expenses
Change in investment contract liabilities
Fee and commission expenses, and other acquisition costs
Change in third-party interest in consolidated funds
Other operating and administrative expenses
Finance costs
Segmental expenses
Profit on sale of subsidiary
Profit/(loss) before tax from continuing operations
Tax expense attributable to policyholder returns
Profit/(loss) before tax attributable to equity holders from
continuing operations
Adjusted for non-operating items:
Impact of acquisition and disposal related accounting
Profit on business disposals
Business transformation costs
Managed separation costs
Finance costs
Policyholder tax adjustments
Customer remediation
Adjusting items before tax
Adjusted profit/(loss) before tax after reallocation
Reallocation of Quilter International costs
7(b)(i)
7(b)(ii)
7(b)(iii)
7(b)(iv)
7(b)(v)
7(b)(vi)
6(b)
532
3,293
110
3,935
(3,293)
(48)
–
(463)
(4)
213
–
–
213
–
–
–
(187)
–
(3,808)
(187)
2
129
(73)
56
11
(2)
32
–
–
7
7
55
111
–
26
–
26
30
–
–
–
–
–
–
30
56
Adjusted profit/(loss) before tax – continuing operations
1See note 6(b) for details of cost reallocations.
2Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
111
56
–
1
–
1
–
–
–
(51)
(10)
(61)
–
(60)
–
(60)
–
–
19
2
10
–
–
31
(29)
(29)
–
–
–
–
–
–
–
(10)
–
(10)
–
(10)
–
(10)
–
–
–
–
–
–
–
–
(10)
10
–
(79)
708
(92)
537
–
(13)
(599)
75
–
666
4,002
18
4,686
(3,293)
(61)
(599)
(636)
(14)
(537)
(4,603)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
85
(73)
12
41
(2)
51
2
10
7
7
116
128
10
138
Quilter Annual Report 2021
187
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
8: Segmental information continued
8(b)(ii): Adjusted profit statement – segmental information for the year ended 31 December 2020
Operating segments
Notes
Affluent
£m
High
Net Worth
£m
Reallocation
of Quilter
International
costs1
£m
Head
Office
£m
Consolidation
adjustments2
£m
Consolidated
income
statement
£m
Income
Fee income and other income from service activities3
Investment return3
Other income
Segmental income
Expenses
Change in investment contract liabilities
Fee and commission expenses, and other acquisition costs3
Change in third-party interest in consolidated funds3
Other operating and administrative expenses
Finance costs
476
2,275
118
2,869
(2,272)
(50)
–
(446)
(5)
190
3
4
197
–
–
–
(191)
(1)
Segmental expenses
(2,773)
(192)
Profit/(loss) before tax from continuing operations
Tax expense attributable to policyholder returns
Profit/(loss) before tax attributable to equity holders from
continuing operations
Adjusted for non-operating items:
Impact of acquisition and disposal related accounting
Business transformation costs
Finance costs
Policyholder tax adjustments
Customer remediation
Adjusting items before tax
Adjusted profit/(loss) before tax after reallocation
Reallocation of Quilter International costs
7(b)(i)
7(b)(ii)
7(b)(iv)
7(b)(v)
7(b)(vi)
6(b)
96
(36)
60
10
39
–
(9)
5
45
105
–
5
–
5
34
–
–
–
–
34
39
–
Adjusted profit/(loss) before tax – continuing operations
1See note 6(b) for details of cost reallocations.
2Consolidation adjustments comprise the elimination of inter-segment transactions and the consolidation of investment funds.
3See notes 5(d) and 5(e) for details of changes to comparative amounts.
105
39
–
1
5
6
–
–
–
(71)
(10)
(81)
(75)
–
(75)
(2)
31
10
–
–
39
(36)
–
(36)
–
–
–
–
–
–
–
(17)
–
(17)
(17)
–
(17)
–
–
–
–
–
–
(17)
17
–
(81)
577
(107)
389
–
(2)
(461)
74
–
585
2,856
20
3,461
(2,272)
(52)
(461)
(651)
(16)
(389)
(3,452)
–
–
–
–
–
–
–
–
–
–
–
–
9
(36)
(27)
42
70
10
(9)
5
118
91
17
108
188
Quilter Annual Report 2021
9: Details of revenue
This note gives further detail on the items appearing in the revenue section of the consolidated income statement.
9(a): Breakdown of income
This note analyses the Group’s income into further detail based on the types of fees earned and split by operating segment, which is aligned to the
Group’s customer base.
Year ended 31 December 2021
Premium-based fees
Fund-based fees1
Retrocessions received, intra-group
Fixed fees
Exit fees
Other fee and commission income
Fee income and other income from service activities
Investment return
Other income
Total income
Year ended 31 December 2020
Premium-based fees
Fund-based fees1,2
Retrocessions received, intra-group
Fixed fees
Exit fees
Other fee and commission income
Fee income and other income from service activities
Investment return2
Other income
Total income
1Income from fiduciary activities is included within fund-based fees.
2See notes 5(d) and 5(e) for details of changes to comparative amounts.
9(b): Investment return
This note analyses the investment return from the Group’s investing activities.
Affluent
£m
High
Net Worth
£m
Head Office
£m
Consolidation
adjustments
£m
Total
continuing
operations
£m
Discontinued
operations
£m
87
376
–
2
–
67
532
3,293
110
3,935
24
189
–
–
–
–
213
–
–
213
–
–
–
–
–
–
–
1
–
1
–
(79)
–
–
–
–
(79)
708
(92)
537
111
486
–
2
–
67
666
4,002
18
4,686
45
81
6
26
11
–
169
1,816
1
1,986
Affluent
£m
High
Net Worth
£m
Head Office
£m
Consolidation
adjustments
£m
Total
continuing
operations
£m
Discontinued
operations
£m
90
334
–
2
–
50
476
2,275
118
2,869
22
168
–
–
–
–
190
3
4
197
–
–
–
–
–
–
–
1
5
6
–
(94)
–
–
–
13
(81)
577
(107)
389
112
408
–
2
–
63
585
2,856
20
3,461
70
88
6
29
13
–
206
1,061
–
1,267
Interest and similar income
Loans and advances
Investments and securities
Cash and cash equivalents1
Total interest and similar income
Dividend income
Foreign currency gains and losses
Total gains on financial instruments mandatorily recognised at fair value through profit or loss
Net investment income – continuing operations
Net investment income – discontinued operations
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m2
1
69
–
70
225
1
3,706
4,002
1,816
1
27
5
33
135
–
2,688
2,856
1,061
Total net investment income
1Included within cash and cash equivalents is £nil interest arising from assets held at amortised cost (31 December 2020: £1 million). The remainder is from assets at FVTPL.
2See note 5(e) for details of changes to comparative amounts.
5,818
3,917
Quilter Annual Report 2021
189
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
10: Details of expenses
This note provides further details in respect of the items appearing in the expenses section of the consolidated income statement.
10(a): Fee and commission expenses, and other acquisition costs
This note analyses the fee and commission expenses and other acquisition costs.
Fee and commission expense
Renewal commission – investment contracts
Retrocessions paid1
Changes in contract costs
Fee and commission expenses, and other acquisition costs – continuing operations
Fee and commission expenses, and other acquisition costs – discontinued operations
Note
23
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
13
30
21
(3)
61
72
3
28
20
1
52
91
Total fee and commission expenses, and other acquisition costs
133
143
1See note 5(d) for details of changes to comparative amounts.
10(b): Other operating and administrative expenses
This note provides further details in respect of the items included within other operating and administrative expenses section of the consolidated
income statement.
Staff costs
Depreciation charge on right-of-use assets
Depreciation charge on other plant and equipment
Impairment of right-of-use assets
Amortisation of software
Amortisation of other acquired intangibles
Administration and other expenses
Other operating and administrative expenses – continuing operations
Other operating and administrative expenses – discontinued operations
Total other operating and administrative expenses
Notes
10(c)(i)
15
15
15
14(a)
14(a)
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
341
10
6
–
2
45
232
636
55
691
344
11
5
3
2
45
241
651
42
693
Administration and other expenses include business transformation costs for the year ended 31 December 2021 of £28 million (2020: £38 million)
in relation to the UK Platform Transformation Programme and £22 million (2020: £33 million) in relation to Optimisation Programme costs as well
as general operating expenses such as IT-related costs, premises and marketing.
10(c): Staff costs and other employee-related costs
10(c)(i): Staff costs
Salaries
Bonus and incentive remuneration
Social security costs
Retirement obligations – Defined contribution plans
Share-based payments – Equity-settled
Other
Staff costs – continuing operations
Staff costs – discontinued operations
Total staff costs
190
Quilter Annual Report 2021
Note
26(e)
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
207
61
27
17
19
10
341
19
360
238
33
23
15
24
11
344
17
361
10: Details of expenses continued
10(c)(ii): Employee numbers
The average number of persons employed by the Group was:
Affluent
High Net Worth
Head Office
Continuing operations
Discontinued operations
Total average number of employees during the year
Year ended
31 December
2021
Number
Year ended
31 December
2020
Number
2,207
917
80
3,204
645
3,849
2,586
962
85
3,633
692
4,325
The monthly average number of persons employed by the Group is based on permanent employees and fixed-term contractors. The revised
segmentation did not apply during 2020. The Group has prepared the staff numbers disclosure for 2020 based on the new segmentation and making
appropriate assumptions where required.
10(d): Auditors’ remuneration
Included in other operating and administrative expenses are fees paid to the Group’s auditors. These can be categorised as follows:
Fees payable for audit services
Group and Parent Company
Subsidiaries
Additional fees payable to KPMG LLP related to the prior year audit of the Group
Total fees for audit services
Fees for audit-related assurance services
Fees for non-audit services
Total Group auditors’ remuneration – continuing operations
Total Group auditors’ remuneration – discontinued operations
Total Group auditors’ remuneration
All fees are presented net of VAT. The 2020 fees have been re-presented to exclude VAT.
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
1.5
2.2
–
3.7
0.8
0.5
5.0
0.3
5.3
1.5
2.0
0.6
4.1
1.0
–
5.1
0.8
5.9
10(e): Finance costs
This note analyses the interest costs on our borrowings and similar charges, all of which are valued at amortised cost. Finance costs comprise:
Term loans and other external debt
Subordinated debt securities (Tier 2 bond)
Interest payable on borrowed funds
Interest expense on lease liabilities
Other
Total finance costs – continuing operations
Total finance costs – discontinued operations
Total finance costs
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
1
9
10
3
1
14
–
14
1
9
10
4
2
16
1
17
Finance costs represent the cost of interest and finance charges on the Group’s borrowings from a number of relationship banks. More details
regarding borrowed funds, including the interest rates payable, are shown in note 30. These costs are excluded from adjusted profit within the “Finance
costs” adjusting item.
Within other finance costs above is £1 million (2020: £2 million) relating to the impact of unwinding the discount rate on contingent consideration
payable as a result of various acquisitions. These costs are excluded from adjusted profit within the “Impact of acquisition and disposal-related
accounting” adjusting item as shown in note 7(b)(i).
Quilter Annual Report 2021
191
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
11: Tax
11(a): Tax charged to the income statement
Current tax
United Kingdom
Overseas tax
Adjustments to current tax in respect of prior periods
Total current tax charge
Deferred tax
Origination and reversal of temporary differences
Effect on deferred tax of changes in tax rates
Adjustments to deferred tax in respect of prior periods
Total deferred tax charge/(credit)
Total tax charged/(credited) to income statement – continuing operations
Total tax charged to income statement – discontinued operations
6(b)
Total tax charged/(credited) to income statement
Attributable to policyholder returns – continuing operations
Attributable to equity holders – continuing operations
Total tax charged/(credited) to income statement – continuing operations
Attributable to equity holders – discontinued operations
Total tax charged to income statement – discontinued operations
Total tax charged/(credited) to income statement
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
Note
36
1
–
37
36
(12)
1
25
62
–
62
73
(11)
62
–
–
62
18
3
(7)
14
(22)
–
4
(18)
(4)
1
(3)
36
(40)
(4)
1
1
(3)
Policyholder tax
Certain products are subject to tax on policyholders’ investment returns. This “policyholder tax” is an element of total tax expense. To make the tax
expense more meaningful, tax attributable to policyholder returns and tax attributable to equity holders’ profits are shown separately in the income
statement.
The tax attributable to policyholder returns is the amount payable in the period plus the movement of amounts expected to be payable in future years.
The remainder of the tax expense is attributed to shareholders as tax attributable to equity holders.
The Group’s income tax charge on continuing operations was £62 million for the year ended 31 December 2021, compared to a credit of £4 million
for the prior year. This income tax expense/credit can vary significantly period on period as a result of market volatility and the impact this has on
policyholder tax. The recognition of the income received from policyholders (which is included within the Group’s income) to fund the policyholder
tax liability can vary in timing to the recognition of the corresponding policyholder tax expense, creating volatility in the Group’s IFRS profit before tax
attributable to equity holders. An adjustment is made to adjusted profit to remove these distortions, as explained further in note 7(b)(v).
Market movements during the year ended 31 December 2021 resulted in investment gains of £343 million on products subject to policyholder tax.
The gain is a component of the total “investment return” gain of £4,002 million shown in the income statement. The impact of the £343 million
investment return gain is the primary reason for the £73 million tax expense attributable to policyholder returns in respect of the continuing operations
for the year ended 31 December 2021 (31 December 2020: £36 million expense in respect of continuing operations and £nil expense in respect of
discontinued operations).
Impact of changes in UK corporation tax rate
On 3 March 2021, the Chancellor of the Exchequer announced in the Budget a future increase in the Corporation Tax rate from 19% to 25%, effective
from 1 April 2023. This change has been substantially enacted by 31 December 2021 resulting in rebasing of deferred tax assets and liabilities.
The £11 million tax credit attributable to equity holders (continuing operations) includes a tax credit of £12 million relating to the change in the UK
corporation tax rate and a tax credit of £4 million in relation to first time recognition of trade losses (31 December 2020: £38 million credit in relation
to first time recognition of accrued interest expense).
192
Quilter Annual Report 2021
11: Tax continued
11(b): Reconciliation of total income tax expense
The income tax charged to profit or loss differs from the amount that would apply if all of the Group’s profits from the different tax jurisdictions had
been taxed at the UK standard corporation tax rate. The difference in the effective rate is explained below:
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
Note
Profit before tax from continuing operations
Tax at UK standard rate of 19% (2020: 19%)
Different tax rate or basis on overseas operations
Untaxed and low taxed income
Expenses not deductible for tax
Adjustments to current tax in respect of prior years
Net movements on unrecognised deferred tax assets
Effect on deferred tax of changes in tax rates
Adjustments to deferred tax in respect of prior years
Income tax attributable to policyholder returns (net of tax relief)
Total tax charged/(credited) to income statement – continuing operations
Total tax charged to income statement – discontinued operations
6(b)
Total tax charged/(credited) to income statement
11(c): Reconciliation of income tax expense in the income statement to income tax on adjusted profit
85
16
1
–
–
–
(4)
(12)
1
60
62
–
62
9
2
4
(1)
2
(7)
(38)
–
4
30
(4)
1
(3)
Income tax expense/(credit) on continuing operations1
Tax on adjusting items
Impact of acquisition and disposal related accounting
Business transformation costs
Finance costs
Customer remediation
Tax adjusting items
Policyholder tax adjustments
Other shareholder tax adjustments2
Tax on adjusting items – continuing operations
Less: tax attributable to policyholder returns within adjusted profit – continuing operations3
Tax credited on adjusted profit – continuing operations
Tax charged on adjusted profit – discontinued operations
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
Note
62
4
10
2
1
(7)
7
17
(66)
13
–
(4)
3
13
2
1
9
36
64
(45)
15
1
7(b)(v)
Tax charged on total adjusted profit
1Includes both tax attributable to policyholders and equity holders, in compliance with IFRS reporting.
2Other shareholder tax adjustments comprise the reallocation of adjustments from policyholder tax as explained in note 7(b)(v) and shareholder tax adjustments for one-off
items in line with the Group’s adjusted profit policy.
3Adjusted profit treats policyholder tax as a pre-tax expense (this includes policyholder tax under IFRS and the policyholder tax adjustments) and is therefore removed from tax
charge on adjusted profit.
13
16
Quilter Annual Report 2021
193
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
12: Earnings per share
The Group calculates earnings per share (“EPS”) on a number of different bases. IFRS requires the calculation of basic and diluted EPS. Adjusted
EPS reflects earnings that are consistent with the Group’s adjusted profit measure and Headline earnings per share (“HEPS”) is a requirement of the
Johannesburg Stock Exchange. The Group’s EPS (in aggregate, including both continuing and discontinued operations) on these different bases are
summarised below.
Basic EPS is calculated by dividing profit after tax attributable to ordinary equity shareholders of the Parent by the weighted average number of
Ordinary Shares in issue during the year. The weighted average number of shares excludes Quilter plc shares held within Employee Benefit Trusts
(“EBTs”) to satisfy the Group’s obligations under employee share awards, and Quilter plc shares held in consolidated funds (“Own shares”). Own shares
are deducted for the purpose of calculating both basic and diluted EPS.
Diluted EPS recognises the dilutive impact of shares awarded and options granted to employees under share-based payment arrangements, to the
extent they have value, in the calculation of the weighted average number of shares, as if the relevant shares were in issue for the full year.
The Group is also required to calculate HEPS in accordance with the Johannesburg Stock Exchange (“JSE”) Listing Requirements, determined by
reference to the South African Institute of Chartered Accountants’ circular 1/2021 Headline Earnings. Disclosure of HEPS is not a requirement of IFRS,
but it is a commonly used measure of earnings in South Africa.
Basic earnings per share
Diluted basic earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
Source of guidance
IFRS
IFRS
Group policy
Group policy
Headline basic earnings per share (net of tax)
Headline diluted earnings per share (net of tax)
JSE Listing Requirements
JSE Listing Requirements
Year ended
31 December
2021
Pence
Year ended
31 December
2020
Pence
9.4
9.2
10.7
10.4
3.9
3.8
5.0
4.9
8.6
8.5
5.2
5.1
Notes
12(b)
12(b)
12(b)
12(b)
12(c)
12(c)
12(a): Weighted average number of Ordinary Shares
The table below summarises the calculation of the weighted average number of Ordinary Shares for the purposes of calculating basic and diluted
earnings per share for each profit measure (IFRS, adjusted and headline profit). Details of the impact on the number of shares from the Quilter share
buyback scheme are detailed in note 25.
Weighted average number of Ordinary Shares
Own shares including those held in EBTs
Basic weighted average number of Ordinary Shares
Adjustment for dilutive share awards and options
Diluted weighted average number of Ordinary Shares
12(b): Basic and diluted EPS (IFRS and adjusted profit)
Year ended
31 December
2021
Millions
Year ended
31 December
2020
Millions
1,721
(77)
1,644
39
1,683
1,842
(82)
1,760
37
1,797
Profit after tax
Total adjusting items before tax
Tax on adjusting items
Less: Policyholder tax adjustments
Adjusted profit after tax after reallocation
Reversal of:
Reallocation of Quilter International costs1
Year ended 31 December 2021
Year ended 31 December 2020
Notes
7(a)
11(c)
11(c)
Continuing
operations
£m
Discontinued
operations
£m
23
116
(17)
(7)
115
10
131
(71)
–
–
60
(10)
Total
£m
154
45
(17)
(7)
175
Continuing
operations
£m
Discontinued
operations
£m
13
118
(64)
9
76
75
1
–
–
76
Total
£m
88
119
(64)
9
152
–
17
(17)
–
152
Adjusted profit after tax
1Reallocation of Quilter International costs includes £10 million of costs (31 December 2020: £17 million) previously reported as part of Quilter International which are presented
within continuing operations as these costs did not transfer to Utmost Group (the acquirer) on disposal. Adjusted profit is presented both before and after the reallocation of
these costs. See note 6(b) for additional details.
125
175
50
93
59
194
Quilter Annual Report 2021
12: Earnings per share continued
12(b): Basic and diluted EPS (IFRS and adjusted profit) continued
Basic EPS
Diluted EPS
Adjusted basic EPS
Adjusted diluted EPS
12(c): Headline earnings per share
Profit attributable to ordinary equity holders
Adjusted for:
(Profit)/loss on sale of operations
Impairment loss on right-of-use assets
Headline earnings
Headline basic EPS (pence)
Headline diluted EPS (pence)
13: Dividends
2019 Final dividend paid – 3.5p per Ordinary Share
2020 Interim dividend paid – 1.0p per Ordinary Share
2020 Final dividend paid – 3.6p per Ordinary Share
2021 Interim dividend paid – 1.7p per Ordinary Share
Dividends paid to Ordinary Shareholders
Year ended 31 December 2021
Year ended 31 December 2020
Post-tax profit
measure used
IFRS profit
IFRS profit
Adjusted profit
Adjusted profit
Continuing
operations
Pence
Discontinued
operations
Pence
1.4
1.4
7.6
7.4
8.0
7.8
3.1
3.0
Note
6(a)
Total
Pence
9.4
9.2
10.7
10.4
Continuing
operations
Pence
Discontinued
operations
Pence
0.8
0.8
5.3
5.2
4.2
4.1
3.3
3.3
Total
Pence
5.0
4.9
8.6
8.5
Year ended
31 December 2021
Gross
£m
Net of tax
£m
Year ended
31 December 2020
Gross
£m
Net of tax
£m
(90)
–
154
(90)
–
64
3.9
3.8
1
3
88
1
2
91
5.2
5.1
Payment date
18 May 2020
21 September 2020
17 May 2021
20 September 2021
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
–
–
61
28
89
64
17
–
–
81
Subsequent to the year ended 31 December 2021, the Directors proposed a final dividend for 2021 of 3.9 pence per Ordinary Share amounting to
£62 million in total. Subject to approval by shareholders at the AGM, the dividend will be paid on 16 May 2022. In compliance with the rules issued by
the Prudential Regulation Authority (“PRA”) in relation to the implementation of the Solvency II regime and other regulatory requirements to which the
Group is subject, the dividend is required to remain cancellable at any point prior to it becoming due and payable on 16 May 2022 and to be cancelled if,
prior to payment, the Group ceases to hold capital resources equal to or in excess of its Solvency Capital Requirement, or if that would be the case if the
dividend was paid. The Directors have no intention of exercising this cancellation right, other than where required to do so by the PRA or for regulatory
capital purposes.
Final and interim dividends paid to Ordinary Shareholders are calculated using the number of shares in issue at the record date less own shares held
in Employee Benefit Trusts.
Quilter Annual Report 2021
195
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
14: Goodwill and intangible assets
14(a): Analysis of goodwill and intangible assets
The table below shows the movements in cost and amortisation of goodwill and intangible assets.
Gross amount
1 January 2020
Acquisitions through business combinations
Additions
31 December 2020
Disposal of interests in subsidiaries
Disposals1
31 December 2021
Amortisation and impairment losses
1 January 2020
Amortisation charge for the year
31 December 2020
Amortisation charge for the year
Disposal of interests in subsidiaries
Disposals1
31 December 2021
Carrying amount
31 December 2020
Software
development
costs
£m
Other
intangible
assets
£m
Goodwill
£m
350
6
–
356
(50)
–
306
–
–
–
–
–
–
–
101
–
4
105
–
(65)
40
(93)
(2)
(95)
(2)
–
65
(32)
428
1
–
429
(4)
–
425
(194)
(45)
(239)
(45)
2
–
(282)
Total
£m
879
7
4
890
(54)
(65)
771
(287)
(47)
(334)
(47)
2
65
(314)
356
10
190
556
31 December 2021
1Disposals of £65 million in the year ended 31 December 2021 relate to the write-off of fully amortised software in respect of the UK Platform Transformation Programme and
following the final migration of client assets in February 2021, with all Quilter Investment Platform assets now live on the new platform.
306
143
8
457
14(b): Analysis of other intangible assets
Net carrying value
Distribution channels – Quilter Financial Planning
Customer relationships
Quilter Cheviot
Quilter Financial Planning
Quilter Private Client Advisers
Other
Total other intangible assets
31 December
2021
£m
31 December
2020
£m
Average
estimated
useful life
Average
period
remaining
9
86
27
18
3
143
15
8 years
2 years
114
31
23
7
190
10 years
8 years
8 years
8 years
3 years
5 years
5 years
2 years
14(c): Allocation of goodwill to cash-generating units (“CGUs”) and impairment testing
Goodwill is monitored by management at the level of the Group’s two operating segments: Affluent and High Net Worth, as disclosed in note 8(a). Both
operating segments represent a group of CGUs. The allocation of goodwill to these segments was based on their individual value-in-use calculations
relative to the combined total.
Goodwill (net carrying amount)
Affluent
High Net Worth
Total goodwill
1At 31 December 2020, the goodwill was allocated to the Group’s previous segments Advice and Wealth Management and Wealth Platforms.
31 December
20211
£m
225
81
306
196
Quilter Annual Report 2021
14: Goodwill and intangible assets continued
14(c): Allocation of goodwill to cash-generating units (“CGUs”) and impairment testing continued
Goodwill of £50 million was included in the Quilter International disposal group and disposed of as part of the sale of Quilter International. The goodwill
allocated to the Quilter International disposal group was determined by reference to the value-in-use of Quilter International as a proportion of the
value-in-use of the Wealth Platforms operating segment to which it belonged at the point that held-for-sale accounting was first applied to the disposal
group. The Group subsequently changed its operating segments as disclosed in note 4.
Impairment review
In accordance with the requirements of IAS 36 Impairment of Assets, goodwill in both the Affluent and High Net Worth CGU groups is tested for
impairment annually, or earlier if an indicator of impairment exists, by comparing the carrying value of the CGU group to which the goodwill relates to
the recoverable value of that CGU group, being the higher of that CGU group’s value-in-use or fair value less costs to sell. If applicable, an impairment
charge is recognised when the recoverable amount is less than the carrying value. Goodwill impairment indicators include sudden stock market falls,
the absence of positive Net Client Cash Flows (“NCCF”), significant falls in profits and an increase in the discount rate.
During the year ended 31 December 2021, management considers there to be no indicators of impairment for continuing operations across the
Affluent and High Net Worth CGU groups. The impairment assessment was performed, using the latest cash flow forecasts from the Group’s three-year
business plan, approved by the Board. The Group’s business plan takes into account the increase in equity markets experienced in 2021, which has
resulted in an increase in the Group’s AuMA and revenue.
The following table details the separate percentage change required in each key assumption before the carrying value would exceed the recoverable
amount, assuming all other variables remain the same. The table continues to demonstrate that further adverse movements to the key assumptions
used in the CGU value-in-use calculation would be required before impairment is indicated.
Reduction in forecast cash flows
Increase in discount rate required
Affluent
72%
53%
High Net
Worth
73%
34%
Forecast cash flows are impacted by movements in underlying assumptions, including equity market levels, revenue margins and NCCF. The Group
considers that forecast cash flows are most sensitive to movements in equity markets because they have a direct impact on the level of the Group’s
fee income.
The principal sensitivity within equity market level assumptions relates to the estimated growth in equity market indices included in the three-year
revenue forecasts. Management forecasts equity market growth for each business using estimated asset specific growth rates that are supported
by internal research, historical performance, Bank of England forecasts and other external estimates.
Value-in-use methodology
The value-in-use calculations are determined as the sum of net tangible assets and the expected cash flows from existing and expected future new
business derived from the business plans. Future cash flow elements allow for the cost of capital needed to support the business.
The cash flows that have been used to determine the value-in-use of the CGUs are based on the most recent management approved three-year profit
forecasts, which incorporate anticipated equity market growth on the Group’s future cash flows, and costs associated with incorporating climate-
related risks within the Enterprise Risk Management Framework and climate-related financial disclosures. These cash flows change at different rates
because of the different strategies of the CGUs. In cases where the CGUs have made significant acquisitions in the recent past, the cash flows are
forecast to grow faster than the more mature businesses. Post the three-year forecasts, the growth rate used to determine the terminal value of the
CGUs in the annual assessment approximates to the UK long-term growth rate of 2% (2020: 0.6%). Market share and market growth information are
also used to inform the expected volumes of future new business.
IAS 36 does not permit any cost savings linked to future restructuring activity to be included within the value-in-use calculation unless an associated
restructuring provision has also been recognised. Consequently, for the purpose of the value-in-use calculation, a number of planned cost savings
(and the related implementation costs), primarily in relation to the Business Simplification programme, have been removed from the future cash flows.
The Group uses a single cost of capital of 9.5% (2020: 9.0%) to discount future expected business plan cash flows across its two groups of CGUs because
they are perceived to present a similar level of risk. Capital is provided to the Group predominantly by shareholders with a small amount of debt. The
cost of capital is the weighted average of the cost of equity (return required by shareholders) and the cost of debt (return required by bond and property
lease holders). When assessing the systematic risk (i.e. beta value) within the calculation of the cost of equity, a triangulation approach is used that
combines beta values obtained from historical data, a forward-looking view on the progression of beta values and the external views of investors.
Quilter Annual Report 2021
197
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
15: Property, plant and equipment
Gross amount
1 January 2020
Additions1
Disposals
31 December 2020
Additions2
Disposal of interests in subsidiaries
Disposals
31 December 2021
Accumulated depreciation and impairment losses
1 January 2020
Depreciation charge for the year
Impairment loss
Disposals
31 December 2020
Depreciation charge for the year
Disposal of interests in subsidiaries
Disposals
31 December 2021
Carrying value
31 December 2020
Right-of-use
assets
£m
Leasehold
improvements
£m
Plant and
equipment
£m
Total
£m
303
34
(51)
286
27
(48)
(18)
247
(160)
(20)
(3)
39
(144)
(16)
37
7
(116)
88
28
(4)
112
13
(16)
(2)
107
(73)
(4)
–
3
(74)
(6)
16
2
(62)
204
6
(44)
166
14
(32)
(16)
132
(80)
(15)
(3)
33
(65)
(10)
21
5
(49)
101
11
–
(3)
8
–
–
–
8
(7)
(1)
–
3
(5)
–
–
–
(5)
3
38
142
3
31 December 2021
1The majority of additions in the year ended 31 December 2020 relate to the lease for Senator House, the Group’s Head Office in London.
2The majority of additions in the year ended 31 December 2021 relate to the lease for Quilter House, the Group’s main Southampton property, and the recognition of revised
dilapidations provisions on properties in the lease portfolio.
45
83
131
The carrying value of right-of-use assets at 31 December 2021 relate to £83 million of property leases (31 December 2020: £101 million).
198
Quilter Annual Report 2021
16: Loans and advances
This note analyses the loans and advances the Group has made. The carrying amounts of loans and advances were as follows:
Loans to policyholders
Loans to advisers and brokers
Total net loans and advances
To be recovered within 12 months
To be recovered after 12 months
Total net loans and advances
31 December
2021
£m
31 December
2020
£m
–
29
29
7
22
29
186
33
219
195
24
219
Policyholder loans are amounts taken from an individual policyholder’s unit-linked accounts and loaned to the same policyholder. Policyholder loans
are non-interest bearing and are considered to be risk free from a shareholder perspective as the policyholder retains all associated risks. Policyholder
loans are considered to be recoverable within 12 months as they have no repayment schedule. Policyholder loans are measured at fair value.
Loans to policyholders reduced to £nil at 2021 (2020: £186 million) due to the sale of Quilter International.
Loans to advisers are made on individual commercial terms. The loan agreement with the adviser details the dates on which the repayments of the loan
are to be made. Where an adviser is due commission payments from Quilter, these commission payments are offset against the loan repayments due
from the adviser. In certain circumstances, the loan agreement period may be extended where agreed by both Quilter and the adviser. Should the
adviser terminate their terms of business agreement with Quilter, the loan balance becomes immediately repayable in full. Loans to advisers are
measured at amortised cost. The carrying amount of loans to advisers approximates to their fair value which is measured as the principal amount
receivable under the loan agreements.
17: Financial investments
The table below analyses the investments and securities that the Group invests in, either on its own proprietary behalf (shareholder funds) or on behalf
of third parties (policyholder funds).
Government and government-guaranteed securities
Other debt securities, preference shares and debentures
Equity securities
Pooled investments
Short-term funds and securities treated as investments
Total financial investments
Recoverable within 12 months
Recoverable after 12 months
Total financial investments
31 December
2021
£m
31 December
2020
£m
649
1,662
7,251
38,002
1
47,565
632
1,952
14,163
46,518
9
63,274
47,565
63,274
–
47,565
–
63,274
The financial investments recoverability profile is based on the intention with which the financial assets are held. These assets are held to cover the
liabilities for linked investment contracts, all of which can be withdrawn by policyholders on demand.
Quilter Annual Report 2021
199
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
18: Derivative financial instruments – assets and liabilities
The Group has limited involvement with derivative instruments and does not use them for speculation purposes. In past periods, derivative
instruments have been used to manage well-defined foreign exchange risks arising out of the normal course of business. The Group does not
anticipate any material adverse effect on its financial position resulting from its involvement in these types of contracts, nor does it anticipate
non-performance by counterparties. The Group only deals with highly rated counterparties.
The derivatives included within the statement of financial position at 31 December 2021 and 31 December 2020 relate to instruments included
as a consequence of the consolidation of investment funds.
19: Categories of financial instruments
The analysis of financial assets and liabilities into their categories as defined in IFRS 9 Financial Instruments is set out in the following tables. Assets
and liabilities of a non-financial nature, or financial assets and liabilities that are specifically excluded from the scope of IFRS 9, are reflected in the
non-financial assets and liabilities category.
For information about the methods and assumptions used in determining fair value, refer to note 20. The Group’s exposure to various risks associated
with financial instruments is discussed in note 37.
31 December 2021
Measurement basis
Assets
Investments in associated undertakings1
Loans and advances
Financial investments
Trade, other receivables and other assets
Derivative assets
Cash and cash equivalents
Total assets that include financial instruments
Total other non-financial assets
Total assets
Liabilities
Investment contract liabilities
Third-party interests in consolidation of funds
Borrowings and lease liabilities
Trade, other payables and other liabilities
Derivative liabilities
Total liabilities that include financial instruments
Total other non-financial liabilities
Total liabilities
Fair value
Mandatorily
at FVTPL
£m
Designated
at FVTPL
£m
Amortised
cost
£m
Non-financial
assets and
liabilities
£m
–
–
47,564
–
14
1,216
48,794
–
48,794
–
6,898
–
–
15
6,913
–
6,913
–
–
–
–
–
–
–
–
–
41,071
–
–
–
–
41,071
–
41,071
–
29
–
325
–
848
1,202
–
1,202
–
–
299
370
–
669
–
669
2
–
1
56
–
–
59
685
744
–
–
–
114
–
114
234
348
Total
£m
2
29
47,565
381
14
2,064
50,055
685
50,740
41,071
6,898
299
484
15
48,767
234
49,001
1Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.
200
Quilter Annual Report 2021
19: Categories of financial instruments continued
31 December 2020
Measurement basis
Assets
Investments in associated undertakings1
Loans and advances
Financial investments
Trade, other receivables and other assets
Derivative assets
Cash and cash equivalents
Total assets that include financial instruments
Total other non-financial assets
Total assets
Liabilities
Investment contract liabilities
Third-party interests in consolidation of funds
Borrowings and lease liabilities
Trade, other payables and other liabilities
Derivative liabilities
Total liabilities that include financial instruments
Total other non-financial liabilities
Total liabilities
Fair value
Mandatorily
at FVTPL
£m
Designated
at FVTPL
£m
Amortised
cost
£m
Non-financial
assets and
liabilities
£m
–
186
63,248
–
43
1,064
64,541
–
64,541
–
6,513
–
–
20
6,533
–
6,533
–
–
1
–
–
–
1
–
1
57,407
–
–
–
–
57,407
–
57,407
–
33
25
444
–
857
1,359
–
1,359
–
–
319
590
–
909
–
909
1
–
–
257
–
–
258
1,213
1,471
–
–
–
82
–
82
563
645
Total
£m
1
219
63,274
701
43
1,921
66,159
1,213
67,372
57,407
6,513
319
672
20
64,931
563
65,494
1Investments in associated undertakings classified as non-financial assets and liabilities are equity accounted.
20: Fair value methodology
This section explains the judgements and estimates made in determining the fair values of financial instruments that are recognised and measured at
fair value in the financial statements. Classifying financial instruments into the three levels of fair value hierarchy (see note 20(b)), prescribed under IFRS,
provides an indication about the reliability of inputs used in determining fair value.
20(a): Determination of fair value
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market exit prices
for assets and offer prices for liabilities, at the close of business on the reporting date, without any deduction for transaction costs:
– for units in unit trusts and shares in open-ended investment companies, fair value is determined by reference to published quoted prices
representing exit values in an active market;
– for equity and debt securities not actively traded in organised markets and where the price cannot be retrieved, the fair value is determined by
reference to similar instruments for which market observable prices exist;
– for assets that have been suspended from trading on an active market, the last published price is used. Many suspended assets are still regularly
priced. At the reporting date all suspended assets are assessed for impairment; and
– where the assets are private company shares or within consolidated investment funds, the valuation is based on the latest available set of audited
financial statements where available, or if more recent, financial statements for the fund or a statement of valuation provided by the management
of the private company or fund.
There have been no significant changes in the valuation techniques applied when valuing financial instruments. Where assets are valued by the Group,
the general principles applied to those instruments measured at fair value are outlined below:
Loans and advances
Loans and advances include loans to policyholders, loans to brokers, and other secured and unsecured loans. Loans and advances to policyholders
of investment-linked contracts are measured at fair value. All other loans are stated at their amortised cost.
Financial investments
Financial investments include government and government-guaranteed securities, listed and unlisted debt securities, preference shares and
debentures, listed and unlisted equity securities, listed and unlisted pooled investments (see below), short-term funds and securities treated
as investments and certain other securities.
Pooled investments represent the Group’s holdings of shares/units in open-ended investment companies, unit trusts, mutual funds and similar
investment vehicles. Pooled investments are recognised at fair value. The fair values of pooled investments are based on widely published prices
that are regularly updated.
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201
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For the year ended 31 December 2021 continued
20: Fair value methodology continued
20(a): Determination of fair value continued
Other financial investments that are measured at fair value use observable market prices where available. In the absence of observable market prices,
these investments and securities are fair valued utilising various approaches including discounted cash flows, the application of an earnings before
interest, tax, depreciation and amortisation multiple or any other relevant technique.
Derivatives
The fair value of derivatives is determined with reference to the exchange traded prices of the specific instruments. The fair value of over-the-counter
forward foreign exchange contracts is determined by the underlying foreign currency exchange rates.
Investment contract liabilities
The fair value of the investment contract liabilities is determined with reference to the underlying funds that are held by the Group.
Third-party interest in consolidated funds
Third-party interests in consolidated funds are measured at the attributable net asset value of each fund.
Borrowings and lease liabilities
Borrowings and lease liabilities are stated at amortised cost.
20(b): Fair value hierarchy
Fair values are determined according to the following hierarchy:
Description of hierarchy
Types of instruments classified in the respective levels
Level 1 – quoted market prices: financial assets and liabilities with
quoted prices for identical instruments in active markets.
Level 2 – valuation techniques using observable inputs: financial assets
and liabilities with quoted prices for similar instruments in active markets
or quoted prices for identical or similar instruments in inactive markets
and financial assets and liabilities valued using models where all
significant inputs are observable.
Listed equity securities, government securities and other listed debt
securities and similar instruments that are actively traded, actively
traded pooled investments, certain quoted derivative assets and
liabilities, policyholder loans (where they form part of a policyholder’s
unit-linked policy) and investment contract liabilities directly linked
to other Level 1 financial assets.
Unlisted equity and debt securities where the valuation is based
on models involving no significant unobservable data.
Over-the-counter (“OTC”) derivatives, certain privately placed debt
instruments and third-party interests in consolidated funds which meet
the definition of Level 2 financial instruments.
Level 3 – valuation techniques using significant unobservable inputs:
financial assets and liabilities valued using valuation techniques where
one or more significant inputs are unobservable.
Unlisted equity and securities with significant unobservable inputs,
securities where the market is not considered sufficiently active,
including certain inactive pooled investments.
The judgement as to whether a market is active may include, for example, consideration of factors such as the magnitude and frequency of trading
activity, the availability of prices and the size of bid/offer spreads. In inactive markets, obtaining assurance that the transaction price provides evidence
of fair value or determining the adjustments to transaction prices that are necessary to measure the fair value of the asset or liability requires additional
work during the valuation process.
The majority of valuation techniques employ only observable data and so the reliability of the fair value measurement is high. However, certain financial
assets and liabilities are valued on the basis of valuation techniques that feature one or more significant inputs that are unobservable and, for them, the
derivation of fair value is more judgemental. A financial asset or liability in its entirety is classified as valued using significant unobservable inputs if a
significant proportion of that asset or liability’s carrying amount is driven by unobservable inputs.
In this context, ‘unobservable’ means that there is little or no current market data available from which to determine the price at which an arm’s length
transaction would be likely to occur. It generally does not mean that there is no market data available at all upon which to base a determination of fair
value. Furthermore, in some cases the majority of the fair value derived from a valuation technique with significant unobservable data may be
attributable to observable inputs. Consequently, the effect of uncertainty in determining unobservable inputs will generally be restricted to uncertainty
about the overall fair value of the asset or liability being measured.
20(c): Transfer between fair value hierarchies
The Group deems a transfer to have occurred between Level 1 and Level 2 or Level 3 when an active, traded primary market ceases to exist for that
financial instrument. A transfer between Level 2 and Level 3 occurs when the majority of the significant inputs used to determine fair value of the
instrument become unobservable. Transfers from Levels 3 or 2 to Level 1 are also possible when assets become actively priced.
There were transfers of financial investments of £16 million from Level 1 to Level 2 during the year (31 December 2020: £9 million). There were transfers
of financial investments of £85 million from Level 2 to Level 1 during the year (31 December 2020: £3 million). These movements are matched closely by
transfers of investment contract liabilities. See note 20(e) for the reconciliation of Level 3 financial instruments.
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Quilter Annual Report 2021
20: Fair value methodology continued
20(d): Financial assets and liabilities measured at fair value, classified according to fair value hierarchy
The majority of the Group’s financial assets are measured using quoted market prices for identical instruments in active markets (Level 1) and there
have been no significant changes during the year.
The linked assets are held to cover the liabilities for linked investment contracts (net of reinsurance). The difference between linked assets and linked
liabilities is principally due to short-term timing differences between policyholder premiums being received and invested in advance of policies being
issued, and tax liabilities within funds which are reflected within the Group’s tax liabilities.
Differences between assets and liabilities within the respective levels of the fair value hierarchy also arise due to the mix of underlying assets and
liabilities within consolidated funds. In addition, third-party interests in consolidated funds are classified as Level 2.
The table below presents a summary of the Group’s financial assets and liabilities that are measured at fair value in the consolidated statement
of financial position according to their IFRS 9 classification (see note 19 for full details).
Financial assets measured at fair value
Level 1
Level 2
Level 3
Total
Financial liabilities measured at fair value
Level 1
Level 2
Level 3
Total
31 December 2021
31 December 2020
£m
%
£m
%
41,996
6,771
27
86.0%
13.9%
0.1%
48,794
100.0%
41,047
6,913
24
85.5%
14.4%
0.1%
47,984
100.0%
56,927
5,793
1,822
64,542
55,135
6,985
1,820
63,940
88.2%
9.0%
2.8%
100.0%
86.3%
10.9%
2.8%
100.0%
The tables below further analyse the Group’s financial assets and liabilities measured at fair value by the fair value hierarchy described in note 20(b):
31 December 2021
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)
Financial investments
Cash and cash equivalents
Derivative assets
Total assets measured at fair value
Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)
Third-party interests in consolidated funds
Derivative liabilities
Designated (fair value through profit or loss)
Investment contract liabilities
Level 1
£m
41,996
40,780
1,216
–
Level 2
£m
6,771
6.757
–
14
41,996
6,771
–
–
–
41,047
41,047
6,913
6,898
15
–
–
Total liabilities measured at fair value
41,047
6,913
Level 3
£m
Total
£m
27
27
–
–
27
–
–
–
24
24
24
48,794
47,564
1,216
14
48,794
6,913
6,898
15
41,071
41,071
47,984
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203
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For the year ended 31 December 2021 continued
20: Fair value methodology continued
20(d): Financial assets and liabilities measured at fair value, classified according to fair value hierarchy continued
31 December 2020
Financial assets measured at fair value
Mandatorily (fair value through profit or loss)
Loans and advances1
Financial investments
Cash and cash equivalents
Derivative assets
Designated (fair value through profit or loss)
Financial investments
Level 1
£m
56,926
186
55,676
1,064
–
1
1
Level 2
£m
5,793
–
5,750
–
43
–
–
Level 3
£m
1,822
–
1,822
–
–
–
–
Total
£m
64,541
186
63,248
1,064
43
1
1
Total assets measured at fair value
56,927
5,793
1,822
64,542
Financial liabilities measured at fair value
Mandatorily (fair value through profit or loss)
Third-party interests in consolidated funds
Derivative liabilities
Designated (fair value through profit or loss)
Investment contract liabilities
–
–
–
55,135
55,135
6,533
6,513
20
452
452
–
–
–
1,820
1,820
6,533
6,513
20
57,407
57,407
Total liabilities measured at fair value
55,135
6,985
1,820
63,940
1Loans and advances mandatorily at fair value through profit or loss, included within fair value Level 1, solely relate to policyholder loans in Quilter International.
20(e): Level 3 fair value hierarchy disclosure
The majority of the assets classified as Level 3 are held within linked policyholder funds. Where this is the case, all of the investment risk associated with
these assets is borne by policyholders and the value of these assets is exactly matched by a corresponding liability due to policyholders. The Group
bears no risk from a change in the market value of these assets except to the extent that it has an impact on management fees earned.
During the year ended 31 December 2021, Level 3 assets also include investments within consolidated funds to the value of £1 million (31 December
2020: £2 million) relating to private equity investments. The Group bears no risk from a change in the market value of these assets and any changes
in market value are matched by a corresponding Level 2 liability within Third-party interests in consolidated funds.
The table below reconciles the opening balance of Level 3 financial assets to the closing balance at each year end:
At beginning of the year
Fair value losses charged to income statement
Purchases
Sales
Transfers in
Transfers out
Disposal of subsidiaries2
Foreign exchange and other movements
Total Level 3 financial assets
Unrealised fair value losses charged to income statement relating to assets held at the year end
31 December
2021
£m
31 December
20201
£m
1,822
(3)
–
–
8
(393)
(1,406)
(1)
27
(4)
1,717
(121)
16
(8)
930
(714)
–
2
1,822
(110)
1During the year ended 31 December 2020, Level 3 assets also included a shareholder investment in suspended funds of £2 million; this was not matched by a corresponding
liability and therefore the changes in market value were recognised in the Group’s consolidated income statement.
2During the year ended 31 December 2021, Level 3 assets decreased by £1,406 million following the sale of Quilter International to Utmost Group.
204
Quilter Annual Report 2021
20: Fair value methodology continued
20(e): Level 3 fair value hierarchy disclosure continued
Transfers into Level 3 assets in the current year total £8 million (31 December 2020: £930 million). This is mainly due to suspended funds previously
shown within Level 1. Suspended funds are valued based on external valuation reports received from fund managers. Transfers out of Level 3 assets
in the current year of £393 million (31 December 2020: £714 million) result from a transfer to Level 1 assets relating to assets that are now being actively
repriced (that were previously stale) and where fund suspensions have been lifted.
The table below analyses the type of Level 3 financial assets held:
Pooled investments
Unlisted and stale price pooled investments
Suspended funds
Private equity investments
Total Level 3 financial assets
31 December
2021
£m
31 December
2020
£m
26
1
25
1
27
522
87
435
1,300
1,822
All of the liabilities that are classified as Level 3 are investment contract liabilities which exactly match against the Level 3 assets held in linked
policyholder funds.
The table below reconciles the opening balance of Level 3 financial liabilities to the closing balance at each year end:
At beginning of the year
Fair value losses charged to the income statement
Purchases
Sales
Transfers in
Transfers out
Disposal of subsidiaries
Foreign exchange and other movements
Total Level 3 financial liabilities
Unrealised fair value losses charged to the income statement relating to liabilities held at the year end
31 December
2021
£m
31 December
2020
£m
1,820
(3)
–
–
5
(391)
(1,406)
(1)
24
(4)
1,717
(120)
16
(8)
927
(714)
–
2
1,820
(110)
Quilter Annual Report 2021
205
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
20: Fair value methodology continued
20(f): Effect of changes in significant unobservable assumptions to reasonable possible alternatives
Details of the valuation techniques applied to the different categories of financial instruments can be found in note 20(a) above, including the valuation
techniques applied when significant unobservable assumptions are used to value Level 3 assets.
The majority of the Group’s Level 3 assets at 31 December 2020 were held within private equity investments, where the valuation of these assets was
performed on an asset-by-asset basis using a valuation methodology appropriate to the specific investment and in line with industry guidelines. Private
equity investments are valued at the value disclosed in the latest available set of audited financial statements or, if more recent information is available,
from investment managers or professional valuation experts at the value of the underlying assets of the private equity investment. For this reason, no
reasonable alternative assumptions are applicable and the Group therefore performs a sensitivity test of an aggregate 10% change in the value of the
financial asset or liability (31 December 2020: 10%), representing a reasonable possible alternative judgement in the context of the current macro-
economic environment in which the Group operates. It is therefore considered that the impact of this sensitivity will be in the range of £2 million to the
reported fair value of Level 3 assets, both favourable and unfavourable (31 December 2020: £182 million). As described in note 20(e), changes in the
value of Level 3 assets held within linked policyholder funds are exactly matched by corresponding changes in the value of liabilities due to
policyholders and therefore have no impact on the Group’s net asset value or profit or loss, except to the extent that it has an impact on management
fees earned.
20(g): Fair value hierarchy for assets and liabilities not measured at fair value
Certain financial instruments of the Group are not carried at fair value. The carrying values of these are considered reasonable approximations of their
respective fair values, as they are either short term in nature or are repriced to current market rates at frequent intervals. Their classification within the
fair value hierarchy would be as follows:
Trade, other receivables, and other assets
Trade, other payables, and other liabilities
Level 3
Level 3
Cash and cash equivalents (excluding money market funds) are held at amortised cost and therefore not carried at fair value. The cash and cash
equivalents that are held at amortised cost would be classified as Level 1 in the fair value hierarchy.
Fixed-term deposits, which are included within Financial investments, are held at amortised cost and therefore not carried at fair value. The fixed-term
deposits that are held at amortised cost would be classified as Level 1 in the fair value hierarchy.
Loans and advances are financial assets held at amortised cost and therefore not carried at fair value, with the exception of policyholder loans which
are categorised as FVTPL. The loans and advances that are held at amortised cost would be classified as Level 3 in the fair value hierarchy.
Borrowed funds are financial liabilities held at amortised cost and therefore not carried at fair value. Borrowed funds relate to subordinated liabilities
and would be classified as Level 2 in the fair value hierarchy.
Lease liabilities valued under IFRS 16 are held at amortised cost and therefore not carried at fair value. They would be classified as Level 3 in the fair
value hierarchy.
206
Quilter Annual Report 2021
21: Structured entities
Structured entities are defined as entities that have been designed so that voting or similar rights are not the dominant factor in deciding who controls
the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual
arrangements. The Group has interests in both consolidated and unconsolidated structured entities.
21(a): Group’s involvement in structured entities
The Group invests in collective investment vehicles, including open-ended investment companies (“OEICs”) and unit trusts, in order to match unit-linked
investment contract liabilities. This means that all of the investment risk associated with these assets is borne by policyholders and any change in the
value of these assets is closely matched by a corresponding change in liability due to policyholders. As the Group earns management fees based on the
market value of unit-linked assets, any change in asset values will increase or decrease the Group’s revenues. The Group has not provided any
non-contractual support to any consolidated or unconsolidated structured entities during 2020 and 2021.
As at 31 December 2020 and 31 December 2021, the Group has no obligation or intention to provide financial support to structured entities that could
expose the Group to a loss.
In addition, shareholder funds are also invested in collective investment vehicles, principally in respect of money market funds as an alternative
to bank deposits.
The Group’s holdings in collective investment vehicles are subject to the terms and conditions of the respective investment vehicles’ offering
documentation and are susceptible to market price risk arising from uncertainties about the future values of those investment vehicles. All of the
investment vehicles in the investment portfolios are managed by portfolio managers who are compensated by the respective investment vehicles
for their services. Such compensation generally consists of an asset-based fee and a performance-based incentive fee and is reflected in the valuation
of the investment vehicles.
These structured entities are not consolidated where the Group determines that it does not have control.
21(b): Interests in unconsolidated structured entities
The Group invests in unconsolidated structured entities as part of its normal investment and trading activities. The Group’s total interest in
unconsolidated structured entities is classified as financial investments held mandatorily at fair value through profit or loss. The table below provides
a summary of the carrying value of the Group’s interests in unconsolidated structured entities:
Financial investments
Cash and cash equivalents
Total Group interest in unconsolidated structured entities
31 December
2021
£m
31 December
2020
£m
34,928
1,216
36,144
43,737
1,064
44,801
The Group’s maximum exposure to loss with regard to the Group’s interests in unconsolidated structured entities presented above, before
consideration of the reduction in unit-linked liabilities, is the carrying amount of the Group’s investments (31 December 2021: £36,144 million;
31 December 2020: £44,801 million). The majority of the exposure relates to unit-linked products and therefore any movement in the Group’s
investment will be offset by a corresponding movement in investment contract liabilities. Once the Group has disposed of its shares or units in a fund,
it ceases to be exposed to any risk from that fund. The Group’s holdings in the above unconsolidated structured entities are less than 50% and as such
the net asset value of these structured entities is significantly higher than the carrying value of the Group’s interest.
21(c): Consolidation considerations for structured entities managed by the Group
The Group acts as fund manager to a number of investment funds. Determining whether the Group controls such an investment fund usually focuses
on the assessment of decision-making rights as fund manager, the investor’s rights to remove the fund manager and the aggregate economic interests
of the Group in the fund in the form of interest held and exposure to variable returns.
In most instances, the Group’s decision-making authority, in its capacity as fund manager, with regard to these funds is regarded to be well-defined.
Discretion is exercised when decisions regarding the relevant activities of these funds are being made. For funds managed by the Group where the
investors have the right to remove the Group as fund manager without cause, the fees earned by the Group are considered to be market related. These
agreements include only terms, conditions or amounts that are customarily present in arrangements for similar services and level of skills negotiated on
an arm’s length basis. The Group has concluded that it acts as agent on behalf of the investors in all instances.
The Group is considered to be acting as principal where the Group is the fund manager and is able to make the investment decisions on behalf of the
unit holders and earn a variable fee, and there are no kick out rights that would remove the Group as fund manager.
There have been no changes in facts or circumstances which have changed the Group’s conclusion on the consolidation of funds.
21(d): Other interests in unconsolidated structured entities
At the current and prior reporting date, the Group held units in each of the investment funds it managed.
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207
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
22: Trade, other receivables and other assets
This note analyses total trade, other receivables and other assets.
Outstanding settlements
Other receivables
Accrued interest
Accrued income
Fee income receivable
Other accruals and prepayments
Contract assets
Management fees
Total trade, other receivables and other assets
To be settled within 12 months
To be settled after 12 months
Total trade, other receivables and other assets
31 December
2021
£m
31 December
2020
£m
181
103
1
40
–
36
11
9
381
381
–
381
277
120
4
31
192
49
12
16
701
555
146
701
Other receivables mainly relate to trade debtors, tax debtors and other debtors.
Fee income receivable reduced to £nil at 2021 (2020: £192 million) due to the sale of Quilter International.
There have been no non-performing receivables or material impairments in the financial year that require disclosure. Information about the Group’s
expected credit losses on trade receivables is included in note 37(b). None of the receivables reflected above have been subject to the renegotiation
of terms.
23: Contract costs
Contract costs (on investment contracts and asset management contracts) relate to costs that the Group incurs to obtain new business. These
acquisition costs are capitalised in the statement of financial position and are amortised in profit or loss over the life of the contracts. The table below
analyses the movements in these balances relating to investment and asset management contracts.
Investment
contracts
£m
Asset
management
£m
452
1
(1)
–
29
(72)
(43)
2
411
2
–
2
24
(45)
(21)
(383)
(3)
6
3
–
(1)
(1)
–
–
–
–
2
1
–
1
–
–
–
–
–
3
Total
£m
455
1
(2)
(1)
29
(72)
(43)
2
413
3
–
3
24
(45)
(21)
(383)
(3)
9
1 January 2020
New business
Amortisation
Continuing operations movement
New business
Amortisation
Discontinued operations movement
Foreign exchange
31 December 2020
New business
Amortisation
Continuing operations movement
New business
Amortisation
Discontinued operations movement
Disposal of subsidiaries
Foreign exchange
31 December 2021
208
Quilter Annual Report 2021
24: Cash and cash equivalents
24(a): Analysis of cash and cash equivalents
Cash at bank
Money market funds
Cash and cash equivalents in consolidated funds
Total cash and cash equivalents per statement of financial position
31 December
2021
£m
31 December
2020
£m
559
1,216
289
2,064
550
1,064
307
1,921
The Group’s management does not consider that the cash and cash equivalents balance arising due to consolidation of funds £289 million
(2020: £307 million) is available for use in the Group’s day-to-day operations. The remainder of the Group’s cash and cash equivalents balance
of £1,775 million (2020: £1,614 million) is considered to be available for use by the Group.
24(b): Analysis of net cash flows from operating activities:
Cash flows from operating activities
Profit before tax from continuing operations
Profit before tax from discontinued operations
Adjustments for
Depreciation and impairment of property, plant and equipment
Movement on contract costs
Movement on contract liabilities and fee income receivable
Amortisation and impairment of intangibles
Fair value and other movements in financial assets
Fair value movements in investment contract liabilities
Other change in investment contract liabilities
(Profit)/loss on sale of subsidiaries
Other movements
Net changes in working capital
Decrease/(increase) in derivatives
Decrease/(increase) in loans and advances
Increase in provisions
Movement in other assets/liabilities1
Taxation paid
Net cash flows from operating activities
1Working capital changes in respect of other assets and liabilities primarily relate to consolidated funds.
31 December
2021
£m
31 December
2020
£m
Notes
6(c)
15
23
32
14
27
6(a)
16
28
85
131
216
16
18
10
47
(5,102)
4,467
3,454
(91)
32
2,851
24
15
17
(20)
36
(10)
9
76
85
23
44
(7)
47
(3,319)
2,632
2,187
1
40
1,648
(11)
(5)
1
(245)
(260)
(28)
3,093
1,445
Quilter Annual Report 2021
209
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
24: Cash and cash equivalents continued
24(c): Cash flows from financing activities is further analysed below:
Liabilities
Equity1
Borrowings and
lease liabilities
£m
Deposits from
reinsurers
£m
Changes in equity
£m
Total
£m
1,878
2,197
Note 30
319
(9)
–
–
(12)
(21)
9
(8)
–
1
–
299
–
–
–
–
–
–
–
–
–
–
–
(89)
(197)
–
(286)
–
–
–
147
1,739
(9)
(89)
(197)
(12)
(307)
9
(8)
–
1
147
2,038
Total
£m
Liabilities
Equity1
Borrowings and
lease liabilities
£m
Deposits from
reinsurers
£m
Changes in equity
£m
Note 30
335
16
2,071
2,422
(9)
(16)
(25)
9
(1)
1
9
–
319
(1)
–
–
(1)
–
(15)
(15)
–
–
–
(81)
(198)
–
(279)
–
–
–
–
86
(10)
(81)
(198)
(16)
(305)
9
(1)
(14)
(6)
86
1,878
2,197
31 December 2021
Opening balance at 1 January 2021
Cash flows from financing activities
Liability related:
Finance costs on external borrowings
Equity related:
Dividends paid to ordinary equity holders of the Company
Repurchase of own shares
Payment of lease liabilities
Cash flows from financing activities
Other changes
External debt interest accrual
Changes in lease liabilities
Other changes in liabilities
Liability related
Equity related
31 December 2021
31 December 2020
Opening balance at 1 January 2020
Cash flows from financing activities
Liability related:
Finance costs on external borrowings
Equity related:
Dividends paid to ordinary equity holders of the Company
Repurchase of own shares
Payment of lease liabilities
Cash flows from financing activities
Other changes
External debt interest accrual
Changes in lease liabilities
Other changes in liabilities
Liability related
Equity related
31 December 2020
1Full details of changes in equity are shown in the consolidated statement of changes in equity.
210
Quilter Annual Report 2021
25: Share capital, capital redemption reserve and merger reserve
Financial instruments issued are classified as equity when there is no contractual obligation to transfer cash, other financial assets or issue a variable
number of own equity instruments. Incremental costs directly attributable to the issue of equity instruments are shown in equity as a deduction from
the proceeds, net of tax. At 31 December 2021, the Parent Company’s equity capital comprises 1,655,827,217 Ordinary Shares of 7 pence each with an
aggregated nominal value of £115,907,905 (31 December 2020: 1,783,969,051 Ordinary Shares of 7 pence each with an aggregated nominal value of
£124,877,834).
This note gives details of the Company’s Ordinary Share capital, shows the movements during the year and gives details of the release of £124 million
of the merger reserve:
At 1 January 2020
Shares cancelled through share buyback programme
At 31 December 2020
Shares cancelled through share buyback programme
At 31 December 2021
Number of shares
Nominal value
£m
Share premium
£m
1,902,251,098
(118,282,047)
1,783,969,051
(128,141,834)
1,655,827,217
133
(8)
125
(9)
116
58
58
58
25(a): Share capital
On 11 March 2020, the Company announced a share buyback programme to purchase shares up to a maximum value of £375 million, in order to return
the net surplus proceeds to shareholders arising from the sale of Quilter Life Assurance which had the impact of reducing the share capital of the Company.
During the year ended 31 December 2021, the Company acquired the committed remainder from 2020 and, as part of tranches 3 and 4 of the share
buyback, a further 128.1 million shares (31 December 2020: 118.3 million) for a total consideration of £197 million (31 December 2020: £153 million)
and incurred additional costs of £3 million (31 December 2020: £4 million). The shares, which had a nominal value of £9 million (31 December 2020:
£8 million), have subsequently been cancelled, increasing the capital redemption reserve of the same value as required by the Companies Act 2006.
At 31 December 2021, the committed remaining share buyback for which a legally binding instruction had been provided by the Board, of £26 million
(31 December 2020: £22 million) was accrued as a liability against retained earnings.
There is one class of Ordinary Share of 7 pence each. All share issued carry equal voting rights. The holders of the Company’s Ordinary Shares are
entitled to receive dividends as declared and are entitled to one vote per share at shareholder meetings of the Company.
25(b): Merger reserve
During the year ended 31 December 2021, there was a dividend paid by Quilter Perimeter Holdings Limited up to its Parent Quilter plc. The resulting
decrease in Quilter Perimeter Holdings Limited’s net asset value gave rise to a £124 million impairment of Quilter plc’s investment in Quilter Perimeter
Holdings Limited and an associated release of the merger reserve reducing it to £25 million.
26: Share-based payments
During the year ended 31 December 2021, the Group participated in a number of share-based payment arrangements. This note describes the nature
of the plans and how the share options and awards are valued.
26(a): Description of share-based payment arrangements
The Group operates the following share-based payment schemes with awards over Quilter plc shares: the Quilter plc Performance Share Plan, the
Quilter plc Share Reward Plan, the Quilter plc Share Incentive Plan, the Quilter plc Sharesave Plan, the Old Mutual Wealth Phantom Share Reward Plan,
and the Charles Derby Group Performance Share Plan.
Quilter Annual Report 2021
211
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
26: Share-based payments continued
26(a): Description of share-based payment arrangements continued
Scheme
Quilter plc Performance Share Plan
Quilter plc Performance Share Plan
Quilter plc Share Reward Plan
Quilter plc Share Incentive Plan
Quilter plc Sharesave Plan3
Old Mutual Wealth Phantom Share
Reward Plan4
Charles Derby Group Performance
Share Plan
Description of award
Vesting conditions
Restricted
shares
Conditional
shares
–
–
–
–
–
–
–
–
–
–
Options
–
–
–
–
Other
–
–
–
–
–
–
Dividend
entitlement1
Contractual
life
(years)
Up to 10
Not less
than 3
Typically, 3
Not less
than 3
3½ – 5½
–
Typically, 3
Up to 10
Typical
service
(years)
Performance
(measure)
3 AP EPS CAGR2
and Relative
Total
Shareholder
Return
3 Conduct, Risk
& Compliance
Underpins
3
2
3 & 5
3
5
–
–
–
–
AP EPS CAGR
1Participants are entitled to actual dividends for the Share Incentive Plan. For all other schemes, participants are entitled to dividend equivalents.
2Adjusted Profit compound annual growth rate (“CAGR”).
3The Quilter plc Sharesave Plan is linked to a savings plan.
4Awards granted under the Phantom Share Reward Plan prior to the demerger of Quilter plc were made over notional Ordinary Shares in Old Mutual plc that were settled in cash
on the vesting date. Upon the demerger and listing of Quilter plc, all unvested notional share awards were converted to conditional awards over Ordinary Shares in Quilter plc,
which will be settled in Quilter plc shares on the normal vesting dates.
26(b): Reconciliation of movements in options
The movement in options outstanding under the Performance Share Plans and Sharesave Plan arrangements during the year is detailed below:
Options over Ordinary Shares
(London Stock Exchange)
Outstanding at beginning of the year
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Cancelled during the year
Outstanding at end of the year
Exercisable at end of the year
Year ended
31 December 2021
Year ended
31 December 2020
Number of
options
Weighted average
exercise price
Number of
options
Weighted average
exercise price
24,898,095
6,315,110
(1,544,730)
(1,609,808)
(220,391)
(649,710)
27,188,566
–
£0.54
£0.86
£0.38
£0.27
£1.25
£1.27
£0.62
–
24,707,734
3,016,429
(976,874)
(620,349)
(287,816)
(941,029)
24,898,095
–
£0.65
£0.00
£0.85
£0.51
£1.25
£1.25
£0.54
–
The weighted average fair value of options at the measurement date for options granted during the year ended 31 December 2021 is £0.68, and for the
year ended 31 December 2020 was £0.95. The weighted average share price at the dates of exercise for options exercised during the year was £1.62.
The options outstanding at 31 December 2021 have exercise prices of £nil for both the Quilter plc Performance Share Plan and the Charles Derby
Group Performance Share Plan, and between £1.25 and £1.31 for the Quilter plc Sharesave Plan, with a weighted average remaining contractual life
of 1.3 years. At 31 December 2020, the exercise price was £nil for both the Quilter plc Performance Share Plan and Charles Derby Group Performance
Share Plan, and £1.25 for the Quilter plc Sharesave Plan, with a weighted average remaining contractual life of 1.8 years.
26(c): Measurements and assumptions
In determining the fair value of equity-settled share-based awards and the related charge to the income statement, the Group makes assumptions
about future events and market conditions. Specifically, management makes estimates of the likely number of shares that will vest and the fair value
of each award granted which is valued and ‘locked in’ at the grant date.
The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate
of fair value of share options granted is measured using either a Black-Scholes option pricing model or a Monte Carlo simulation.
212
Quilter Annual Report 2021
26: Share-based payments continued
26(c): Measurements and assumptions continued
The inputs used in the measurement of fair values at the grant date for awards granted during 2021 were as follows:
Scheme
Quilter plc Performance Share Plan
– Share Options (Nil cost options)
Quilter plc Performance Share Plan
– Conditional Shares
Quilter plc Share Reward Plan
– Conditional Shares
Quilter plc Sharesave Plan
Weighted
average
share
price
£
Weighted
average
exercise
price
£
Weighted
average
expected
volatility
Weighted
average
expected
life
(years)
Weighted
average
risk-free
interest
rate
Weighted
average
expected
dividend
yield
Expected
forfeitures
per annum
1.64
0.00
33%
1.62
0.00
33%
1.64
1.59
0.00
1.31
32%
29%
3.0
3.0
1.9
3.5
0.2%
0.0%
0.2%
0.0%
0.1%
0.2%
0.0%
3.1%
0%
4%
4%
5%
The expected volatility used was based on the historical volatility of the share price over the period for which trading history is available. The risk-free
interest rate was based on the yields available on UK Government bonds as at the date of grant. The bonds chosen were those with a similar remaining
term to the expected life of the share awards.
26(d): Share grants
The following summarises the fair value of Conditional Shares granted by the Group during the year:
Instruments granted during the year
Quilter plc Performance Share Plan – Conditional Shares
Quilter plc Share Reward Plan – Conditional Shares
Year ended
31 December 2021
Year ended
31 December 2020
Number
granted
3,854,809
4,243,273
Weighted
average
fair value
£1.64
£1.64
Number
granted
4,911,597
13,471,153
Weighted
average
fair value
£1.17
£1.17
26(e): Financial impact
The share-based payment reserve of £42 million (31 December 2020: £42 million) represents the cumulative expense of the Group for the unsettled
portion of equity awarded schemes.
The total expense recognised in the year arising from equity compensation plans was as follows:
Expense arising from equity-settled share and share option plans – continuing operations
Expense arising from equity-settled share and share option plans – discontinued operations
Total expense arising from share and share option plans
Year ended
31 December
2021
£m
Year ended
31 December
2020
£m
19
1
20
24
1
25
Quilter Annual Report 2021
213
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
27: Investment contract liabilities
The following table provides a summary of the Group’s investment contract liabilities:
Carrying amount at 1 January
From continuing operations
Fair value movements
Investment income
Movements arising from investment return
From discontinued operations
Fair value movements
Investment income
Movements arising from investment return
Contributions received
Maturities
Withdrawals and surrenders
Claims and benefits
Other movements
Change in liability
Currency translation (gain)/loss
Disposal of subsidiaries
Investment contract liabilities at 31 December
2021
£m
2020
£m
57,407
52,455
2,821
472
3,293
1,646
172
1,818
6,837
(406)
(3,460)
(162)
1
7,921
(199)
(24,058)
41,071
1,760
512
2,272
872
184
1,056
4,871
(97)
(3,226)
(59)
2
4,819
133
–
57,407
For unit-linked investment contracts, movements in asset values are offset by corresponding changes in liabilities, limiting the net impact on profit.
The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the return on their selected
investments and collective fund investments, whose underlying investments include equities, debt securities, property and derivatives. This
investment mix is unique to individual policyholders.
The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There will be no difference between
the carrying amount and the maturity amount at maturity date.
For unit-linked business, the unit liabilities are determined as the value of units credited to policyholders. Since these liabilities are determined on a
retrospective basis no assumptions for future experience are required. Assumptions for future experience are required for unit-linked business in
assessing whether the total of the contract costs asset and contract liability is greater than the present value of future profits expected to arise on the
relevant blocks of business (the “recoverability test”). If this is the case, then the contract costs asset is restricted to the recoverable amount. For linked
contracts, the assumptions are on a best estimate basis.
214
Quilter Annual Report 2021
28: Provisions
31 December 2021
Balance at beginning of the year
Charge to income statement1
Utilised during the period
Unused amounts reversed
Reclassification within statement of financial position2
Disposals
Balance at 31 December 2021
31 December 2020
Balance at beginning of the year
Additions from business combinations
Charge to income statement1
Utilised during the year
Unused amounts reversed
Reclassification within statement of financial position
Compensation
provisions
£m
Sale of
subsidiaries
£m
Property
provisions
£m
Clawback and
other
provisions
£m
42
23
(12)
(10)
–
(2)
41
10
17
(4)
(1)
–
–
22
–
7
–
–
2
–
9
25
2
(4)
(5)
3
–
21
Compensation
provisions
£m
Sale of
subsidiaries3
£m
Property
provisions
£m
Clawback and
other
provisions
£m
31
12
10
(5)
(6)
–
16
–
–
(4)
(2)
–
–
–
–
–
–
–
17
–
1
(4)
(3)
14
Total
£m
77
49
(20)
(16)
5
(2)
93
Total
£m
64
12
11
(13)
(11)
14
Balance at 31 December 2020
1Part of the charge to income statement is included within the discontinued operations income statement.
2Property provisions related to dilapidations and other provisions related to historical licence agreements have been reclassified during the year from lease liabilities and accruals
respectively reflecting the uncertainty of the amounts to be settled. During 2020, the Clawback provision was reclassified, with the liability due to product providers on indemnity
commission disclosed within provisions and the recoverable amount from brokers disclosed within receivables.
3Sale of subsidiaries in the year ended 31 December 2020 was previously split between provisions related to the sale of QLA (balance of £3 million) and the sale of the Single
Strategy business (balance of £7 million).
77
42
25
10
–
Compensation provisions
Compensation provisions total £41 million (31 December 2020: £42 million), and are comprised of the following:
Lighthouse pension transfer advice provision of £29 million (31 December 2020: £28 million)
Lighthouse pension transfer advice provided to British Steel members £21 million (31 December 2020: £28 million)
A provision for DB to DC pension transfer advice provided by Lighthouse advisers in respect of pension transfers for British Steel Pension Scheme
members, prior to Lighthouse transitioning to our systems and controls following our acquisition of Lighthouse, was established within the fair value
of the Lighthouse assets and liabilities acquired.
During 2020, the FCA reported the results of its thematic review into the general market of DB to DC pension transfers, which included British Steel
Pension Scheme pension transfers. The FCA review determined that the percentage of unsuitable files for British Steel Pension Scheme transfers
generally for the industry was higher than those for other DB to DC pension transfers in their thematic sample. The FCA review included a sample
of British Steel Pension Scheme pension transfer advice provided by Lighthouse advisers.
In April 2020, the Group was informed by the FCA that it would be required to appoint a skilled person to review the DB to DC pension transfers
that Lighthouse advisers advised on in the period up to Lighthouse transitioning to Quilter’s systems and controls following Quilter’s acquisition of
Lighthouse. A skilled person was appointed, and during 2020 they performed initial provisional calculations for a significant portion of the British Steel
Pension Scheme complaints received by Lighthouse where the advice given to customers was assessed as being unsuitable to obtain an indication
of how much redress (if any) may be payable to these customers to the extent that they sustained losses as a result of that unsuitable advice. The
methodology employed to perform these initial provisional redress calculations uses assumptions and estimation techniques which are consistent with
principles under the FCA’s FG17/9 “Guidance for firms on how to calculate redress for unsuitable defined benefit pension transfers”. The provisional
redress amounts calculated on the complaints were extrapolated to the entire population of 266 British Steel Pension Scheme transfers on which
Lighthouse advisers provided advice and the relevant customers proceeded to make a transfer, in order to determine an approximation of the
estimated redress that may be payable to customers who are found to have received unsuitable advice which caused them to sustain losses. The
provision was determined by (a) subdividing the population into cohorts with similar characteristics, including the results in 2020 of the skilled person’s
assessment of the number of cases where unsuitable advice was given, and also (b) dividing the population into transfers pre and post June 2017 when
the Trustees of the British Steel Pension Scheme changed the basis on which transfer values were calculated. The timing of any benefits withdrawn by
the member after the transfer also has an impact upon the provisional redress amounts calculated. The estimated redress per client as a proportion
of the transfer value of the pensions was determined for each cohort and extrapolated to the population of cases assessed as unsuitable where advice
was provided and acted upon through Lighthouse.
Quilter Annual Report 2021
215
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
28: Provisions continued
During 2021, a loss assessment and redress calculation methodology has been designed by the skilled person following discussions and in
collaboration with the FCA, to ensure consistency and compliance with the FCA’s Final Guidance 17/9, which is being used to calculate redress offers
for those cases where the skilled person determines that a customer received unsuitable defined benefit pension transfer advice which caused them
to sustain losses. At 31 December 2021, offers relating to the majority of the provision balance have been made to customers and, subject to FCA
confirmation, we expect the skilled person review to be completed during 2022. The majority of suitability reviews were completed by the skilled person
during the year. The provision has been updated at 31 December 2021 reflecting the outcome of the suitability review on a case-by-case basis, redress
calculations performed by the skilled person using the agreed methodology and the offers made to customers who received unsuitable advice which
caused them to sustain a loss.
A total provision of £21 million (31 December 2020: £28 million) has been calculated for the potential redress of British Steel Pension Scheme cases,
including anticipated costs associated with the redress activity. This is comprised of two parts:
(a) Client redress provision of £19 million, comprised of £23 million (31 December 2020: £25 million) redress payable, less payments made to customers
of £4 million during 2021,
(b) Anticipated costs associated with redress activity of £2 million (31 December 2020: £3 million), comprised of £4 million costs payable, less payments
made of £2 million during the year. This provision is recognised in respect of the anticipated costs of legal and professional fees related to the cases and
redress process, which includes the expected costs to review advice provided of a similar nature in relation to cases that the Group believes may have
similar characteristics. The costs do not include any potential regulatory fines or penalties as a result of the unsuitable advice.
The £3 million insurance recoverable that was included in the fair value of the acquired net assets of Lighthouse has not changed. Discussion with
insurers is ongoing, insurers have not confirmed coverage and the Group will review the recoverable amount as and when they receive further
certainty, which is not expected until after the completion of the skilled person review. The insurance asset at 31 December 2021 is disclosed within
“Trade, other receivables and other assets”.
The final costs of redress for cases upheld will depend on specific calculations on a case-by-case basis, which will be calculated per the detailed redress
methodology designed by the skilled person following discussions and in collaboration with the FCA and also impacted by market movements and
other parameters affecting the defined contribution scheme asset, and is therefore exposed to volatility from this, and may vary from the amounts
currently provided.
The key assumptions which have an impact upon the redress payable calculation are the discount rate and changes in market levels. For the purpose
of the redress calculation, changes in the discount rate impact the valuation of the defined benefit (“DB”) scheme at the reporting date, and market level
changes impact the valuation of the personal pension scheme for each client.
At the date of signing the financial statements, a redress calculation has been performed for the majority of customers who have had an assessment of
unsuitable pension transfer advice, leading to greater certainty over the range of the provision balance, and therefore provision sensitivity for changes
in assumptions has not been disclosed. The range of outcomes for the remaining provision, including anticipated costs, varies from £19 million
(decrease of £2 million) to £22 million (increase of £1 million), with full settlement of payments expected to be completed during 2022.
Lighthouse pension transfer advice provided to members of other schemes of £8 million (31 December 2020: £nil)
During 2021, the skilled person review has identified unsuitable DB to DC pension advice provided by Lighthouse advisers for pension schemes other
than the British Steel Pension Scheme. The majority of the suitability assessments for cases currently identified as being in scope have been completed.
Using provisional calculations of redress for similar cases where customers had sustained losses a factor was determined representing average redress
as a proportion of average pension transfer value. The factor was used to estimate a provision of £8 million for the unsuitable cases, which has been
recognised at 31 December 2021. If the factor was to increase or decrease by 10%, the impact upon the provision would be £2 million. Payments are
expected to be completed by the end of the third quarter of 2022.
Compensation provisions (other) of £12 million (31 December 2020: £14 million)
Other compensation provisions of £12 million are held within the Group’s continuing operations and include amounts relating to the cost of correcting
deficiencies in policy administration systems, including restatements, any associated litigation costs and the related costs to compensate previous or
existing policyholders and customers. This provision represents management’s best estimate of expected outcomes based upon previous experience,
and a review of the details of each case. Due to the nature of the provision, the timing of the expected cash outflows is uncertain. The best estimate of
timing of outflows is that the majority of the balance is expected to be settled within 12 months.
216
Quilter Annual Report 2021
28: Provisions continued
A provision of £6 million, included within the balance, has been recognised during 2021 relating to potentially unsuitable pension advice provided by
advisers including advice provided prior to Quilter’s acquisition of the relevant advice businesses. Of this balance, £2 million has been recognised for
potentially unsuitable pension advice provided to British Steel Pension Scheme members by Quilter Financial Planning firms other than Lighthouse,
following the receipt of a “Dear CEO” letter from the FCA in December 2021 outlining their consideration of an industry-wide consumer redress scheme
for British Steel Pension Scheme pension transfers between 1 March 2017 and 31 March 2018. These British Steel Pension Scheme cases have yet to
be reviewed for suitability and an estimate of the provision has been made based upon experience of the Lighthouse skilled person review.
An indemnification asset of £2 million relating to a certain portion of the potentially unsuitable advice has been recognised within “Trade, other
receivables and other assets” representing the amount receivable from the sellers under the terms of the sale agreement.
During the year, compensation provisions of £2 million within Quilter International were disposed of as a result of the sale of the business.
The Group estimates a reasonably possible change of +/- £3 million from the £12 million balance, based upon a review of the cases and the range
of potential outcomes for the customer redress payments.
Sale of subsidiaries
Sale of subsidiaries provisions total £22 million (31 December 2020: £10 million), and are comprised of the following:
Provisions arising on the disposal of Quilter International of £16 million (31 December 2020: £nil)
Quilter International was sold on 30 November 2021, resulting in provisions totalling £17 million being established in respect of costs related to the
disposal including the costs of business separation and data migration activities.
The costs of business separation arise from the process required to separate Quilter International’s infrastructure, which is complex and covers a wide
range of areas including people, IT systems, data, and contracts facilities. A programme team has been established to ensure the transition of these
areas to the acquirer. These provisions have been based on external quotations and estimations, together with estimates of the time required for
incremental resource costs to achieve the separation, which is expected to occur over a two-year period.
The most significant element of the provision is the cost of migration of IT systems and data to the acquirer. Work has taken place during 2021 in
preparation for migration. Calculation of the provision is based on management’s best estimate of the work required, the time it is expected to take, the
number and skills of the staff required and their cost, and the cost of related external IT services to support the work. In reaching these judgements and
estimates, management has made use of its past experience of previous IT migrations following business disposals, including the recent migration of
QLA. The Group estimates a provision sensitivity of +/-25% (£4 million), based upon a review of the range of time periods expected to complete the work
required. The provision is expected to be fully utilised over three years from the sale, with £7 million forecast to be paid within one year.
During the year £1 million of the provision has been utilised.
Provisions arising on the disposal of Quilter Life Assurance of £1 million (31 December 2020: £3 million)
Quilter Life Assurance was sold on 31 December 2019, resulting in a number of provisions totalling £6 million being established in respect of the costs
of disposing the business and the related costs of business separation.
The costs of business separation arise from the process to separate QLA’s infrastructure, which is complex and covers a wide range of areas including
people, IT systems, data, contracts and facilities. A programme team has been established to ensure the transition of these areas to the acquirer. These
provisions have been based on external quotations and estimations, together with estimates of the time required for incremental resource costs to
achieve the separation.
The most significant element of the provision is the cost of migration of IT systems and data to the acquirer. Work has taken place during 2020 and
concluded during 2021. Calculation of the provision is based on management’s best estimate of the work required, the time it is expected to take, the
number and skills of the staff required and their cost, and the cost of related external IT services to support the work. In reaching these judgements and
estimates, management has made use of past experience of previous IT migrations following business disposals.
During the year £2 million of the provision has been utilised. The remaining provision is expected to be utilised during 2022, as the final costs to close
the project are paid.
Quilter Annual Report 2021
217
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
28: Provisions continued
Sale of Single Strategy Asset Management business provision of £4 million (31 December 2020: £7 million)
In 2018, a restructuring provision was recognised as a result of the sale of the Single Strategy Asset Management business (now known as Jupiter
Investment Management (‘Jupiter’)) to enable the remaining Quilter Investors business to function as a standalone operation going forward. The
remaining provision relates to various sale-related future commitments, the outcome of which was uncertain at the time of the sale and the most
significant of which is in relation to the guarantee of revenues for the seller in future years arising from funds invested by customers of Quilter. The
balance has decreased to £4 million during 2021 as a result of the settlement of £2 million related to the 2020 measurement year and £1 million
reversed for the latest estimate for the 2022 measurement year.
The provision considers sensitivities including potential scenarios which would result in a reduction in Group assets under management held in
the relevant Jupiter funds, leading to a reduction in the management fees paid to Jupiter. The scenarios are based upon assumptions determined
considering historical outflows over the past three years, expectation of outflows to December 2022 and the latest information received from Jupiter.
Per the conditions of the sale agreement, the maximum remaining potential exposure is £14 million for the 2022 calendar year. The expected range
of payments based upon the latest information received from Jupiter and the Group’s reasonable expectations of AUM invested within Jupiter funds
during the 2022 assessment period is between £2 million and £8 million.
The £4 million provision outstanding is estimated to be payable after one year, with expected final settlement due in the first half of 2023.
Property provisions
Property provisions represent the discounted value of expected future costs of reinstating leased property to its original condition at the end of the
lease term. During 2021, management reviewed the Group’s property provisions and the assumptions on which these provisions are based. The review
included consideration of external advice on potential future costs, in order to determine a reasonable estimate of the amount to be recognised. The
estimate is based upon property location, size of property and an estimate of the charge per square foot. Property provisions are utilised or released
when the reinstatement obligations have been fulfilled. The associated asset for property provisions is included within “Property, plant and equipment”.
Of the £9 million provision outstanding, £1 million is estimated to be payable within one year. The majority of the balance relates to leased property
which has a lease term maturity of more than five years.
Clawback and other provisions
Other provisions include amounts for the resolution of legal uncertainties and the settlement of other claims raised by contracting parties and
indemnity commission provisions. Where material, provisions and accruals are discounted at discount rates specific to the risks inherent in the liability.
The timing and final amounts of payments in respect of some of the provisions, particularly those in respect of litigation claims and similar actions
against the Group, are uncertain and could result in adjustments to the amounts recorded.
Included within the balance in 2021 is £16 million (31 December 2020: £18 million) of clawback provisions in respect of potential refunds due to product
providers on indemnity commission within the Quilter Financial Planning business. This provision, which is estimated and charged as a reduction of
revenue on the income statement at the point of sale of each policy, is based upon assumptions determined from historical experience of the
proportion of policyholders cancelling their policies, which requires Quilter to refund a portion of commission previously received. Reductions to the
provision result from the payment of cash to product providers as refunds or the recognition of revenue where a portion is assessed as no longer
payable. The provision has been assessed at the reporting date and adjusted for the latest cancellation information available. At 31 December 2021,
an associated balance of £9 million recoverable from brokers is included within “Trade, other receivables and other assets” (31 December 2020:
£13 million).
The Group estimates a reasonably possible change of +/- £5 million, based upon the potential range of outcomes for the proportion of cancelled
policies within the clawback provision, and a detailed review of the other provisions.
Of the total £21 million provision outstanding, £13 million is estimated to be payable within one year (2020: £13 million).
218
Quilter Annual Report 2021
29: Tax assets and liabilities
Deferred income taxes are calculated on all temporary differences at the tax rate applicable to the jurisdiction in which the timing differences arise.
Deferred tax summary
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
31 December
2021
£m
31 December
2020
£m
88
139
51
78
106
28
On 3 March 2021, the Chancellor of the Exchequer announced in the Budget a future increase in the Corporation Tax rate from 19% to 25%, effective
from 1 April 2023. This change has been substantially enacted by 31 December 2021, the impact on the deferred tax assets and liabilities is a net
increase of £12 million.
29(a): Deferred tax assets
Deferred tax assets are recognised for tax losses carried forward only to the extent that the realisation of the related tax benefit is probable, being
where, on the basis of all available evidence, it is considered more likely than not that there will be suitable taxable profits against which the reversal
of the deferred tax asset can be deducted.
The movement on recognised deferred tax assets is as follows:
31 December 2021
Tax losses carried forward
Accelerated depreciation
Accrued interest expense and other temporary differences
Share-based payments
Deferred expenses
Provisions
Netted against liabilities
Deferred tax assets at 31 December 2021
31 December 2020
Tax losses carried forward
Accelerated depreciation
Accrued interest expense and other temporary differences
Share-based payments
Deferred expenses
Provisions
Netted against liabilities
Deferred tax assets at 31 December 2020
At beginning
of the year
£m
Income
statement
(charge)/
credit
£m
At end of
the year
£m
15
19
41
9
6
1
(13)
78
9
1
–
–
–
(1)
1
10
At beginning
of the year
£m
Income
statement
(charge)/
credit
£m
19
19
3
8
7
–
(13)
43
(4)
–
38
1
(1)
1
–
35
24
20
41
9
6
–
(12)
88
At end of
the year
£m
15
19
41
9
6
1
(13)
78
Quilter Annual Report 2021
219
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
29: Tax assets and liabilities continued
29(a): Deferred tax assets continued
The credit to the income statement of £9 million in 2021 in respect of Tax losses carried forward includes a credit of £4 million relating to first time
recognition of a deferred tax asset, as explained in note 11(a).
The credit to the income statement of £38 million in 2020 in respect of Accrued interest expense and other temporary differences includes a credit
of £39 million relating to first time recognition of a deferred tax asset on accrued interest expenses.
The recognition of deferred tax assets is subject to the estimation of future taxable profits, which is based on the annual business planning process and
in particular on estimated levels of assets under management, which are subject to a large number of factors including global stock market movements
and related movements in foreign exchange rates, together with estimates of net client cash flow, expenses and other charges.
The business plan, adjusted for known and estimated tax sensitivities, is used to determine the extent to which deferred tax assets are recognised.
In general, the Group assesses recoverability based on estimated taxable profits over a three-year planning horizon.
Deferred tax assets have been recognised to the extent they are supported by the Group’s business plans. The sensitivity of these assets is such that
any decrease in profitability over the assessment period would result in a write down in the deferred tax assets.
Unrecognised deferred tax assets
The amounts for which no deferred tax asset has been recognised comprises:
Pre April 2017 UK tax losses
Post April 2017 UK tax losses
Overseas losses
Capital losses
Total unrelieved tax losses
Other timing differences
Total unrecognised deferred tax assets1
1None of the unrecognised deferred tax assets have a set expiry date in tax law.
31 December 2021
£m
31 December 2020
£m
Gross amount
252
106
–
347
705
3
708
Tax
63
26
–
87
176
1
177
Gross amount
252
121
60
347
780
5
785
Tax
48
23
9
66
146
1
147
Unrecognised deferred tax assets
Under UK tax law, UK brought forward non-capital tax losses that arose after 1 April 2017 (“Post April 2017 UK tax losses”) may be offset against current
year UK taxable profits arising in any company within Group, subject to a restriction of 50% of profits each year. Consequently, as described above and
in note 11, the recognition of deferred tax assets on Post April 2017 UK tax losses is assessed by reference to the Group’s business plans.
The Group may in the future recognise additional deferred tax assets in respect of the unrecognised portion of the Post April 2017 UK tax losses,
as the Group’s business plans progress. The recognition of deferred tax assets on these losses is expected to remain a Critical accounting estimate
as described in these accounts for the foreseeable future.
All other non-capital UK tax losses within the Group (“Pre-April 2017 UK tax losses”) can only be used against taxable profits arising in the same
company as the loss. It is therefore less likely that a deferred tax asset will be recognised in the foreseeable future in respect of the currently
unrecognised portion of these tax losses.
Capital losses are in Quilter Life & Pensions Limited. There is currently insufficient evidence to forecast future chargeable gains in the company on which
to justify recognition of a deferred tax asset for any of these losses.
Movements in unrecognised deferred tax assets
The unrecognised deferred tax asset on overseas losses decreased by £9 million as a result of the sale of Quilter International. The tax value of other
unrecognised deferred tax assets increased by £30 million primarily as a result of the change in the UK corporation tax rate from 19% to 25% from
1 April 2023.
220
Quilter Annual Report 2021
29: Tax assets and liabilities continued
29(b): Deferred tax liabilities
The movement on deferred tax liabilities is as follows:
31 December 2021
Other acquired intangibles
Other temporary differences
Investment gains
Netted against assets
Deferred tax liabilities at 31 December 2021
31 December 2020
Other acquired intangibles
Other temporary differences
Investment gains
Netted against assets
At beginning
of the year
£m
Income
statement
(credit)/
charge1
£m
Acquisition/
disposal of
subsidiaries
£m
36
2
81
(13)
106
At beginning
of the year
£m
39
–
62
(13)
(4)
–
39
–
35
–
(2)
–
–
(2)
Income
statement
(credit)/
charge1
£m
Acquisition/
disposal of
subsidiaries
£m
(4)
4
19
–
1
(2)
–
–
At end of
the year
£m
32
–
120
(13)
139
At end of
the year
£m
36
2
81
(13)
Deferred tax liabilities at 31 December 2020
1In the year ended 31 December 2021, the £35 million income statement credit all relates to continuing operations. In the year ended 31 December 2020, £17 million relates to
continuing operations and £2 million to discontinued operations.
(1)
88
19
106
29(c): Current tax receivables and payables
Current tax receivables and current tax payables at 31 December 2021 were £nil (2020: £24 million) and £2 million (2020: £1 million), respectively.
30: Borrowings and lease liabilities
The following table analyses the Group’s borrowings and lease liabilities:
Subordinated debt: fixed rate loan at 4.478%
Lease liabilities
Total borrowings and lease liabilities
Notes
30(a)
30(b)
31 December
2021
£m
31 December
2020
£m
199
100
299
199
120
319
30(a): Borrowings
Borrowed funds are repayable on demand and categorised in terms of IFRS 9 Financial Instruments as “Financial liabilities at amortised cost”.
The carrying value of the Group’s borrowings is considered to be materially in line with the fair value. All amounts outstanding at 31 December 2021
are payable to a number of relationship banks.
On 28 February 2018, the Group issued a £200 million subordinated debt security in the form of a 10-year Tier 2 bond with a one-time issuer call option
after five years to J.P. Morgan Securities plc, paying a semi-annual coupon of 4.478% (the “Tier 2 Bond”). The bond was remarketed and sold to the
secondary market in full on 13 April 2018. It is now listed and regulated under the terms of the London Stock Exchange. The bond matures in 2028 with
the option to redeem in 2023.
In addition, the Group entered into a £125 million revolving credit facility which remains undrawn and is being held for contingent funding purposes.
30(b): Lease liabilities
The Group has entered into commercial non-cancellable leases on certain property, plant and equipment where it is not in the best interest of the
Group to purchase these assets. Such leases have varying terms, escalation clauses and renewal rights.
Termination options are included in a number of property leases across the Group. These are used to maximise operational flexibility in terms of
managing the assets used in the Group’s operations. The majority of termination options held are exercisable only by the Group and not by the
respective lessor.
Quilter Annual Report 2021
221
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
30: Borrowings and lease liabilities continued
30(b): Lease liabilities continued
As at 31 December 2021, future undiscounted cash outflows of £nil (2020: £22 million) have been included in the lease liability which will occur beyond
termination option dates on none (2020: three) of the Group’s principal property leases. The lease term is reassessed if an option is exercised (or not
exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event
or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee.
During the year, certain lease terms were reassessed to reflect the expectation that termination options will now be exercised. The financial effect of
this reassessment was a decrease in recognised lease liabilities and right-of-use assets of £11 million (2020: £7 million). These are the only significant
property leases where the term is modelled up to a termination option date.
Lease liabilities represent the obligation to pay lease rentals as required by IFRS 16 and are categorised as financial liabilities at amortised cost.
Opening balance
Additions
Disposals and adjustments to lease liabilities
Interest charge for the year
Reclassification to provisions
Payment for interest portion of lease liability
Payment for principal portion of lease liability
Disposal of interests in subsidiary
Closing balance
To be settled within 12 months
To be settled after 12 months
Total lease liabilities
Maturity analysis – undiscounted
Within one year
One to five years
More than five years
Total lease liabilities – undiscounted
31: Trade, other payables and other liabilities
Claims outstanding
Amounts owed to intermediaries
Amounts payable on direct insurance business
Outstanding settlements
Accruals and deferred income
Trade creditors
Deferred consideration
Other liabilities
Total trade, other payables and other liabilities
To be settled within 12 months
To be settled after 12 months
Total trade, other payables and other liabilities
222
Quilter Annual Report 2021
31 December
2021
£m
31 December
2020
£m
120
13
(12)
4
(2)
(2)
(10)
(11)
100
10
90
100
13
40
67
120
137
6
(11)
4
–
(2)
(14)
–
120
9
111
120
11
57
75
143
31 December
2021
£m
31 December
2020
£m
46
–
46
185
123
33
5
92
484
484
–
484
131
8
139
255
111
41
16
110
672
666
6
672
32: Contract liabilities
Contract liabilities relate to non-refundable front-end fee income, comprising fees received at inception or receivable over an initial period for services
not yet provided, and is deferred through the creation of a contract liability on the statement of financial position and released to income as the services
are provided. Equal service provision is assumed over the lifetime of the contract and, as such, the contract liability is amortised on a linear basis over
the expected life of the contract, adjusted for expected persistency. The contract liability principally comprises fee income already received in cash. The
table below analyses the movements in contract liabilities. All contract liabilities for the years ended 2020 and 2021 relate to discontinued operations.
1 January 2020
Fees and commission income deferred
Amortisation
Acquisition of subsidiaries
Foreign exchange
Discontinued operations movements
31 December 2020
Fees and commission income deferred
Amortisation
Foreign exchange
Discontinued operations movements
Disposal of subsidiaries
31 December 2021
The Group expected to recognise the above contract liability balance as revenue in the following years:
Within one year
One to five years
More than five years
Total contract liabilities
Total
£m
403
35
(62)
–
3
(24)
379
41
(40)
(4)
(3)
(376)
–
31 December 2020
£m
61
184
134
379
33: Post-employment benefits
The Group operates a number of defined contribution and defined benefit pension schemes in the UK, the Channel Islands and Ireland.
Defined contribution pension schemes
The Group’s defined contribution schemes require contributions to be made to funds held in trust, separate from the assets of the Group. Participants
receive either a monthly pension supplement to their salaries or contributions to personal pension plans. For the defined contribution schemes, the
Group pays contributions to separately administered pension schemes. The Group has no further payment obligations once the contributions have
been paid. The contributions are recognised in current service cost in the consolidated income statement as staff costs and other employee-related
costs when they are due.
Defined benefit schemes
The Group operates two defined benefit schemes: The Quilter Cheviot Limited Retirement Benefits Scheme and the Quilter Cheviot Channel Islands
Retirement Benefits Scheme which are both closed to new members. The assets of these schemes are held in separate trustee administered funds.
Pension costs and contributions relating to defined benefit schemes are assessed in accordance with the advice of qualified actuaries. Actuarial advice
confirms that the current level of contributions payable to each pension scheme, together with existing assets, are adequate to secure members’
benefits over the remaining service lives of participating employees. The Group’s policy is to fund at least the amounts sufficient to meet minimum
funding requirements under applicable employee benefit and tax regulations. The schemes are reviewed at least on a triennial basis or in accordance
with local practice and regulations. In the intervening years, the actuary reviews the continuing appropriateness of the assumptions applied.
In 2019, the Trustees of the Quilter Cheviot Limited Retirement Benefits scheme purchased a bulk annuity from Aviva to de-risk the defined benefit
pension scheme obligation. This investment strategy was intended to equally match the assets and liabilities of the scheme. This covers all remaining
insured scheme benefits following previous bulk annuity transactions in 2013, 2014 and 2015.
IAS 19 Employee Benefits disclosures
This note gives full IAS 19 Employee Benefits disclosures for the above schemes.
Quilter Annual Report 2021
223
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
33: Post-employment benefits continued
33(a): Liability for defined benefit obligations
The IAS 19 value of the assets and the scheme obligations are as follows:
Changes in retirement benefit obligations
Total IAS 19 retirement benefit obligation at beginning of the year
Interest cost on benefit obligation
Actuarial losses
Benefits paid
Total IAS 19 retirement benefit obligations at 31 December
Change in plan assets
Total IAS 19 fair value of scheme assets at beginning of the year
Actual return on plan assets
Benefits paid
Total IAS 19 fair value of scheme assets at 31 December
Net IAS 19 asset recognised in statement of financial position
Funded status of plan
Unrecognised assets
Net IAS 19 amount recognised in statement of financial position as at 31 December
31 December
2021
£m
31 December
2020
£m
(41)
(1)
–
1
(41)
42
1
(1)
42
1
(1)
–
(38)
(1)
(4)
2
(41)
39
5
(2)
42
1
(1)
–
Contributions for the year to the defined benefit schemes totalled £nil (2020: £nil), and £1 million was accrued at 31 December 2021 (2020: £1 million).
The Group expects to contribute £1 million in the next financial year, based upon the current funded status and the expected return assumption for the
next financial year.
Changes in the asset ceiling
Opening unrecognised asset due to asset ceiling
Closing unrecognised asset due to the asset ceiling
31 December
2021
£m
31 December
2020
£m
1
1
1
1
33(b): Income/expense recognised in the income statement
The total pension charge to staff costs for all of the Group’s defined benefit schemes for the year ended 2021 was £nil (2020: £nil).
Actuarial gains and losses and the effect of the limit to the pension asset under IAS 19 Employee Benefits paragraph 58 have been reported in other
comprehensive income.
The cumulative amount of actuarial losses recognised in other comprehensive income is £33 million (2020: £33 million).
Assumptions
The expected long-term rate of return on assets represents the Group’s best estimate of the long-term return on the scheme assets and is generally
estimated by computing a weighted average return of the underlying long-term expected returns on the different asset classes, based on the target
asset allocations. The expected long-term return on assets is a long-term assumption that is generally expected to remain the same from one year
to the next unless there is a significant change in the target asset allocation, the fees and expenses paid by the plan or market conditions.
The Group, in consultation with its independent investment consultants and actuaries, determined the asset allocation targets based on its
assessment of business and financial conditions, demographic and actuarial data, funding characteristics and related risk factors. Other relevant
factors, including industry practices, long-term historical and prospective capital market returns, were also considered.
The scheme return objectives provide long-term measures for monitoring the investment performance against growth in the pension obligations.
The overall allocation is expected to help protect the plan’s funded status while generating sufficiently stable real returns (net of inflation) to help cover
current and future benefit payments.
224
Quilter Annual Report 2021
33: Post-employment benefits continued
33(b): Income/expense recognised in the income statement continued
Both the equity and fixed income portions of the asset allocation use a combination of active and passive investment strategies and different
investment styles. The fixed income asset allocation consists of longer duration fixed income securities in order to help reduce plan exposure to
interest rate variation and to better correlate assets with obligations. The longer duration fixed income allocation is expected to help stabilise plan
contributions over the long run.
The weighted average duration of the defined benefit obligation is 20 years, based upon actual cash flows.
The following table presents the principal actuarial assumptions at the end of the reporting year:
Discount rate
Rate of increase in defined benefit funds
Inflation
The mortality assumptions used give the following life expectancy at 65:
31 December
2021
%
31 December
2020
%
1.8
3.7
3.3
1.4
3.5
2.9
31 December 2021
31 December 2020
Life expectancy at 65 for male
member currently
Life expectancy at 65 for female
member currently
Mortality table
S2PA Light
S2PA Light
Aged 65
23.60
23.40
Aged 45
25.50
25.50
Aged 65
25.10
24.50
Aged 45
27.10
26.70
Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate, inflation rate and rate of mortality.
The sensitivities regarding the principal assumptions used to measure the defined benefit obligations are described below. Reasonably possible
changes at the reporting date to one of the principal actuarial assumptions, holding other assumptions constant, would have affected the defined
benefit obligation as follows:
Discount rate (0.1% movement)
Inflation rate (0.1% movement)
Rate of mortality (increase by 1 year)
33(c): Scheme assets allocation
Scheme assets are stated at their fair values. Total scheme assets are comprised as follows:
31 December 2021
31 December 2020
Increase
£m
Decrease
£m
Increase
£m
Decrease
£m
(0.7)
0.3
1.6
0.8
(0.3)
–
(0.7)
0.3
1.7
0.7
(0.3)
–
Equity securities
Debt securities
Total IAS 19 fair value of scheme assets
31 December
2021
%
31 December
2020
%
31 December
2021
£m
31 December
2020
£m
7
93
100
7
93
100
3
39
42
3
39
42
Equity instruments, debt instruments and investment fund assets have a quoted market price. All other assets, including the value of the bulk annuity
policy, do not have a quoted market price. The bulk annuity policy, where assets are matched to the value of liabilities, is included at values provided by
the actuary in accordance with relevant guidelines.
Quilter Annual Report 2021
225
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
34: Master netting and similar agreements
The Group offsets financial assets and liabilities in the statement of financial position when it has a legally enforceable right to do so and intends to settle
on a net basis simultaneously. Currently, the only such offsetting within the Group relates to the pooling of bank accounts and, in some circumstances
a bank account may be overdrawn and therefore offset.
The following tables present information on the potential effect of netting offset arrangements after taking into consideration these types
of agreements.
31 December 2021
Financial assets
Cash and cash equivalents
Financial liabilities
Trade, other payables and other liabilities
31 December 2020
Financial assets
Cash and cash equivalents
Financial liabilities
Trade, other payables and other liabilities
Amounts
offset in the
statement of
financial
position
£m
Net amounts
reported in
the statement
of financial
position
£m
Gross amounts
£m
2,146
82
(82)
(82)
2,064
–
Amounts
offset in the
statement of
financial
position
£m
Net amounts
reported in
the statement
of financial
position
£m
Gross amounts
£m
1,999
78
(78)
(78)
1,921
–
35: Contingent liabilities
The Group, in the ordinary course of business, enters into transactions that expose it to tax, legal and business risks. The Group recognises a provision
when it has a present obligation as a result of past events, it is probable that a transfer of economic benefits will be required to settle the obligation and
a reliable estimate of the amount can be made (see note 28). Possible obligations and known liabilities where no reliable estimate can be made or it is
considered improbable that an outflow would result are reported as contingent liabilities in accordance with IAS 37 Provisions, Contingent Liabilities and
Contingent Assets.
Contingent liabilities – acquisitions and disposals
The Group routinely monitors and assesses contingent liabilities arising from matters such as business reviews, litigation, warranties and indemnities
relating to past acquisitions and disposals.
In April 2020, the Group was informed by the FCA that it would be required to appoint a skilled person, under section 166(3)(a) of the Financial Services
and Markets Act 2000 (“FSMA”), in relation to DB to DC pension transfer advice provided by Lighthouse advisers. The review covers Lighthouse Advisory
Services Limited only, and no other companies within the Group. The review covers the period from 1 April 2015 to 27 January 2020, which is the date
that Lighthouse converted to the Quilter Financial Planning advice process for their Defined Benefit transfer activity following the acquisition of
Lighthouse by Quilter.
The review covers British Steel Pension Scheme DB to DC pension transfer advice activity undertaken by Lighthouse advisers and a representative
sample of other Lighthouse DB to DC pension transfer advice activity in the relevant period. The skilled person also calculates redress, using a redress
methodology that the skilled person has designed following discussions and in collaboration with the FCA, and to ensure consistency with the FCA’s
FG17/9 “Guidance for firms on how to calculate redress for unsuitable defined benefit pension transfers” guidance for those cases where the skilled
person determines that a customer received unsuitable DB to DC pension transfer advice which led to customers sustaining losses. Until the skilled
person review has finalised, uncertainty exists as to the value of total redress which will be payable and a reliable estimate of all amounts cannot be
determined. Subject to FCA confirmation, we expect the skilled person review to be completed during 2022.
For the British Steel Pension Scheme cases, and a portion of the other cases reviewed by the skilled person, the Group currently considers that the
likelihood of redress is probable on a proportion of the cases, but this is subject to confirmation through the ongoing skilled person review process.
An estimate of the amount of redress payable has been made and is included within Provisions in note 28.
It is possible that further material costs of redress may be incurred in relation to the skilled person review, as well as customer redress for other
potential unsuitable pension transfer advice cases.
Any further redress costs, and any differences between the provision and final payment to be made for the any unsuitable DB to DC pension transfer
cases, will be recognised as an expense or credit in the Income Statement.
226
Quilter Annual Report 2021
35: Contingent liabilities continued
Tax
The tax authorities in the principal jurisdictions in which the Group operates routinely review historical transactions undertaken and tax law
interpretations made by the Group. The Group is committed to conducting its tax affairs in accordance with the tax legislation of the jurisdictions in
which it operates. All interpretations made by the Group are made with reference to the specific facts and circumstances of the transaction and the
relevant legislation.
There are occasions where the Group’s interpretation of tax law may be challenged by the tax authorities. The financial statements include provisions
that reflect the Group’s assessment of liabilities which might reasonably be expected to materialise as part of their review. The Board is satisfied that
adequate provisions have been made to cater for the resolution of tax uncertainties and that the resources required to fund such potential settlements
are sufficient.
Due to the level of estimation required in determining tax provisions, amounts eventually payable may differ from the provision recognised.
Complaints, disputes and regulations
The Group is committed to treating customers fairly and supporting its customers in meeting their lifetime goals. The Group does from time to time
receive complaints and claims from customers, enters into commercial disputes with service providers, and is subject to regulatory discussions and
reviews in the normal course of business. The costs, including legal costs, of these issues as they arise can be significant and, where appropriate,
provisions have been established under IAS 37.
36: Commitments
The Group has contractual commitments in respect of funding arrangements which will be payable in future periods. These commitments are not
recognised in the Group’s statement of financial position.
37: Capital and financial risk management
37(a): Capital management
The Group manages its capital with a focus on capital efficiency and effective risk management. The capital management objectives are to maintain the
Group’s ability to continue as a going concern while supporting the optimisation of return relative to the risks. The Group ensures that it can meet its
expected capital and financing needs at all times having regard to the Group’s business plans, forecasts, strategic initiatives and regulatory
requirements in all businesses in the Group.
The Group’s overall capital risk appetite is set with reference to the requirements of the relevant stakeholders and seeks to:
– maintain sufficient, but not excessive, financial strength to support stakeholder requirements;
– optimise debt to equity structure to enhance shareholder returns; and
– retain financial flexibility by maintaining liquidity including unutilised committed credit lines.
The primary sources of capital used by the Group are equity shareholders’ funds of £1,739 million (31 December 2020: £1,878 million) and subordinated
debt which was issued at £200 million in February 2018. Alternative resources are utilised where appropriate. Risk appetite has been defined for the
level of capital, liquidity and debt within the Group. The risk appetite includes long-term targets, early warning thresholds and risk appetite limits.
The dividend policy sets out the target dividend level in relation to profits.
The regulatory capital for the Group is assessed under Solvency II requirements.
37(a)(i): Regulatory capital (unaudited)
The Group is subject to Solvency II group supervision by the PRA. The Group is required to measure and monitor its capital resources under the
Solvency II regulatory regime.
The Group’s insurance undertakings are included in the Group solvency calculation on a Solvency II basis. Other regulated entities are included in the
Group solvency calculation according to the relevant sectoral rules. The Group’s Solvency II surplus is the amount by which the Group’s capital on a
Solvency II basis (own funds) exceeds the Solvency II capital requirement (solvency capital requirement or “SCR”).
The Group’s Solvency II surplus is £1,030 million at 31 December 2021 (31 December 2020: £1,021 million), representing a Solvency II ratio of 275%
(31 December 2020: 217%) calculated under the standard formula. The Solvency II regulatory position for the year ended 31 December 2021 allows for
the impact of the recommended final dividend payment of £62 million (31 December 2020: £61 million). This disclosure includes the capital movements
associated with the sale of Quilter International and the £200 million share buyback (Tranches 3 and 4).
Quilter Annual Report 2021
227
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
37: Capital and financial risk management continued
37(a): Capital management continued
The Solvency II results for the year ended 31 December 2021 (unaudited estimate) and 31 December 2020 were as follows:
Own funds
Solvency capital requirement (SCR)
Solvency II surplus
Solvency II coverage ratio
1Filing of annual regulatory reporting forms due by 20 May 2022.
2As represented within the Group Solvency and Financial Condition Report for the year ended 31 December 2020.
31 December
20211
£m
31 December
20202
£m
1,617
587
1,030
275%
1,897
876
1,021
217%
The Group’s own funds include the Quilter plc issued subordinated debt security which qualifies as capital under Solvency II. The composition of own
funds by tier is presented in the table below.
Group own funds
Tier 11
Tier 22
Total Group Solvency II own funds
1All Tier 1 capital is unrestricted for tiering purposes.
2Comprises a Solvency II compliant subordinated debt security in the form of a Tier 2 bond, which was issued at £200 million in February 2018.
31 December
2021
£m
31 December
2020
£m
1,412
205
1,617
1,688
209
1,897
The Group’s insurance subsidiary based in the UK is also subject to Solvency II at entity level. Other regulated entities in the Group are subject to the
locally applicable entity-level capital requirements in the jurisdictions in which they operate. In addition, the Group’s asset management and advice
businesses are subject to group supervision by the FCA under the UK Investment Firms Prudential Regime.
The solvency and capital requirements for the Group and its regulated subsidiaries are reported and monitored through regular Capital Management
Forum meetings. Throughout 2021, the Group has complied with the regulatory capital requirements that apply at a consolidated level and Quilter’s
insurance undertakings and investment firms have complied with the regulatory capital requirements that apply at entity level.
37(a)(ii): Loan covenants
Under the terms of the revolving credit facility agreement, the Group is required to comply with the following financial covenant: the ratio of total net
borrowings to consolidated equity shareholders’ funds shall not exceed 0.5.
Total external borrowings of the Company
Less: cash and cash equivalents of the Company
Total net external borrowings of the Company
Total shareholders’ equity of the Group
Tier 2 bond
Total Group equity (including Tier 2 bond)
Ratio of Company net external borrowings to Group equity
The Group has complied with the covenant since the facility was created in February 2018.
Note
30
30
31 December
2021
£m
31 December
2020
£m
199
(503)
(304)
1,739
199
1,938
-0.157
199
(314)
(115)
1,878
199
2,077
-0.055
228
Quilter Annual Report 2021
37: Capital and financial risk management continued
37(a): Capital management continued
37(a)(iii): Own Risk and Solvency Assessment (“ORSA”) and Internal Capital Adequacy Assessment Process (“ICAAP”)
The Group ORSA process is an ongoing cycle of risk and capital management processes which provides an overall assessment of the current and future
risk profile of the Group and demonstrates the relationship between business strategy, risk appetite, risk profile and solvency needs. These
assessments support strategic planning and risk-based decision making.
The underlying ORSA processes cover the Group and consider how risks and solvency needs may evolve over the planning period. The ORSA includes
stress and scenario tests, which are performed to assess the financial and operational resilience of the Group.
The Group ORSA report is produced annually and summarises the analysis, insights and conclusions from the underlying risk and capital management
processes in respect of the Group. The ORSA report is submitted to the PRA as part of the normal supervisory process and may be supplemented by
ad hoc assessments where there is a material change in the risk profile of the Group outside the usual reporting cycle.
In addition to the Group ORSA process, an entity level ORSA process is performed for Quilter Life & Pensions Limited.
The Group ICAAP process is similar to the ORSA process although the ICAAP process is performed for a subset of the Group consisting of the
investment and advisory firms within the Group (the “ICAAP Group”). The Group ICAAP report is also produced annually and summarises the analysis,
insights and conclusions from the underlying risk and capital management processes in respect of the ICAAP Group. The ICAAP report is submitted to
the FCA as part of the normal supervisory process and may be supplemented by ad hoc assessments where there is a material change in the risk profile
of the ICAAP Group outside the usual reporting cycle. Due to the implementation of the Investment Firms Prudential Regime on 1 January 2022, the
ICAAP process will be replaced by the Internal Capital Adequacy and Risk Assessment (ICARA) process in 2022.
The conclusions of ORSA and ICAAP (and the new ICARA) processes are reviewed by management and the Board throughout the year.
37(b): Credit risk
Overall exposure to credit risk
Credit risk is the risk of adverse movements in credit spreads (relative to the reference yield curve), credit ratings or default rates leading to a
deterioration in the level or volatility of assets, liabilities or financial instruments resulting in loss of earnings or reduced solvency. This includes
counterparty default risk, counterparty concentration risk and spread risk.
The Group has established a Credit Risk Framework that includes a Credit Risk Policy, Credit Risk Standard and Credit Risk Appetite Statement.
This framework applies to all activities where the shareholder is exposed to credit risk, either directly or indirectly, ensuring appropriate identification,
measurement, management, monitoring and reporting of the Group’s credit risk exposures.
The credit risk arising from all exposures is mitigated through ensuring the Group only enters into relationships with appropriately robust
counterparties, adhering to the Group Credit Risk Policy. For each asset, consideration is given as to:
– the credit rating of the counterparty, which is used to derive the probability of default;
– the loss given default;
– the potential recovery which may be made in the event of default;
– the extent of any collateral that the firm has in respect of the exposures; and
– any second order risks that may arise where the firm has collateral against the credit risk exposure.
The credit risk exposures of the Group are monitored regularly to ensure that counterparties remain creditworthy, to ensure there is appropriate
diversification of counterparties and to ensure that exposures are within approved limits. At 31 December 2021, the Group’s material credit exposures
were to financial institutions (primarily through the investment of shareholder funds), corporate entities (including external fund managers) and
individuals (primarily through fund management trade settlement activities).
There is no direct exposure to European sovereign debt (outside of the UK) within the shareholder investments. The Group has no significant
concentrations of credit risk exposure.
Other credit risks
The Group is exposed to financial adviser counterparty risk through a number of loans that it makes to its advisers and the payment of upfront
commission on the sale of certain types of business. The risk of default by financial advisers is managed through monthly monitoring of loan and
commission debt balances.
The Group is also exposed to the risk of default by fund management groups in respect of settlements and rebates of fund management charges on
collective investments held for the benefit of policyholders. This risk is managed through the due diligence process which is completed before entering
into any relationship with a fund group. Amounts due to and from fund groups are monitored for prompt settlement and appropriate action is taken
where settlement is not timely.
Quilter Annual Report 2021
229
Strategic ReportGovernance ReportFinancial statementsOther information Notes to the consolidated financial statements
For the year ended 31 December 2021 continued
37: Capital and financial risk management continued
37(b): Credit risk continued
Legal contracts are maintained where the Group enters into credit transactions with a counterparty.
Impact of credit risk on fair value
Due to the limited exposure that the Group has to credit risk, credit risk does not have a material impact on the fair value movement of financial
instruments for the year under review. The fair value movements on these instruments are mainly due to changes in market conditions.
Maximum exposure to credit risk
The Group’s maximum exposure to credit risk does not differ from the carrying value disclosed in the relevant notes to the financial statements.
Loans and advances subject to 12-month expected credit losses (“12-month ECL”) are £29 million (31 December 2020: £31 million) and other
receivables subject to lifetime expected credit losses (“lifetime ECL”) are £252 million (31 December 2020: £525 million). These balances are not rated;
they represent the pool of counterparties that do not require a rating. These counterparties individually generate no material credit exposure and this
pool is highly diversified, monitored and subject to limits.
Exposure arising from financial instruments not recognised on the statement of financial position is measured as the maximum amount that the Group
would have to pay, which may be significantly greater than the amount that would be recognised as a liability. The Group does not have any significant
exposure arising from items not recognised on the statement of financial position.
The table below represents the Group’s exposure to credit risk from cash and cash equivalents.
31 December 2021
Cash at amortised cost, subject to 12-month ECL
Money market funds at FVTPL
Total cash and cash equivalents
31 December 2020
Cash at amortised cost, subject to 12-month ECL
Money market funds at FVTPL
Total cash and cash equivalents
1Cash included in the consolidation of funds is not rated (see note 24(a)).
Credit rating relating to cash and cash equivalents that are neither past due nor impaired
£m
AAA
–
1,216
1,216
AAA
–
1,062
1,062
AA
105
–
105
A
451
–
451
BBB