abrdn has revealed a plan to reduce annualised costs by £150m by the end of 2025, which includes cutting 500 jobs, in a trading update statement today (24 January).
The global asset manager headquartered in Scotland called it "a new transformation programme" which was "designed to restore our core Investments business to an acceptable level of profitability and allow for incremental reinvestment into growth areas".
Stephen Bird, CEO abrdn plc, said: "Market conditions have remained challenging for our mix of business, and this is reflected in our year-end AUMA, flow numbers, and margins. The Board and I are committed to taking these significant cost actions now to restore our core Investments business to a more acceptable level of profitability.
"Although our business model benefits from the diversification that comes from operating three businesses, we will not rest until all of them are contributing strongly to group profitability, as Adviser and interactive investor have done in 2023.
The new transformation programme announced today, when completed, will deliver a step change in our cost to income ratio. We exceeded our £75m cost reduction target for 2023 for Investments, but we recognise more needs to be done.
"After a root and branch review, we are now re-engineering and simplifying our business model to remove at least £150m of costs - mostly from group functions and support services.
"The programme will largely be implemented in 2024, completing in 2025. These changes will allow us to continue our focus on building a growth business."
Abrdn further said the transformation programme targets an annualised cost reduction of at least £150m compared to 2023, with approximately 80% of the savings benefiting the Investments business.
"This target excludes any cost reduction from previously announced divestments, including the sale of our European-headquartered private equity business.
"The programme includes the removal of management layers, increasing spans of control, further efficiency in outsourcing and technology areas, as well as reducing overheads in group functions and support services. The bulk of the savings will be in non-staff costs. The programme is expected to result in the reduction of approximately 500 roles.
"The Investments front office will see a modest adjustment: our focus remains on delivering excellent service and strongly competitive investment performance to all our clients, supported by the Group's strong risk management and control environment.
abrdn continued: "A streamlined operations and management structure will enable the Group to deploy its resources more efficiently and improve management accountability. The increased profitability will enable incremental investment in the capabilities to deliver excellent customer outcomes.
"Implementation of the programme is expected to take place primarily in 2024, with c. £60m benefit expected to accrue this year and will be completed by the end of 2025. To achieve the desired simplification and cost savings, total implementation costs are estimated to be around £150m."
abrdn also gave an update on its year-end 2023 assets under management and administration (AUMA) including second half 2023 net flows, and revenue margin guidance.
Its assets under management dropped from £376.6bn at the end of June 2023 to £366.7bn six months later.
This reflected positive market movements offset by net outflows and the disposal of the US private equity business in H2, abrdn said.
The AUM fell from £372.5bn in the first half of the year to £362.7bn at the end of the period.
Its adviser side of the business suffered £15.bn in net outflows and Q3 saw the lowest advised platform market net flows on record.