ABRDN, the Scottish financial services heavyweight, is to cut around 500 jobs as it bids to revive its flagging investment business to an “acceptable level of profitability”.

The cuts would amount to a 10% reduction in the Edinburgh-based firm’s headcount and are aimed at saving costs by £150 million a year. It aims to make around 80%, or £120m, of those savings from its under-performing investment business.

The move comes as abrdn bids to stem outflows from its investment funds, which have dogged the company since the merger of Standard Life and Aberdeen Asset Management in 2017.

The firm cited “challenging” market conditions, including high inflation and geopolitical uncertainty, as it reported net outflows of £12.5bn from investments in the second half of 2023, leaving it with £366.7bn of assets under management and administration (AUMA) by the end of the year.

Taking into account the firm's personal and adviser businesses, which include its interactive investor retail platform, it reported total net outflows £12.4bn for the second half, resulting in total AUMA of £494.9bn at December 31. 

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Although abrdn said the bulk of the targeted savings will come from non-staff costs, the cost-cutting plans are expected to result in the loss of around 500 roles. It noted that the programme will include the removal of management layers, increasing spans of control, and further efficiency in outsourcing and technology areas. There are also plans to reduce overheads in group functions and support services.

The company did not break down where the job reductions will fall, though it is understood the cuts will focus on group functions and support services rather than frontline investment roles. A significant proportion of the company's function and support roles are believed to be based in Edinburgh.

The redundancy process is expected to largely take place this year before completing in 2025.

Chief executive Stephen Bird 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.

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“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.”

abrn has gradually evolved to focus on three core businesses since Mr Bird succeeded Keith Skeoch as chief executive in 2020. As well as the fund management arm, these include a personal business focused largely on interactive investor (ii), the subscription-based online platform for retail investors it acquired for £1.5bn in December 2021, and its adviser business, which provides solutions and technology to UK financial advisers.

The personal business reported inflows of £1.1bn in the second half to £66bn, as customer numbers rose to 407,000 by the end of 2023, up from 402,000 at December 31, 2022. It benefited from the "continued positive flow momentum in interactive investor", with total net inflows of £3.3bn for ii last year.

Adviser reported net outflows of £1.5bn to £73.5bn in the second half of 2023, which abrdn said reflected economic uncertainty and the impact of the higher cost of living on disposable incomes. 

Shares in abrdn closed the day down up 2.7p, or 1.57%, at 175p.