By Scott Wright

THE chief executive of abrdn has been awarded a bonus of nearly £800,000 as the Scottish financial services heavyweight swings the axe on hundreds of jobs.

Stephen Bird will receive a total bonus of £786,000, equating to 89.8% of his £875,000 salary, for 2023, according to the latest abrdn annual report. His total remuneration, including pension allowance, bonus, and salary, totalled £2.14 million for the year, the report shows.

Details of Mr Bird’s remuneration emerged as abrdn reaffirmed plans to slash around 500 jobs as part of a restructuring programme announced in January that aims to restore its investment business to an “acceptable level of profitability”. The cuts would amount to a 10% reduction in the firm’s headcount and save around £150m a year. The restructuring is expected to cost around £150m.

The challenges facing the investment business were writ large in full-year results yesterday, which revealed a fall in profits and revenue, and further net outflows from its investment funds.

abrdn reported overall net outflows of £13.9 billion as its investment business came under pressure from “structural and macroeconomic” challenges in global equities markets. Mr Bird also cited the “higher for longer” interest rate environment in developed economies, which he said was “adding sustained pressure on most asset classes”.

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The company reported net outflows of £15.3bn from its investment business.

However, abrdn underlined the strength of its interactive investor (ii) and Adviser businesses, which Mr Bird declared were “delivering” for the company. He said the company was “scaling up these market-leading platforms to benefit from long-term structural growth in UK savings and wealth”.

abrdn acquired ii, a subscription-based investment platform, for £1.5bn in December 2021 and it now forms a key strand of its business. The company said it benefited in 2023 from a full year’s contribution from ii which “continued to perform well against an uncertain market environment”, with net operating revenue rising by 43% to £287m and adjusted operating profit up 58% at £114m.

Its Adviser business, which provides platforms and solutions to independent financial advisers, reported a 21% rise in net operating revenue to £224m and a 37% increase in adjusted operating profit to £118m.

Overall assets under management and administration at the company fell to £494.9bn from £500bn.

abrdn reported a 5% fall in adjusted operating profit to £249m in 2023, as net revenue dipped by 4% to £1.4bn. It said the fall in profit and revenue reflected the impact of net outflows and adverse markets though it said this was partly mitigated by the diversification in sources of revenue.

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abrdn said it expects structural and cyclical market conditions to remain challenging for active asset managers and anticipates headwinds arising from changing client demand and preferences. It anticipates insurance partners will continue to move money from active equity and fixed income strategies to passive quantitative strategies in 2024.

abrdn saw shares lift in early trading after it said it reduced costs by £102m in 2023, ahead of the £75m targeted, and reaffirmed that the cuts announced on January 24 would save at least £150m a year by 2025. However, the share price went into reverse as the day progressed, and closed down 5.3p, or 3.3%, or 156.2p.

The dividend was maintained at 14.6p per share.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “High inflation and worries about economic growth have been challenging for the asset management sector, and abrdn has embarked on a deep cost-cutting plan to revive its performance.

"It sold off its US and European private equity arms but has been trying to keep revenue moving in the right direction through the acquisition of interactive investor. This should provide a relatively stable source of assets for the group, given its one of the UK's biggest direct-to-consumer investment platforms, albeit in a highly competitive market.

“There is likely to be significant disgruntlement emanating from reports that the deteriorating performance hasn’t stopped the board awarding chief executive Stephen Bird an £800,000 bonus, particularly given the scale of the job cuts announced.”

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Mr Bird said: “Over the past three years we have reshaped the business to fit the modern investment landscape. We now have content and distribution aligned to the products and services clients need, and we are better positioned for future growth.”

He added: “Our balance sheet remains strong which enables us to fund our cost transformation while continuing to strategically invest in growth areas and maintain our dividend. There is significant work ahead, but we are confident we will be successful in delivering future growth.”

John Moore, senior investment manager at RBC Brewin Dolphin, said: “Financial services markets are changing more rapidly than ever and, with that, abrdn has been in more or less a constant state of flux for the past few years.

“This challenging backdrop is reflected in today’s mixed results, which has some signs of bright spots but also highlights areas for improvement. interactive investor remains the stand-out performer and the growing diversification of abrdn’s business is helping to steady the ship.

“However, another transformation programme introduces a degree of uncertainty, and the uncovered dividend feels too high at its current level for the period of change the company is going through.”