They are supposed to be in the business of making money for their clients, but Britain’s biggest wealth management firms have seen the value of their own shares slump since new rules were introduced to give customers a better deal.
The biggest loser has been St James’s Place, whose shares have dived by 44 per cent – or £2.6 billion – after the consumer duty regulations came into force in July.
SJP, the UK’s largest wealth manager, has slashed fees for long-standing clients and plans to axe controversial early withdrawal penalties to comply with the new rules.
The moves are set to cost the firm around £150 million when those changes come into effect in 2025.
The company has been under fire for a ‘cruises and cufflinks’ mentality that rewarded its top salesmen at the expense of clients, who faced charges of up to 6 per cent for exiting their pension investments early. The firm says the culture has been reformed.
Pension exit charges have been capped at 1 per cent since 2017.
City watchdog the Financial Conduct Authority wants firms to focus on ‘fair value’ and ‘good outcomes’ for customers.
Experts say the FCA, which has been attacked for failing to curb sky-high fees, is finally baring its teeth and has started to regulate prices to the benefit of customers.
David McCann, an analyst at investment bank Numis, said: ‘We think this regulation could move it very close to that description in substance, given it will be the ultimate judge of whether a company is charging ‘fair’ prices.’
Investors are already drawing their own conclusions and selling shares in other wealth managers.
Since the new rules came into effect Abrdn shares are down 19 per cent, AJ Bell is off 28 per cent and Schroders is 17 per cent lower, while Hargreaves Lansdown has fallen by 18 per cent.
McCann also notes that apart from SJP, most firms have said very little about their consumer duty obligations, other than general comments about ‘no significant changes to our business’ or seeing the new rules as ‘a net opportunity’.
‘We feel that such comments may underplay the risks that some in the sector face that we have identified and could result in disappointment for investors,’ McCann added.
Investment platforms such as Hargreaves Lansdown, which take a cut from the interest earned on clients’ cash, are also in the sights of transparency campaigner Gina Miller of wealth manager SCM Direct.
‘This is a complete scandal,’ she said. ‘Such cuts from clients’ savings should be immediately banned by the regulator.’
An FCA spokesman said: ‘We want competitive markets with products sold clearly and priced fairly.
‘Consumer duty isn’t about us setting the price. It means financial firms proving to themselves, and if necessary us, that what they charge reflects the value customers receive.
‘If they can’t, they need to make changes.’
SJP was contacted for comment.
