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Wealth manager St James’s Place has announced a £426mn provision for potential client refunds and slashed its dividend, sending shares in the group down almost a third in early trading on Wednesday.
The group said it had received a significant increase in the number of client complaints late last year about whether they had received a sufficient level of service, prompting St James’s Place to make the provision.
“We recognise that this is a disappointing outcome for everyone,” said chief executive Mark FitzPatrick, who was presenting his first set of results since taking the top job in December. The provision pushed the company to a pre-tax loss of £4.5mn last year, down from a pre-tax profit of £504mn in 2022.
FitzPatrick cautioned that the industry outlook remained “challenging”.
The Financial Conduct Authority has repeatedly warned wealth managers to ensure consumers are receiving value for money when they pay for financial advice, and this month it said it may crack down on high charges.
The warnings are part of the watchdog’s consumer duty regulations, introduced last year, which require companies to meet higher standards of customer protection. Under the new rules, firms must act in good faith towards customers, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives.
St James’s Place said it anticipated it would take between two and three years to settle the issue, and had engaged “extensively” with the FCA on the matter.
The £426mn provision was based on a “statistically credible representative cohort” of clients, the company said, however it did not know how many clients in total were affected.
“The further back in time we go, our ability to evidence the interaction that the client and the adviser had is less available,” said FitzPatrick.
The company said the introduction of a new IT system from Salesforce in 2021 meant that it was now able to monitor the service provided to clients, and that it expected the claims to be a “historic issue”.
But analysts at Numis said on Wednesday that it was “disappointing to see another piecemeal warning/major adverse development to the investment story . . . rather than seeing these issues dealt with comprehensively on one occasion”.
Based in Gloucestershire, SJP became a powerhouse over three decades as its more than 4,000 financial advisers offered clients everything from wealth management to retirement planning.
However, over the past year the group has found itself in the crosshairs of the Financial Conduct Authority over a fee structure long regarded as opaque and expensive.
SJP charges an upfront advice fee for clients when they sign up, and then an ongoing advice fee annually for the relationship with their adviser, which is 0.5 per cent of assets for most clients.
Following pressure from regulators, SJP in October announced an overhaul of its fees, including scrapping penalties for customers pulling their money within a certain period.
The company said on Wednesday that the new charging structure would hit its ability to increase profits, and “reduces our ability to invest for long-term growth in our business over the next few years”.
It has cut payouts to shareholders as a result, reducing its final dividend from 37.19p a share to 8p a share. The total payout for the year was 23.83p, less than half the level of 2022.
