MAJOR UNCERTAINTY FOR SJP INVESTORS

St James' Place PLC Investment Update

In the last week St James' Place share price has plummeted even further. SJP have recently announced the need to set aside £426 million and have slashed their dividends to shareholders in preparation for refunds due to a significant increase in customer complaints.

Now, if you were privy to my previous updates, you will recall that the recorded profit for 2021 was £842 million and dropped to just £0.7 million in 2022 and now they must set aside £425 million just for refunds, whilst they continue to be subject to FCA Scrutiny.

Overview of SJP Problem

SJP have experienced serious issues over the past year due to Consumer Duty requirements and limitations in their business model. High charges, forced client retention through unfair exit penalties, poor performance, and limitations in their 'restricted' business model have led to a significant decrease in market confidence. 

The share price and company value has dropped a third of its value in just one week which is staggering (w/e 28th February). This amounts to a total drop in value of a massive two-thirds in the last 12 months - from 1250p to 415p.

Despite facing issues such as poor performance, limited protection under the Government's Financial Services Compensation Scheme (FSCS), high charges, and unfair exit penalties, the wealth management giant has continued to grow over the past two decades with its sales model. However, in today's information age, savvy consumer investors are now more discerning and placing a greater emphasis on value.

The chart below details the St James's Place share price drop over the last year.

Factors Influencing St James' Place Market Position

Throughout the past year, St James' Place has witnessed a significant decline in client retention. The escalating number of client complaints and growing market apprehensions are key factors contributing to the potential loss of clients for the firm.

Partner Retention - St James' Place Partners are the restricted self-employed advisers that distribute advice on behalf of SJP, and at client level are responsible for the company’s sales revenue and the distribution of SJP funds and products.
Partner numbers increased in 2021. The number of partners in 2023 dropped to 4,766. Furthermore, over the last few years as SJP have come under scrutiny, we have seen a greater push internally in moving SJP employees through the SJP academy to become self-employed partners. This would indicate that the recruitment of internal staff to SJP Partners, is subsidising partner recruitment from the external adviser market, demonstrating less demand for their partner proposition.
SJP Value Proposition - Despite claiming in their most recent 'Value Assessment Report' that 38 out of 45 of their funds "delivered overall value", analysis of their funds has consistently identified under-performance with 75% of their funds receiving a poor 1 or 2-star performance rating, when compared to all other same sector funds. Their ongoing charges are relatively high, especially in regard to their pension products.
The company's presentation can be opaque and misleading, particularly when it comes to point-of-sale commissions and their tiered early withdrawal charges ranging from 6% to 1% are prohibiting for clients forcing them to remain with SJP when they wish to leave.
Market Conditions - As seen over the last year, due to regulatory matters or other, SJP's market value has been cut by a massive two-thirds.
Regulatory environment - Changes in the regulatory environment are impacting St James' Place PLC's operations and financial performance, which in turn are influencing its share price, in particular 'Consumer Duty' in force since July 2023.

What Next For St James' Place?

SJP is a distribution business in a 'catch 22' position. They distribute investment funds to consumer investors via their distribution network of advisers (referred to as SJP Partners), all of which are self-employed and free to move from SJP at any time. SJP PLC have shareholders which they must satisfy, all of whom are free to divest at any time, which has been evident by their two-thirds drop in value over the last year.

Conclusion and Future Outlook

In a nutshell St James' Place currently offers poor value at a relatively higher cost when compared to other options for consumers in the investment/advice marketplace.

Should SJP experience a mass exodus of partner firms or clients leaving this would have significant implications for the company. Of course, this is the same for all commercial entities, however, their value proposition needs significant improvement, and it will be more difficult for SJP than most other firms to achieve this based on the limitations and restrictions within their existing business/distribution model.

Access Whole of Market Advice

90% of UK investors opt for independent ‘whole of market advice’ from firms that are not restricted to their own products or services unlike SJP with non-independent; restricted, expensive and underperforming limited options, including their suspended property fund.

Independent financial advisors have no ties to fund managers and put the needs of clients first with access to over 80,000 investment options. Ensuring clients are invested efficiently using the top fund managers, managing risk and fund manager diversification to maximise protection under MIFID II regulation, if living in the EU.

For an EU MiFID II regulated adviser contact us here…

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