St James’s Place put in its place by investors as action on fee conduct bites
How many pairs of cufflinks could £1bn buy?
That was the question being asked by City wags after that sum of money was wiped from the stock market value of St James’s Place (SJP) this morning.
It was a knowing reference to the most famous of the gifts with which the UK’s biggest wealth manager used to reward its most successful advisers that came to light in a Sunday Times expose back in 2017.
The paper revealed that SJP’s best-performing advisers were benefiting from what the paper referred to as a “cruises-and-cufflinks bonus scheme” – with a key perk being cufflinks, in the shape of SJP’s old winged lion logo, coming in colours going from blue to green to gold depending on how far in the business an individual got.
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An anonymous adviser told the paper: “It’s a real status symbol among advisers and something we all prided ourselves on. Principal partners can get 18-carat white gold, diamond-encrusted cufflinks worth about £1,200.”
The rewards were among lavish accoutrements that the best SJP advisers could expect if they hit their targets.
There were lavish cruises and holidays to luxury destinations and the famous conferences, at venues like the Royal Albert Hall, where TV presenters such as Fiona Bruce or Jonathan Ross would introduce guest speakers like David Beckham or Bill Clinton.
It all came to an end when the former chief executive Andrew Croft, realising the damage the revelations had done to the company’s reputation, pulled the plug on the scheme in 2019.
Insisting that they had not led to the mis-selling of financial products, he told The Times: “It’s a bit more than an irritation. It’s a frustration. It’s not reflecting the company we are.”
And yet today’s gags – after shares of SJP fell by as much as 32% at one point to reach a level last seen in January 2013 – show how hard it can be to shift impressions.
That is why an even greater reset was called for. It has fallen to Mark FitzPatrick, a former interim chief executive and chief financial officer of the insurance giant Prudential, who succeeded Mr Croft at the beginning of October last year.
Mark FitzPatrick
Central to changing those impressions and assumptions was a decision Mr FitzPatrick took just three weeks later.
He announced that the company, which manages £168.2bn on behalf of 958,000 clients, would be changing its charging structure – and reducing its fees and controversial exit charges for clients leaving the business early.
As Mr FitzPatrick put it today: “[Our] charging has too often been seen as complex and therefore open for external commentators to challenge.”
He said that, ultimately, the changes would be good for the health of the business.
Yet that simplification of fees means SJP’s profits growth will be impacted in years to come and, in turn, reduce the amount it has available to invest.
The main factor behind today’s stock price meltdown, though, was a one-off provision made by the company of £426m to compensate clients whose service has fallen short of what they might have been entitled to.
Mr FitzPatrick said: “Throughout late 2023 and early 2024 we saw a significant increase in the number of complaints, largely related to whether clients had received ongoing servicing historically. Given the scale of complaints, we needed to explore the issue by assessing client experience.
“The crux of the matter is that…in some instances the frequency of services being delivered was below what clients should have received. This means that we may need provide refunds for clients where we cannot find evidence that ongoing servicing has been provided.”
He said this was “clearly disappointing” but insisted: “We are dealing decisively with these two historic challenges.”
The matter is expected to take between two to three years to resolve and Mr Fitzpatrick said that the company was engaging “extensively” with the Financial Conduct Authority – an increasingly stern critic of opaque charging structures – on the matter.
He added: “We’ve been in extensive conversations with the FCA, we’ve had a skilled person appointed to look at elements of our book and servicing…they’ve undertaken a review of the elements of our book.
“We’ve taken the FCA through this…as is normal for this type of process.
“This has been done with their full awareness and understanding.”
He said records would need to show that an adviser had held a meeting with a client and taken notes on the meeting as evidence that the client had received the service to which they were entitled.
Mr FitzPatrick added: “If you can’t evidence it was done – it wasn’t done.”
He said that since SJP had implemented a new customer relationship management system from Salesforce, in 2021, it had a lot more evidence.
He added: “The size and scale of the issue for 2023 was that 2% of our clients had not been serviced or we didn’t have evidence of servicing. We have written out to those effected clients already…and they will be refunded over the course of this year.”
The investigation dates back to 2018 – when the statute of limitations runs for when this kind of evidence needs to have been retained. The provision meant St James’s Place reported a pre-tax loss of £4.5million for 2023 – down from a profit of £503.9m in 2022.
While the share price reaction is not altogether unexpected, a cynic might say that today’s results statement is a good example what is known in the City as a ‘kitchen sink job’ – where a company issues a set of results or a trading statement containing as much bad news as it is possible to incorporate.
In theory, it should create a base for the share price, potentially making life easier for Mr FitzPatrick in future as he seeks to prove how he is turning around the business.
So where does the company go from here?
Mr FitzPatrick insisted today he was optimistic for the future given how millions of Britons have to provide for their future and have a need for financial advice.
And he was able to point to a quite startling statistic – which is that retention rates at St James’s Place, whose client numbers have more than doubled over the last 10 years, stood at 93.5% last year.
That points to a quite remarkable level of loyalty among SJP clients in spite of the constant drip-drip of awful publicity for the company over the last seven years or so.
He also pointed out that SJP had more branches across the UK than the country’s five biggest banks. That in theory should make it easier to attract new customers.
Investors will worry about whether other nasty surprises may be waiting to come out.
But Mr FitzPatrick said: “I’ve been in the role 12 weeks. I’ve spent a long time listening, learning, looking at things – I can’t see any other significant potholes ahead of us. I’m confident with this issue being acknowledged and that we’re dealing with this – all of this puts us in a place where we can look forward with confidence. This is a historic issue as against a current issue.”
Time will tell. Mr FitzPatrick deserves credit for taking bold and decisive action. It is hard, though, to avoid the conclusion that, just three months into the job, he has already made a pledge on which he will be judged for as long as he is in it.
Business
Donald Trump’s tariffs will have consequences for globalisation, the US economy and geopolitics
For decades, trade and trade policy has been an economic and political backwater – decidedly boring, seemingly uncontroversial.
Trade was mostly free and getting freer, tariffs were getting lower and lower, and the world was becoming more, not less, globalised.
But alongside those long-term trends, there were some serious consequences.
Trump latest: US president announces sweeping global trade tariffs
Mature, developed economies like the UK and US became ever more reliant on cheap imports from China and, in the process, saw their manufacturing sectors shrink.
Large swathes of the rust belt in the US – and much of the Midlands and North of England – were hollowed out.
And to some extent that’s where the story of Donald Trump’s “Liberation Day” really began – with the notion that free trade and globalisation had a darker side, a side he wants to remedy via tariffs.
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Trump’s tariffs: Ed Conway analysis
He imposed a set of tariffs in his first term, some on China, some on specific materials like steel and aluminium. But the height and the breadth of those tariffs were as nothing compared with the ones we have just heard about.
Not since the 1930s has the US so radically increased the level of tariffs on all nations across the world. Back then, those tariffs exacerbated the Great Depression.
It’s anyone’s guess as to what the consequences of these ones will be. But there will be consequences.
Consequences for the nature of globalisation, consequences for the US economy (tariffs are exceptionally inflationary), consequences for geopolitics.
Imports from the UK will face a 10% tariff, while EU goods will see 20% rates. Pic: Reuters
And to some extent, merely knowing that little bit more about the White House’s plans will deliver a bit of relief to financial markets, which have fretted for months about the imposition of tariffs. That uncertainty recently reached unprecedented levels.
But don’t for a moment assume that this saga is over. Nothing of the sort. In the coming days, we will learn more – more about the nuts and bolts of these policies, more about the retaliatory measures coming from other countries.
We will, possibly, get more of a sense about whether some countries – including the UK – will enjoy reprieves from the tariffs.
To paraphrase Churchill, this isn’t the end of the trade war, or even the beginning of the end – perhaps just the end of the beginning.
Donald Trump has announced a 10% trade tariff on all imports from the UK – as he unleashed sweeping tariffs across the globe.
Speaking at a White House event entitled “Make America Wealthy Again”, the president held up a chart detailing the worst offenders – which also showed the new tariffs the US would be imposing.
“This is Liberation Day,” he told a cheering audience of supporters, while hitting out at foreign “cheaters”.
Follow live: Trump tariffs latest
He claimed “trillions” of dollars from the “reciprocal” levies he was imposing on others’ trade barriers would provide relief for the US taxpayer and restore US jobs and factories.
Mr Trump said the US has been “looted, pillaged, raped, plundered” by other nations.
Pic: AP
His first tariff announcement was a 25% duty on all car imports from midnight – 5am on Thursday, UK time.
Mr Trump confirmed the European Union would face a 20% reciprocal tariff on all other imports. China’s rate was set at 34%.
The UK’s rate of 10% was perhaps a shot across the bows over the country’s 20% VAT rate, though the president’s board suggested a 10% tariff imbalance between the two nations.
It was also confirmed that further US tariffs were planned on some individual sectors including semiconductors, pharmaceuticals and critical mineral imports.
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Trump’s tariffs explained
The ramping up of duties promises to be painful for the global economy. Tariffs on steel and aluminium are already in effect.
The UK government signalled there would be no immediate retaliation.
Business and Trade Secretary Jonathan Reynolds said: “We will always act in the best interests of UK businesses and consumers. That’s why, throughout the last few weeks, the government has been fully focused on negotiating an economic deal with the United States that strengthens our existing fair and balanced trading relationship.
“The US is our closest ally, so our approach is to remain calm and committed to doing this deal, which we hope will mitigate the impact of what has been announced today.
“We have a range of tools at our disposal and we will not hesitate to act. We will continue to engage with UK businesses including on their assessment of the impact of any further steps we take.
“Nobody wants a trade war and our intention remains to secure a deal. But nothing is off the table and the government will do everything necessary to defend the UK’s national interest.”
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Who showed up for Trump’s tariff address?
The EU has pledged to retaliate, which is a problem for Northern Ireland.
Should that scenario play out, the region faces the prospect of rising prices because all its imports are tied to EU rules under post-Brexit trading arrangements.
It means US goods shipped to Northern Ireland would be subject to the EU’s reprisals.
The impact of a trade war would be expected to be widely negative, with tit-for-tat tariffs risking job losses, a ramping up of prices and cooling of global trade.
Research for the Institute for Public Policy Research has suggested more than 25,000 direct jobs in the UK car manufacturing industry alone could be at risk from the tariffs on car exports to the US.
The Society of Motor Manufacturers and Traders (SMMT) had said the tariff costs could not be absorbed by manufacturers and may lead to a review of output.
The tariffs now on UK exports pose a big risk to growth and the so-called headroom Chancellor Rachel Reeves was forced to restore to the public finances at the spring statement, risking further spending cuts or tax rises ahead to meet her fiscal rules.
Read more:
What do Trump’s tariffs mean for the UK?
The rewards and risks for US as trade war intensifies
A member of the Office for Budget Responsibility (OBR), David Miles, told MPs on Tuesday that US tariffs at 20% or 25% maintained on the UK for five years would “knock out all the headroom the government currently has”.
But he added that a “very limited tariff war” that the UK stays out of could be “mildly positive”.
He said: “There’s a bit of trade that will get diverted to the UK, and some of the exports from China, for example, that would have gone to the US, they’ll be looking for a home for them in the rest of the world.
“And stuff would be available in the UK a bit cheaper than otherwise would have been. So there is one, not central scenario at all, which is very, very mildly potentially positive to the UK. All the other ones which involve the UK facing tariffs are negative, and they’re negative to very different extents.”
Business
Donald Trump’s tariffs will have consequences for globalisation, the US economy and geopolitics
For decades, trade and trade policy has been an economic and political backwater – decidedly boring, seemingly uncontroversial.
Trade was mostly free and getting freer, tariffs were getting lower and lower, and the world was becoming more, not less, globalised.
But alongside those long-term trends, there were some serious consequences.
Trump latest: US president announces sweeping global trade tariffs
Mature, developed economies like the UK and US became ever more reliant on cheap imports from China and, in the process, saw their manufacturing sectors shrink.
Large swathes of the rust belt in the US – and much of the Midlands and North of England – were hollowed out.
And to some extent that’s where the story of Donald Trump’s “Liberation Day” really began – with the notion that free trade and globalisation had a darker side, a side he wants to remedy via tariffs.
He imposed a set of tariffs in his first term, some on China, some on specific materials like steel and aluminium. But the height and the breadth of those tariffs were as nothing compared with the ones we have just heard about.
Not since the 1930s has the US so radically increased the level of tariffs on all nations across the world. Back then, those tariffs exacerbated the Great Depression.
It’s anyone’s guess as to what the consequences of these ones will be. But there will be consequences.
Consequences for the nature of globalisation, consequences for the US economy (tariffs are exceptionally inflationary), consequences for geopolitics.
Imports from the UK will face a 10% tariff, while EU goods will see 20% rates. Pic: Reuters
And to some extent, merely knowing that little bit more about the White House’s plans will deliver a bit of relief to financial markets, which have fretted for months about the imposition of tariffs. That uncertainty recently reached unprecedented levels.
But don’t for a moment assume that this saga is over. Nothing of the sort. In the coming days, we will learn more – more about the nuts and bolts of these policies, more about the retaliatory measures coming from other countries.
We will, possibly, get more of a sense about whether some countries – including the UK – will enjoy reprieves from the tariffs.
To paraphrase Churchill, this isn’t the end of the trade war, or even the beginning of the end – perhaps just the end of the beginning.
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