Wealth management giant St James’s Place (SJP) has very ambitious growth plans for the years ahead but the firm has admitted there will have to be changes.
In its financial results for the year ending on 31 December 2020, the business reported 5% lower gross inflows at £14.3bn and an 8% fall in net investments, but funds under management (FuM) grew by 11% reaching £129.3bn ($181bn, €150bn).
Despite a very difficult year due to the outbreak of covid-19, national lockdowns and social distancing measures which have impacted the firm’s performance, the wealth manager is sticking to its five-year plan.
SJP chief executive Andrew Croft said the company’s “ambition” is to “deliver growth in new business of around 10% per annum which, with modest help from investment markets and continued high retention rates, would see FuM grow to in excess of £200bn by the end of 2025”.
Such massive growth plans, however, do come at a cost.
The firm revealed that in the next few months it will be simplifying its operations with the removal of work duplication. This will lead to the firm cutting around 200 roles across the SJP business.
Croft added: “We hope that a combination of filling vacant roles across the business and a voluntary redundancy programme in appropriate areas, will mitigate the number of individuals impacted by this difficult decision.”
Also, SJP said in its results that the Asian arm of the business has “faced some considerable external challenges over the last two years”, from the US and China trade tensions in 2019 to the coronavirus pandemic.
But these did not impact performance, as the arm ended 2020 with a 27% increase in gross inflows at £321m and with net inflows 15% higher than last year at £257.
The Asia business was forced, however, to stop recruiting financial advisers during 2020, as it focused on accelerating its cash result profitability.
As a result, it reduced the number of hires and ended 2020 with a total 132 employed advisers.
Elsewhere, SJP’s DFM subsidiary Rowan Dartington saw its gross inflows drop by 17% and net inflows by 24%. Despite this, FuM saw a small uptick of 3% at £2.9bn.
SJP added: “The combination of lower flows and volatile markets reduced the planned income of the business. However, strong expense discipline resulted in a lower net investment cost in 2020 compared to 2019.
“We expect the investment cost to continue to decline in coming years with the operations becoming cash generative in 2024.”
One of the biggest costs for the business was a major spike in the Financial Services Compensation Scheme (FSCS) levy in the UK.
SJP contributed £36.7m last year, a 33% increase from its levy in 2019.
Croft said: “Whilst we continue to support an industry safety net for consumers, the increasing size of the levy is a real concern and source of frustration. Good companies are having to continue to fund a significant cost over which they have no control or influence.”
Croft’s sentiments were echoed by SJP chief financial officer Craig Gentle, who said the sum “increased substantially and disappointingly during the year”.
The firm expected its FSCS levy to grow by around 15%, but the actual bill was “over and above” expectations.
Gentle added: “Although we are fundamentally supportive of a mechanism that protects consumers, we agree with the comment made by the Financial Conduct Authority (FCA) chair Charles Randell when he said ‘…all too often, the polluter doesn’t pay. The cost of bad behaviour by firms which then fail is usually mutualised through the FSCS, rather than borne by the wrongdoers’.
“We welcome the goal that has been outlined by the FCA of redesigning the system to make the polluters pay.”