St. James’s Place slashes dividend as complaints redress wipes out profits

St. James’s Place is a shell of its former self. The business model that enriched the company with high fees for managing individuals’ wealth has come crashing down around them, culminating in a dividend cut and a loss for 2023.

Today, the company issued its results for the year ending 31 December 2023, highlighting the impact of £426m redress provisions, which have entirely wiped out profits after tax.

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St. James’s Place shares were down 28% at the time of writing and, at 442p, are worth around 25% of the stock’s all-time highs.

The company has set aside a substantial amount for customer complaints as regulatory pressure increases on high fees and the quality of advice services.

In the context of the FCA’s push to improve outcomes for retail investors, St. James’s Place’s struggles as a business represent a fairer and better value wealth management market for UK savers.

St. James’s Place has been criticised for unfair charges, including prohibitive exit fees.

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Wealth firms have been found to fail customers in terms of ongoing customer service, and this accounts for a large proportion of the redress set aside by the company today.

“The Cash result for the year of £68.7 million (2022: £410.1 million) has been significantly impacted by an assessment into the evidencing and delivery of historic ongoing servicing and the provision we have established for potential client refunds,” said Mark FitzPatrick, Chief Executive Officer.

“This work was undertaken following a significant increase in complaints, particularly in the latter part of 2023, mostly linked to the delivery of ongoing servicing.”

The post-tax Cash result of just £68.7 million was significantly impacted by a one-off £426.0 million pre-tax provision for potential client refunds related to historical service evidencing and delivery.

Net inflows fell to £5.1bn as assets under management grew to £168bn compared to £148bn in 2022 due to higher asset prices. The problem for St. James’s Place is the level of fees they will able to generate from assets under management in the future.

A major blow for investors is the slashing of dividends.

SJP has declared a final dividend of 8p per share, bringing the total dividend for 2023 to 23.83p per share. This is down from 52.78p in 2023.

In the future, SJP has revised its dividend policy to set total annual shareholder distributions at 50% of the full-year Underlying cash result. Such a policy will likely lead to much lower dividends on an ongoing basis.

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