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SJP moves into banking as distribution arm posts £11m loss

St James’s Place has announced it is launching a banking service powered by Metro Bank, as its distribution arm posts a £10.9m loss for 2014.

In its annual results, published today, the wealth manager says it is to introduce a “fully functional” banking service, allowing clients to pay in cheques and use debit cards, and giving clients mobile and online banking access.

The service will be branded as the St James’s Place Money Management Account, and will be backed by Metro Bank.

The account will also provide an overdraft facility, secured against the value of clients’ investment portfolio. SJP plans to launch the service in April.

The move comes as SJP reveals its advice business made a £10.9m loss last year, compared to a £6.1m loss in 2013.

It attributes the loss partly to the £1.7m cost associated with acquiring the Henley Group, an advice firm with offices in Shanghai, Singapore and Hong Kong.

SJP says it also incurred higher adviser recruitment expenses last year.

The company saw its Financial Services Compensation Scheme levy rise from £5.5m in 2013 to £5.9m.

Overall, SJP saw a 20 per cent increase in net inflows from £4.2bn to £5.1bn, while funds under management rose from £44.3bn to £52bn.

The number of qualified advisers went up by 10 per cent to 2,835.

SJP made a pre-tax profit of £182.9m for 2014, down 4 per cent on the £190.7m profit in 2013. Last year results were boosted by a £8.9m reinsurance deal.

The company is paying a full-year divided of 23.3 pence per share, up 46 per cent from 2013.

SJP chief executive David Bellamy says: “This year we will seek to further strengthen our relationship with our clients by exploring opportunities to enhance our proposition, through the continual development of our approach to the management of their wealth and the addition of complementary services, so that we are able to offer a more complete proposition.

“We are delighted to be working with Metro Bank and look forward to being able to offer this additional facility for our clients.”

He adds: “There is a reassuring consistency about our business that is once again reflected in these results. We begin 2015 with confidence that we are well positioned for future growth, in line with our medium to long-term objectives.”

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. They bought the Henley Group ……….and they wonder why they are running up losses, long may it continue

  2. Mmm! SJP finally joining the Banking set; that’s the restricted, miss selling, tax evading, ineffective and shoddy Client services, shareholders first, Financial Services area. They may fit in rather well.

  3. E L Wisty (an only twin) 25th February 2015 at 10:49 am

    “The move comes as SJP reveals its advice business made a £10.9m loss last year, compared to a £6.1m loss in 2013. It attributes the loss partly to the £1.7m cost associated with acquiring the Henley Group”.

    I may not be the most numerate person around, but even if you allow for the Henley Group, SJP still lost 3.1 million more than last year – and it can’t all be recruitment costs.

    With 2,385 salesmen – sorry, ‘partners’ – I wonder how long this can carry on for before the wheels come off the bus, and we start to see rationalisation? Surely, there are only so many people for whom investment bonds are suitable, and that’s before we consider the cold regulatory wind that is blowing from Europe.

  4. @Wisty
    The bus is very healthy, £182.9M profit before tax. How the passengers are distributed in the cabin is another matter.

    This does raise a post-RDR point though. COBS rule 6.1A.9R states:

    “If the firm or its associate is the retail investment product provider, the firm must ensure that the level of its adviser charges is at least reasonably representative of the services associated with making the personal recommendation (and related services).”

    This must surely raise questions about the level of SJP advice charges? If the distribution arm is making increasing losses how can their charges be representative? As Captain Jack Sparrow would say, “that’s interesting…”

  5. E L Wisty (an only twin) 25th February 2015 at 3:10 pm

    @ Grey Area

    I couldn’t agree more.

    Time for someone to clear away the SJP smoke and mirrors. Or is this really what the regulator thinks good looks like?

  6. It seems that the jealousy around SJP is alive and well. Lazy misconceptions abound and this can only be bad for the wider advice community.

    Interested to note the comment above regarding Investment Bonds whereas for one, IFA’s provided a staggering number of these when commission was payable at ludicrous rates and a closer look at the financial data for SJP does not show any obvious bias towards Investment Bonds. They are also the largest ISA provider.

    52,000 new clients in a year and a retention rate of over 95% on FUM maybe helps you to gain a better insight as I suppose it is the clients/ customers that decide the quality of any business.

  7. @Jordan – I don’t really care either way, but is Grey Area right with his figures and his quote from the COBs rules?
    If it is true, then I would hope and expect the FCA take note (they will not tell us as they cannot comment on specific cases says Rory Percival…. hello Rory, how was Yorkshire this week? I hope you are reading MM and thinking about how this announcement does meet COBs)

  8. @ Phil

    I am struggling to see the connection between the cost of advice detail in the COBS paragraph and the profit/loss in the distribution arm. Maybe just me.

  9. I will leave GA to explain it. I think I get where he is coming from.

    I honestly haven’t got an axe to grind with SJP,(I am a bit oif a wind up merchant at times, I do accept 🙂 ) but I do have a concern that with your front end charges, NOT being front ended, but acting as a disincentive to transfer away AND the fact you include a trail fee, that cant be directed to a non SJP servicing agent I believe, we may be working under different rules from those the FCA purported we should be once RDR came in. Hence my reference to Rory P, who I posed this very question to in public at a PFS meeting in Kent recently.

  10. E L Wisty (an only twin) 26th February 2015 at 10:01 am

    @ Jordan Marshall

    I am sorry to hear that you are “struggling to see the connection”, and I suspect that it is just you. Oh well, you may be none the wiser, but at least you are now better informed.

    For clarity, I am not in the least bit “jealous” of SJP. However, I am very concerned for the same reasons as GA and PC. It does appear that there are valid concerns that need to be urgently addressed by the regulator, and all parties would benefit from such attention. Hopefully, Rory Percival is reading these comments and will ensure that the right people at the FCA take appropriate action.

    SJP is, undoubtedly, successful as a corporate entity, but is this success in conflict with the interest of its clients? This needs to be investigated. From my experience of taking on dissatisfied, former SJP clients (and there are many), investment bonds are a standard recommendation, and sophistry appears to be a fundamental ingredient in the slick sales pitch employed by SJP salesmen.

    Yes, you are right, many former IFAs did abusively sell investment bonds – hence the need for the RDR. However, I wonder how many of these miscreants renounced their independence and moved to SJP (always amuses me that SJP’s head office is located by the river Churn).

    On a slight different, but connected issue, can anyone explain why SJP’s salesmen are self-employed, rather than employees? I appreciate that ‘partner’ is only a marketing term (intended to convey professionalism and respectability), but even professional LLPs are now coming under challenge to review the tax and NIC position for salaried partners.

    It would appear (and please correct me if I am wrong) that the SJP sales force is self-employed, although there is a clear ‘master and servant’ relationship and I am unaware of any SJP salesmen who also act for other providers. If this is the case, then taxpayers are being deprived of millions of pounds in unpaid NIC and the sales people in question are losing out on valuable employee rights and privileges.

    At a time when public anger against aggressive tax avoidance and evasion is at an all time high, it would be reassuring to know that SJP’s employment and tax position is above censure. And if not ……..

  11. For the avoidance of doubt the rule in question is designed to ensure that the RDR principle of separation of advice and product is upheld, especially when it comes to payment for each respectively. Otherwise, product providers with an adviser capability could load charges into products and charge less for advice, thus making it look cheaper than it is. We are talking cross-subsidisation.

    I have quoted the rule but below it in the Handbook is guidance, one bit of which reads as follows:

    “An adviser charge is likely to be reasonably representative of the services associated with making the personal recommendation if… the allocation of costs and profit to adviser charges and product charges is such that any cross-subsidisation is not significant in the long term”

    Which leaves the question of what amounts to significant and what is meant by long term? A distribution arm loss/subsidy of £10.9M in 2014 being an increase from a loss/subsidy of £6.1M in 2013 seems significant to me and looking forward it’s also travelling in the wrong direction.

    Are the advice charges levied by SJP cheaper than they should be? Are they gaining a competitive advantage from this? Answers on a postcard…

  12. It’s amazing how many IFAs ceased to be ‘salemen’ once they had bought a new suit post RDR!

    You’ve all got somehting to sell lads, so like it or not, you’re all still ‘salesmen’! 🙂

  13. @Gilbert – I am a salesman and proud of it. I need to be a good salesman in order for my clients to actually FOLLOW my advice.
    As to suits I only wear them for weddings, funerals and when dealing with people who might think they are superior if they are wearing one and I am not. I started NOT wearing a suit whilst still working for a bank to make a point when we became peripatetic staff i.e. whilst I would still wear a suit at the bank branch and when seeing clients I refused to wear one when not doing client facing activities i.e. training courses and team meetings (as my line manager will recall for trying to discipline me for the same). They did not have a leg to stand on as the women were often wearing jean skirts and tee shirts otherwise whilst we were being told we must wear suits and NOT take our suit jackets off!

  14. E L Wisty (an only twin) 27th February 2015 at 3:42 pm

    @ Gilbert Lennard

    Nothing wrong with selling.

    However, in this context, we are using the term to differentiate between someone who promotes the products and services of a specific company that they are a representative of, and someone who acts as the objective and impartial agent of the client.

    Happy now?

  15. Julian Stevens 6th March 2015 at 1:14 pm

    I’ve just reviewed one of my client’s SJP ISA, spread across 6 funds ~ Balanced (managed), Global (mainly equities), Global Equity, Managed Growth (a global managed fund), Strategic Managed (global) and Worldwide Opportunities (global managed). Lots of diversification there then.

    Of these six funds, four are less than 5 years old whilst the performance of the other 2 over 5 years is slightly better than average.

    All have a 5% B/O Spread w3ith an average AMC of 1.73%.

    Draw your own conclusions.

  16. E L Wisty (an only twin) 12th March 2015 at 9:57 am

    @ Julian

    I have seen similar myself, Interesting how SJP clients react, when you provide them with impartial advice and professional investment alternatives. In my experience, quite a few express anger and annoyance that such sophistry, charges and poor investment options are lawful post-RDR, while most are simply glad to move on and put it down to experience.

    The real worry is that this vertically-integrated sales operation appears to have regulatory approval and is regarded by its clients and many professional introducers as ‘high end’ and offering value for money. Nothing could be further from the truth.

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