St James's Place - the numbers are in

￡168.2bn under management, nearly one million clients and close to 4,500 advisers. We can only be talking about one wealth manager - St James's Place (SJP).

With the backdrop of the fees scandal of last year coupled with lack lustre fund performance, Chair, Paul Manduca, and new CEO, Mark Fitzpatrick, have been forced into initiating radical changes to the fee structure and company culture.

These changes, the publicity that went before them, and their repercussions on SJP's share price, throw the spotlight on the 2023 Report & Accounts, which have just landed.

The question we all want answering is where has the pain been felt the most: among shareholders, management, advisers, or clients?

Spoiler alert – it’s not the management.

The ripple effects of fee restructuring

The decision to overhaul SJP's fee structure was officially driven by a need to align with the Financial Conduct Authority's Consumer Duty. No one is denying, however, that it was the increasing furore about the cost of advice – or lack of it - and the poor performance of the funds that forced the management into a corner.

Unsurprisingly, there has been a marked uptick in client complaints, leading the company to create a hefty ￡426m provision in anticipation of client refunds for the lack of historical ongoing servicing.

In the words of Paul Manduca:

"An initial assessment of client servicing records has been undertaken and the findings from this indicate the need for us to take action to refund clients where ongoing service has not been evidenced”.

Add to this Mark Fitzpatrick's candid admission that SJP's charging structures have obscured comparisons of the cost of advice, and the declining brand reputation and value for money rating is unsurprising.

The clients

The accounts show that the 958,000 clients have paid ￡2.8bn between them in fees and commission income. That translates to around ￡3,000 each on an average portfolio of ￡175k. The larger the portfolio, of course, the larger the share.

Fee income from existing clients is unlikely to come down for some time to come as the scrapping of the exit penalty is only relevant to new investments after the end of 2025.

(Existing clients will continue to be liable for exit penalties should they leave, and any investment in an SJP pension or bond product between now and the end of 2025 will be liable for an exit penalty all the way up to 2029 and 2031).

Fees are one thing, but if you’re a client, what is likely to matter the most is the performance of your investments.

The financial accounts don’t comment on the fund performance, of course, but at the end of November, just before the accounts were struck, a large proportion of the funds continued to languish in the worst 25% of their sector according to analysis by Yodler.

The best news for existing clients, then, is the ￡426m provision fund. Please form an orderly queue.

The shareholders

The financial implications of the changes are seen most starkly, not in the accounts, where the cash has continued to pour in - investors are locked into the fee structure and exit is expensive - but in the share price, which has plunged from ￡1,199.00 on 11 April 2023 to ￡431.80 a year later.

The compensation to shareholders, through a total dividend of 23.83 pence per share, might be seen as an attempt to mollify their discontent.

The advisors

So, what about the advisors, the salespeople at the front of the SJP distribution model?

The 4,384 advisers have reaped an income of ￡1billion, or a simple average of ￡207,000 each, not too shabby by most people’s standards.

To date, the advisers have been insulated from the financial impact of the changes, but that may not go on forever.

The new charging model is likely to force SJP to reduce the amount of initial and ongoing fees it allocates to its partner advisers. At the same time, the declining brand reputation will be making new client acquisition more difficult. Q1 '24 net inflows are down 65% on the same period last year.

Sympathy might not be universal.

The management

The discussion around executive compensation is always contentious. With board chair fees, executive salaries and share awards seeing increases, there seems to be little attempt to repair the disconnect between leadership remuneration and client value.

In fairness, though, while new CEO, Mark Fitzpatrick’s, compensation of ￡840k + 10% pension contribution + up to 200% bonus is good, it is probably not out of line with the market, and at a level that was needed to encourage him to move from Prudential and take on the challenge.

Outgoing CEO, Andrew Croft, who left last November, took ￡695k and remains on full salary until next September. There is no bonus for Mr Croft, though.

CFO, Craig Gentle, pocketed ￡798k and the non-execs shared another ￡1.3m between them.

I’ll do the sums for you: that’s just shy of ￡3m, accounting for the fact that Mark Fitzpatrick joined in October and his salary is only included up to 31 December.

A year for reflection and action

As SJP looks into 2024 and beyond, the management's actions and strategic decisions will rightly remain under the microscope.

For reasons of balance, we should acknowledge the steps that are being taken to improve.?

-?????? The move to revise fee structures indicates an acceptance of regulatory expectations and client needs.

-?????? The creation of a large provision fund suggests that compensation will be available to those that complain.

-?????? The appointment of a new CEO points to an acknowledgement of the need to drive significant change from the top.

-?????? The ￡9.5 million raised for charity through the SJP Foundation will be welcome by those that received it.

-?????? With 89% of company vehicles being electric or hybrid, there are signs of trying to do the right thing in small pockets.

However, the issues of fund performance, executive compensation, operational transparency, and the need for enhanced client servicing can’t be overlooked.

It used to be said that the only way to make money from SJP was to be a shareholder in SJP.

For the time being, it seems, the only way to make money from SJP is to work for SJP.