St James’s Place in Turmoil: Shocking Losses & Share Plunge Explained

Troubled wealth manager St James’s Place reported its final results, for the year ending December 2023 this morning, and numbers have shocked the city.

Terrible Results

The company posted a net loss of -£9.90 million compared to 2022s £407.20 million profit.

The annual loss is due to a £426.0 million provision, against what the firm called “client refunds linked to the historic evidencing and delivery of ongoing servicing”

A rise in the number of complaints about ongoing service levels at the firm prompted an internal investigation, which revealed a significant shortfall in record keeping.

Readers will recall that back in October St James’s Place removed controversial exit fees and simplified its charging structure, to become more transparent and to comply with the FCA rules around consumer duty, which became effective in July 2023.

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STJ Share Price Battered

The St James’s Place share price plunged by -20.0% on that news in October.

However, the stock has fallen by -33.0% this morning, following the disclosure of the multi-million-pound provision.

That fall means that the stock price has more than halved in the last 6 months, and is down by a whopping -67.50% over the last year.

In truth, the wealth managers’ share price has been falling for a decade and this is just the latest crisis to hit the group.

Dividend Reduction

The £426.0 million charge is said to be a one-off.

However, it has far-reaching ramifications, not least for the dividend, which has been slashed to 23.83p per share for the full year from the 37.19p it paid in 2022.

What’s more, the dividend will be reduced to 18p per annum out to 2026, though the firm does say that it will distribute 50.0% of its full-year underlying cash to shareholders in 2024, 2025 and 2026

With share buybacks making up the difference, over and above the fixed dividend.

CEO Mark FitzPatrick said of the results:

“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”

He added that

“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 (of clients). The assessment revealed that our evidence of ongoing client servicing was less complete in the years preceding investment into our Salesforce CRM system in 2021.”

Can St James’s Place Recover?

It’s not immediately clear what sanctions, if any, the FCA will take against St James’s Place for poor record keeping.

But in the past, the regulator has levied hefty fines for this kind of malfeasance, and it’s also possible that we could see class action lawsuits against the company, from disaffected clients.

Mark FitzPatrick said he expected the industry outlook to remain challenging, he is right.

However, it will be made doubly challenging for St James’s Place, thanks to the negative publicity and share price moves, associated with this latest story.

As a result, I am forced to question whether the group can continue in its current format.

At the very least I think a rebrand and root and branch reform of its business practices, may be necessary, to bring the business up to scratch with current regulatory expectations.

In a different climate St James’s Place might now be considered a bid target.

However, potential buyers will think twice, and wonder whether there are any other skeletons in the cupboard, waiting to emerge.