St. James’s Place Plc is a FTSE 100 financial services group that provides high quality wealth management services to businesses and individuals across the UK. With around 443,000 clients and £47.6bn in funds under management, St. James’s Place is well established as one of the UK’s leading wealth managers. The strength of the Group’s adviser-led approach to wealth management, twinned with a proven investment management proposition, leaves St. James’s Place uniquely positioned to benefit from favourable long-term demographic and market opportunities in wealth management.
St. James’s Place recently announced its 2014 half-year results, reporting a 20% increase in new business and a strong increase in Partnership numbers, which now stand at 2,007. In addition, the underlying cash result for the year to date was £78.5m, an increase of 17% reflecting increased new income from funds under management (see Financial Reporting below for more on this measure). Driven by strong new business flows and excellent fund retention, net inflows totalled £2.4bn, up 23%.
The market place
There are more than 9m individuals in the UK with between £50,000 and £5m in liquid assets. This segment is forecast to control an aggregate £2 trillion in investable assets by 2018.
The UK population is ageing while the state and corporate sectors are shifting the burden of retirement onto individuals. These favourable demographics, twinned with an ever-increasing tax burden, will create further demand for high quality wealth management services over the longer term.
Proprietary distribution model
Key to the success of St. James’s Place is the group’s own dedicated distribution network, known as the Partnership, which benefits from the strength of the St. James’s Place brand. With 2,007 high-quality and experienced advisor businesses which are focused on establishing long term client relationships, the group has been able to consistently achieve predictable and high quality new business flows, as well as sustainable asset accumulation through exceptional fund retention and strong client advocacy.
The drivers of growth in new business sales are two-fold: increasing the scale and the productivity of the Partnership. The Partnership has grown in size for eleven successive years and new business per Partner has increased steadily over time. Whilst the demand for high quality face-to-face advice is rising, the number of active financial advisers in the UK has continued to reduce. This provides St. James’s Place with a compelling competitive advantage.
In February 2012, St. James’s Place re-launched the Academy, a training and development programme for experienced City professionals and those with a non-finance industry background and a parallel programme for sons and daughters of existing Partners who aspire to join the business. In addition, 2014 will see a new regional Academy initiative starting in Manchester. These initiatives complement St. James’s Place’s traditional adviser recruitment activities.
Distinct investment management approach
St. James’s Place has a distinctive approach to investment management. The Group has no in-house team of investment managers, believing that no single investment house can have a monopoly of investment expertise. Instead St. James’s Place selects a number of leading external managers from around the world to manage its broad range of funds.
The cornerstone of this approach is the Investment Committee who ‘manage the fund managers’ on behalf of clients. In addition, St. James’s Place retains an independent investment consulting firm, Stamford Associates, which plays a crucial role in selection and management. This approach provides St. James’s Place with both the flexibility to respond to market conditions as they change and also the confidence that it is employing the best fund managers for its clients.
Funds under management
The combination of new business sales growth, positive investment returns and consistently strong fund retention rates, has seen St. James’s Place grow funds under management by 20% per annum over the past five years, to £47.6bn.
Reflecting confidence in the cash earnings of the business as the in-force book continues to mature, St. James’s Place announced with its 2014 half-year results a 40% increase in the dividend, with a similar increase anticipated in the full year dividend. This follows eight successive years of dividend growth. Going forward, the Group intends to continue with a progressive dividend policy, growing the future dividend in line with the underlying performance of the business.
Strong capital position
The Group operates with a robust balance sheet. St. James’s Place has regulatory capital well in excess of solvency requirements. The Group has a prudent investment policy for managing solvency assets - being predominantly in cash, AAA rated money market funds and UK government securities. The Group does not offer options or guarantees on its investment products, is not exposed to longevity risk through an annuity book and uses a prudent reassurance programme to manage the mortality and morbidity risks.
St. James’s Place reports its financial results twice yearly at the half and full year stage. In addition the company updates its new business sales and funds under management quarterly, via the interim management statements.
In addition to presenting the financial performance on the IFRS and EEV basis, we also provide an analysis of the post-tax sources of cash emergence in the year which we refer to as the cash result. The cash result is based on the IFRS result, but removes non-cash items such as DAC, DIR and deferred tax. It is also adjusted to reflect a level of regulatory solvency constraint on profits emerging from regulated companies such as our insurance businesses in line with that required by UK regulators.
The effect is to create a measure which more reflects the cash generated by the business. Since the cash result can be impacted by timing variances and capitalised impacts of changes in solvency requirements, management believes it is also useful to present an underlying cash result excluding these effects, which the Board reviews in determining the proposed dividend payments to shareholders.
Retail distribution review
As a vertically integrated business that acts as both distributor and manufacturer, St. James’s Place is well placed to take advantage of the opportunities that RDR will continue to present going forward.
Experienced management team
St. James’s Place is led by a very experienced executive management team, which comprises David Bellamy (Chief Executive), Andrew Croft (Chief Financial Officer), Ian Gascoigne (Managing Director) and David Lamb (Managing Director).