TIDMSTJ
RNS Number : 2989Q
St. James's Place PLC
17 October 2023
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THIS ANNOUNCEMENT RELATES TO THE DISCLOSURE OF INFORMATION THAT
QUALIFIED OR MAY HAVE QUALIFIED AS INSIDE INFORMATION WITHIN THE
MEANING OF ARTICLE 7(1) OF THE MARKET ABUSE REGULATION (EU)
596/2014
SJP SIMPLIFIES CLIENT CHARGING MODELS
17 October 2023
St. James's Place plc (SJP) today announces changes to its
charging structures that are planned to come into effect during the
second half of 2025.
Having completed an internal evaluation of our charging
structures, and concluded on these changes for the future, we are
ensuring we continue to have a sustainable and competitive charging
platform for the long-term, offering simplicity, comparability, and
a continued focus on value for clients.
The changes announced today create a revised charging structure
for the vast majority of new investment bonds and pensions. These
will operate with an initial charge and ongoing charges applicable
from the outset, and without any early withdrawal charges (EWC) or
gestation period, as is already the case with our unit trust and
ISA business. In addition, charges across all our wrappers, which
have historically been disclosed primarily on an all-inclusive
basis, will be separated into component parts. These will comprise
initial and ongoing advice, investment management, and product
administration which will be tiered for larger investments.
Furthermore, we are rebalancing our charges so that they better
reflect the value clients see across each element of our
proposition.
These changes, which have naturally involved engagement with our
key regulators, address the evolution over time of an external
environment that is increasingly seeking simple comparability of
all advice, investment management and other services, on a
component-by-component basis.
In addition to benefiting from improved simplicity and therefore
comparability, clients will see enhanced value from the changes we
are making, with reduced overall ongoing charges for existing
client investments across our core product wrappers. Our continued
focus on value and outcomes for clients is consistent with the
ongoing expectations of Consumer Duty and we are confident that our
changes will work well for clients.
Our charges will continue to compare favourably with competitor
rates available in the marketplace, representing good value for the
high-quality service that we provide alongside our Partners. This
will support our brand and reputation in the marketplace, which
will, in turn, benefit the Partnership.
For shareholders, these changes and the associated
implementation costs will affect the shape of the Cash result in
the future. The changes will reduce the Underlying Cash result over
the next few years before growth accelerates over the medium term
and beyond, aligned with the development of total Group funds under
management.
Andrew Croft, Chief Executive Officer, commented:
"The changes announced today are about positioning our business
for continued success by putting in place a future charging
structure that reflects the evolution of consumer engagement with
retail financial services, and is aligned to the long-term value
that we deliver to clients through the Partnership.
We have always been confident that SJP offers its clients real
value that helps individuals and families achieve financial
wellbeing. However, it is increasingly evident that consumers are
seeking simple comparability, and this has been reflected in
regulatory trends too, as highlighted with the Assessment of Value
and Consumer Duty regimes. The review of our charging model
reflects these developments.
I am confident that SJP's ability to both deliver and
demonstrate value in the future, with this sustainable model of
charging for our end-to-end services, is good for clients and
represents an exciting opportunity for SJP. "
More detail on the changes, implementation, and impacts, is
included in the pages that follow.
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Presentation webcast
Date: 17 October 2023
Time: 08:30 BST
Duration: 1.5 hours
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Q&A session
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Q&A, but if you wish to ask questions during this session
please dial-in to the conference call line from 8:30am BST using
the details below:
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All other locations: Global Dial-In Numbers
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Accessing the telephone replay
A recording will be available until Tuesday 24 October 2023
United Kingdom: 0808 304 5227
United Kingdom (Local): 020 3936 3001
All other locations: +44 20 3936 3001
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Reviewing our charges
As the UK's leading provider of advice-led wealth management,
with GBP158.6bn of funds under management and over 900,000 clients,
we have a clear understanding of the growing need for trusted
financial advice, and the critical value it provides for clients as
they get the support and expertise that they need to build their
financial futures. Over more than 30 years, we and our Partner
businesses have evolved to meet changing client expectations and
developments in the industry and regulatory landscapes. In 2023 we
have seen a shift in the wealth management landscape, with the
introduction of Consumer Duty cementing good client outcomes and
value at the heart of our industry.
In recent months we have performed an evaluation of our business
to ensure we are best positioned to serve our clients well over the
long-term and capitalise on the market opportunity ahead. As part
of this we have completed a review of our charging structure. As a
result, we are making changes to our approach that will mean
charges for our advice, investment management and other services
are simple, comparable, deliver further value for clients, and
provide us with the flexibility to develop our proposition more
easily. Continuing to deliver good outcomes for our clients has
naturally been central to the design of our future charges and it
has also led us to consider how we further strengthen the way we
support vulnerable clients who may face challenging
circumstances.
Our future charging structure
The updates we are making to our charging structure following
this review will result in three key changes that will apply to the
vast majority of our investment wrappers. These changes are
expected to be in place by the second half of 2025:
-- Simplifying new investment bond and pension business - The
structure of our investment bond and pension business will change
so that new business will no longer include an EWC structure.
Instead, new investment bond and pension business will operate with
initial charges together with ongoing charges. These ongoing
charges will be applicable from the outset for all components of
our service, as is already the case with our unit trust and ISA
business. Existing investment bond and pension products will
continue to operate with the EWC structure until the end of their
applicable six-year EWC period. This new approach aligns our
charging structures across our product sets, significantly
simplifying our proposition for clients.
-- Separating our charges - Our charges will be separated into
their component parts (advice charges, fund charges, and product
charges). Showing our charges in this way will help clients to
consider the value they are receiving from each element of our
services, and better enable potential clients to review and compare
our charges across the marketplace. It will also allow more
relevant benchmarking of investment performance going forward,
supporting our distinctive Investment Management Approach.
-- Rebalancing our advice and product charges - Our charges will
be rebalanced towards the value of advice. For all products,
initial product charges will be removed, and ongoing product
charges will be reduced and tiered for large investments. This
rebalancing results in component charges that are aligned with
where clients receive value across the components of our service
proposition.
Additionally, in 2024 we will introduce a more consistent
approach to fund charges that reflects the value each fund
provides. Some charges may decrease while others may increase, but
on average the impact on fund charges across the whole portfolio is
neutral.
For illustrative purposes, we have set out below what this new
charging model might look like for a typical client:
Component Investment Bond & Unit Trust & ISA
Pension
---------------------------- ------------------ -----------------
Initial Advice Charge(1) Max of 450 bps Max of 450 bps
Total Initial Charge (1) Max of 450 bps Max of 450 bps
---------------------------- ------------------ -----------------
Ongoing Advice Charge(1) Max of 80 bps Max of 80 bps
Ongoing Product Charge(2) Max of 35 bps Max of 27 bps
Ongoing Fund Charge(3) 52 bps 52 bps
---------------------------- ------------------ -----------------
Total Ongoing Charge(1,2,3) Max of 167 bps Max of 159 bps
---------------------------- ------------------ -----------------
(1) Varies with investment size and complexity of advice
(2) Tiered for larger investments
(3) Varies by fund, illustrative example shown
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Making these changes will position SJP and the Partnership for
long-term, sustainable success. Simplifying our charges will
support our brand and reputation and challenge the common
misconceptions around our proposition, broadening our appeal over
time; and they will enable us to better present the value we and
our advisers are able to deliver for clients across all elements of
our proposition.
Clients will see enhanced value from the changes we are making,
with reduced overall ongoing charges across our product wrappers.
The overall level of client charges across all our wrappers will
continue to compare favourably with competitor rates available in
the marketplace, representing good value for the high-quality,
financial planning service that our Partners provide.
Partners will receive an increased weighting towards ongoing
advice fees in the future. An important focus of the business will
be to engage with Partners through the transition period to ensure
that their businesses are well placed as we implement the new
structure.
Financial Impact
These changes will strengthen our business, supporting and
underpinning our growth ambitions into the future. We expect they
will also change the shape of the future Cash result, with a
reduction in the short-term result, before growth returns over the
medium and long-term.
The key effects of the changes are:
-- Implementation costs - We will immediately commence a broad
and complex programme to accommodate these changes and this will be
structured in a such a way as to deliver improvement and value as
the programme progresses. For example, in 2024 we will introduce
changes to our fund charges.
-- We anticipate incurring investment costs of GBP140-160
million before tax to implement these changes, with approximately
GBP10 million over the remainder of 2023, GBP95 million in 2024 and
the balance in 2025.
-- Net income from funds under management - We expect that the
net income from annual management charges will be lower in the
short term. This will reflect reduced and tiered ongoing product
charges across our wrappers, partially offset by the retention of a
proportion of ongoing advice and fund charges . We expect this to
recover over the medium-term as existing funds under management in
gestation matures and we benefit from all new business contributing
immediately without entering a gestation period.
-- The margin range for net income from mature funds under
management is expected to reduce by some 11 bps to a range between
43 bps and 45 bps from the point of implementation onwards;
-- In the future, 100% of gross inflows will contribute
immediately to mature funds under management and, therefore, to the
Cash result.
-- Margin arising from new business - The removal of initial
product charges across all product wrappers, means there will no
longer be a contribution to the cash result from a margin arising
on new business.
While the evolution of the future Cash result will naturally
reflect actual variations in net new business, investment market
performance and expenses, we anticipate these changes will reduce
the Cash result in the short term. Following this, a period of
growth in the Cash result should arise as new business contributes
immediately to mature funds at the same time as existing gestation
funds will also be maturing. This will set the Cash result on a
more positive trajectory into the next decade and beyond.
There are no changes to our wider strategic priorities or the
ambitions that we set out in our 2025 business plan, albeit we
recognise the headwinds we face in the current market environment.
Given our confidence in making these changes, there is also no
change to our ongoing dividend guidance, which continues to be
based on an expectation that we will distribute 70% of the full
year Underlying cash result.
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END
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October 17, 2023 02:00 ET (06:00 GMT)
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