St James’s Place faces ‘significant’ financial impact from complaints

‘Misselling’ firms will be seeing increased demand following Britain’s largest wealth manager St James’s Place Plc’s dire annual earnings call this Wednesday.

FTSE 100-listed SJP reported a £9.9 million loss after tax, compared to a £407.2 million profit a year earlier after setting aside £426 million for expected compensation.

There had been a significant increase in complaints in the latter part of last year, with a skilled person review finding that some clients had not received any ongoing annual service despite paying for one.

These provisions follow an overhaul of SJP’s fee structure at the behest of City watchdog, which has pressed the firm to align its fees with the new “consumer duty” regulations.

The Financial Conduct Authority (FCA) brought in the new consumer duty regs last July, forcing a rethink on what SJP charges for advisory and administrative services, as well as early-withdrawal charges.

Last October, SJP estimated these changes would cost up to £160 million this year, while putting a considerable strain on profit margins.

One law firm, whose advertisements appeared alongside SJP articles today, put the call out for customers who have used SJP in the past 10 years and may be “owed thousands” in compensation.

Another firm selling SJP claims advice said there’s a possibility of “receiving full compensation up to £85,000”, while another suggested you could claim over £400,000 for “bad advice, excessive fees and poor fund performance”.

As for City analysts, they have responded with mixed signals to SJP’s results.

UBS analysts said they “expect a strong negative reaction” among investors (today’s 26% share price plunge to 457p more than proved this point).

However, UBS still sees a valuation upside, maintaining a ‘buy’ rating on shares with a 12-month price target of 780p.

Jefferies had this to say: “(SJP) has seen a significant increase in complaints from customers that ongoing service charges have not been matched by the provision of those services in the past.

“The FCA has requested evidence of service provision, and it appears that (SJP) will not be able to provide evidence in all cases, particularly in years before the implementation of a Salesforce CRM system in 2021.

“While the company is confident this is a historical issue, the financial impact is significant. We would hope the company has ‘kitchen sinked’ the issue with this provision.”

However, as with UBS, Jefferies still sees an upside on SJP shares with an 820p 12-month price target.