St. James’s Place is a wealth management business; the Group’s advisers, the St. James’s Place Partnership, provide clients with a financial planning service and face-to-face advice; clients’ wealth is managed through the Group’s distinctive Investment Management Approach (IMA). Almost uniquely within the UK wealth management market, this vertically integrated model means that the Group is directly responsible for the whole offering, including advice, management of investments and any related services.
There are estimated to be more than 10 million individuals in the UK with between £50,000 and £5m in investable assets. This segment is forecast to control over £2 trillion of investable assets by 20201. The UK population is ageing, while the state and corporate sectors are shifting the burden of retirement onto individuals. These 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
The Partnership is critical to the success of the business. Partners are able to attract clients and, through building trust, develop long-term relationships, supporting clients with their financial needs over time. This relationship-based approach is greatly valued by the Group’s clients, no more so than in periods of financial uncertainty. The Group’s experience is that there is an increasing demand for trusted advice from experienced advisers, backed by a strong brand and an organisation that takes responsibility for all aspects of the service.
With 2,378 high-quality and experienced Partner businesses, working with 3,415 qualified advisers focused on establishing long-term client relationships, the Group has been able to achieve predictable and high quality new business flows, as well as sustainable asset accumulation through exceptional fund retention and strong client advocacy.
St. James’s Place aims to grow its Partnership by 5-7% per annum, through its core recruitment efforts and newer initiatives such as the expansion into Asia, the Academy and, most recently, the acquisition of Rowan Dartington.
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, which manages the fund managers on behalf of clients. In addition, St. James’s Place retains a number of independent investment consulting firms, including Stamford Associates and Redington, that play a crucial role in the selection and monitoring of managers. 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.
Driving growth in funds under management
The Group aims to attract and retain retail funds under management from which it receives an annual management fee. This is the principal source of income for the Group, and it grows with additional new business and also as a result of growth in markets and the success of our approach to investment management.
The combination of strong gross inflows, positive investment returns and consistently strong fund retention rates has seen St. James’s Place grow funds under management by 18% per annum over the past ten years, rising to £75.3bn at 31 December 2016.
Driving returns to shareholders
Reflecting the continued strong performance of the business and the Board’s confidence in the Group’s future prospects, St. James’s Place announced with its 2016 full-year results a proposed 20% increase in the final dividend. Over the past 10 years, the annual dividend has grown at a compound rate of 25% per annum. Going forward, the Group intends to grow the future 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 provides a quarterly update on new business and funds under management. As well as presenting the financial performance on the IFRS and EEV basis, we provide two additional measures: an analysis of the post-tax sources of cash emergence in the year (which we refer to as the cash result) and the IFRS underlying profit.
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 that better 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.
To further aid investors’ understanding we have added a measure called underlying profit, which is based on the IFRS result but adjusted to exclude the impact of the DAC, DIR and PVIF intangibles.
1 Source: Datamonitor, 3 February 2016