St. James's Place has responded to pressure by regulators by overhauling its charging structure, set to come into effect during the second half of 2025.
In a stock exchange notice today (17 October), the £158.6bn wealth giant said the updates resulting from a review into its charging structure will result in three key changes that will apply to most of its investment wrappers.
The structure of its investment bond and pension business will change so that new business will no longer include an early withdrawal charge structure. Instead, new investment bond and pension business will operate with initial charges together with ongoing charges.
SJP will also separate its charges into their component parts: advice charges, fund charges, and product charges, allowing clients to consider the value they are receiving from each element of its services.
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The firm said this will also help potential clients to review and compare its charges across the marketplace, and allow more relevant benchmarking of investment performance going forward.
Its charges will be rebalanced towards the value of advice, with initial product charges removed for all products, and ongoing product charges reduced and tiered for large investments.
In 2024, SJP will also introduce a "more consistent" approach to fund charges to reflect the value each fund provides. This means some charges may decrease and others increase, but the firm said that, on average, the impact on fund charges across the whole portfolio will be neutral.
The move came after the wealth manager's shares fell by over 20% on Friday (13 October) following a report by the FT that the firm was facing pressure from regulators to reform its fee model in a bid to comply with the recently introduced Consumer Duty.
SJP has come under fire for its expensive charges for financial advisers and its penalties for exit withdrawals. In July, SJP announced changes to fees, including a 0.15 percentage point cut to the maximum annual product management fee for about 65,000 clients.
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CEO Andrew Croft, who is set to step down in six week's time, said the new charging structure 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," he said.
"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."
The wealth manager said that for shareholders, these changes and associated implementation costs amounting to £140-160m before tax, will impact its 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," SJP said.
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SJP expects the margin range for net income from mature funds under management is expected to reduce by some 11bps to a range between 43bps and 45bps from the point of implementation onwards.
However, it noted that in the future, 100% of gross inflows will contribute "immediately" to mature funds under management, and therefore to the cash result.
"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," the firm said.
"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."
