St James's Place shares drop after £426m set aside for complaints, dividend cut

International adviser group St James’s Place shed more than a quarter of its value this morning (28 February) after it slashed its dividend and made a £426m provision to refund clients on ongoing advice fees.

UK-headquartered St James’s Place experienced a spike in the number of client complaints in the latter part of 2023, and after launching an assessment into the issue, it found evidence that its ongoing client servicing was "less complete in the years", prior to its investment into customer relationship management systems in 2021.

CEO Mark Fitzpatrick said the cost of complaints and a fees overhaul pushed through by the firm last year would likely weigh on growth in the years ahead as he slashed the dividend payout to shareholders.

“A combination of the provision we have established and an expected decrease in the level of profit growth in the next few years as we transition to our new charging structure, reduces our ability to invest for long term growth in our business over the next few years,” he said in a statement.

Craig Gentle, chief financial officer, said SJP "recognises the importance of returns to shareholders and is confident that sufficient capital and liquidity is available to deal with this legacy matter".

However, setting aside the funds has "significantly impacted" its cash reserves as it equates to 82% of the period's underlying cash total and as a result, the company has been forced to halve its dividend, from 52.78 pence per share in 2022 to 23.83p per share in 2023.

FitzPatrick described the fee issues as a "legacy concern" and said that while the firm's financial results had been impacted "the board recognises the importance of returns to shareholders and is confident that sufficient capital and liquidity is available to deal with the financial impact of the provision".

He said: "A combination of the provision we have established and an expected decrease in the level of profit growth in the next few years as we transition to our new charging structure, reduces our ability to invest for long term growth in our business over the next few years."

Outside of the cash issues, the company's inflows were in line with consensus at £15.4bn, but outflows were higher by £200m.

Funds under management set a new record level of £168.2bn, surpassing consensus expectations with a13% increase year-on-year.