St James’s Place shares slump as investors fret fee structure overhaul
- St James’s Place shares were the FTSE 100 Index’s worst performer on Friday
- All firms overseen by the FCA have to abide by new Consumer Duty regulations
St James’s Place shares experienced a sharp decline on Friday morning amidst reports suggesting that the investment manager is considering a revamp of its fee structure.
By midday on Friday, the company’s share price had plummeted by 15.7%, reaching 690.4p, thereby making it the worst performing stock on the FTSE 100 Index by a significant margin.
According to The Financial Times, the investment group is currently in discussions with regulators who are concerned that the wealth manager is not adhering sufficiently to the new Consumer Duty rules.
Decline: St James’s Place shares tumbled on Friday morning after reports emerged that the investment manager could be about to revamp its fee structure
Since July, all firms overseen by the Financial Conduct Authority have been required to provide consumers with ‘timely and clear’ information, better customer service, and products and services offering ‘fair value’.
Critics have accused SJP, Britain’s largest wealth manager, of operating an unfair fee structure which involves charging high amounts for financial advice and imposing early withdrawal fees.
Presently, withdrawal fees for new clients can reach up to 6%, gradually dropping to 1% over a span of six years.
Shortly before the implementation of the Consumer Duty rules, SJP announced a cap on annual management charges for clients who had invested in bond and pension investments for over ten years.
However, according to the FT, this measure has not satisfied regulators, who have questioned the logic of retaining exit fees for existing customers while abolishing them for new ones.
The FCA is also reportedly examining whether significant upfront advice costs are in the best interests of customers and whether it is fair to require them to pay advice fees long into the future.
However, SJP is concerned that eliminating exit fees for existing clients could have a substantial negative impact on its balance sheet.
According to calculations by the FT, as of June 2023, approximately £47 billion of the firm’s assets under management, which equates to around 30%, were subject to exit penalties.
In a statement to investors, SJP stated that it is reviewing its fees and charging models with the goal of establishing “a simple and scalable charging platform for the long term.”
The firm also expressed confidence that all the options under consideration will provide value for clients and ensure a strong, secure, and sustainable business for all stakeholders.
SJP stated, “We naturally continue to engage with all of our primary regulators during this process.”
This announcement by SJP comes less than two weeks after former Prudential chief executive Mark FitzPatrick was appointed as the firm’s CEO-designate, replacing Andrew Croft who will step down in December after a thirty-year career at the company.
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