Net inflows at St James’s Place drop sharply

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St James’s Place has suffered a sharp drop in net inflows over the first quarter as the wealth manager grapples with customers withdrawing their money and potential redress payments to clients.

The FTSE 100 company said net inflows fell to just over £700mn in the three months to the end of March, down from £2bn a year ago. Analysts said the figures were a fifth below their expectations of £900mn.

Mark FitzPatrick, who became chief executive of SJP at the end of last year, warned that the rate of customers pulling out their money was at “an elevated level”, reflecting a broader industry trend as customers “draw upon their savings to meet continued financial needs”.

Shares in SJP fell almost 3 per cent in morning trading on Tuesday before paring some of those losses.

FitzPatrick told the Financial Times that customers were not “spooked” by issues affecting the company, such as the potential redress to customers who did not receive sufficient services, noting that the wealth manager was continuing to attract new clients as well as advisers.

“I would’ve been more worried if we were losing clients,” he added.

However, Hargreaves Lansdown, the UK’s largest DIY investment site, reported £1.6bn of net inflows over the first three months of the year on Tuesday — in line with last year. And SJP rival Quilter last week reported £810mn of net inflows over the quarter — about double the previous year’s.

SJP’s latest figures come after a turbulent 12 months for the UK’s largest wealth manager, in which its share price has dropped more than 60 per cent.

The group announced a major overhaul of its charges during the year to comply with new Consumer Duty regulations that came into force last July and were aimed at helping customers receive fair value.

On Tuesday SJP said it “continued to move forward” with plans to implement the new charges, which will no longer include exit penalties for early withdrawals.

FitzPatrick is also conducting a review of the business after money flowing into the group’s funds and other products nearly halved last year. He said on Tuesday that the company was “making good progress” with the review and would update the market at its half-year earnings point in the summer.

SJP was forced to earmark £426mn earlier this year to cover potential redress for clients who did not receive a sufficient level of service from the company’s financial advisers. FitzPatrick said SJP was pushing ahead with its review of historic client servicing records.

David McCann, analyst at Numis, noted that the scale of customer outflows was worse than expected, but said the business was in a position to seize market opportunities over the longer term. He pointed to the growing demand for advice as more people take responsibility for their retirement funds due to the shift to defined contribution pensions.

Julian Roberts, analyst at Jefferies, said SJP’s adviser numbers “continue to increase, which we see as a sign of health, despite difficult market conditions for flows”.

The value of SJP’s total assets under management increased to £179bn, up from £154bn a year ago, owing to strong investment performance.

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