Yesterday was a bad day for SJP. At one stage its share price was down more than 30%. The company is in mourning for its co-founder who died this week.

This is Kate Beioly’s report in her morning newsletter for the FT

It is the turn of St James’s Place to run the market gauntlet today, with the wealth manager reporting a big jump in provisions for potential client refunds and slashing its dividend.

SJP is setting aside £426mn for potential refunds “following a significant increase in complaints” in the latter half of last year and linked to the “delivery of ongoing servicing”. The company slashed its final dividend by 78 per cent to 8p per share, and said payouts would remain at a fixed level for the next three years.

SJP said the refund provisions had impacted its 2023 results, with the FTSE 100 company reporting a £9.9mn loss after tax, compared with a £407.2mn profit the previous year.

The update comes after chief executive Mark FitzPatrick said in January he would be reviewing every element of the business as part of the group’s “vision for 2030”. SJP said it would set out the outcome of that review at the half year point. Last month SJP reported annual inflows had nearly halved in 2023, from just under £9.8bn to £5.1bn. Total funds under management rose to a new record of £168.2bn, however, helped by strong investment returns.

SJP has also recently announced the biggest overhaul of fees in its 31-year history, after regulatory pressure to embark on more radical changes following modest updates in July. This morning FitzPatrick said last year had been “a difficult year for SJP but we’ve faced into our challenges”.

The adviser trade press, for whom SJP is a bete noire , were less balanced

For several years , I have used this blog to encourage SJP to change – as it’s predecessor – Allied Dunbar – failed to do. SJP is a serious adviser but it still has the structure of a direct salesforce.

It has managed to convince itself that its customer satisfaction ratings (excellent) were more important than the nagging of the FCA, the Times and the bitching of social media over its high fees, variable fund performance and the ostentatious marketing to clients and prospects – focussing on elite sports, fine living and conspicuous consumption.

This in sharp contrast to Hargreaves Lansdown which sells itself as little more than a savings platform.

The problem with its clients are now emerging. The consumer duty is a “get out of fees” card for clients who may be paying for advice and not getting it. It is hard to prove a service has been delivered when the service is so dependent on the perception of its customers, customer satisfaction surveys are fickle things.

A trend to disintermediation?

If Holly McKay’s research has correctly identified a trend towards DIY investing, it will not be a surprise. Artificial Intelligence is now putting information in people’s hands which is real time and definitive. It is very hard to stop AI making recommendations if you ask it too and provided you are prepared to trust the computer when it says “yes”, them it- or your phone – may be a more attractive source for that “definitive course of action”.

I fear for wealth management if people find what they want from a the submit button.

Should the FCA be bothered?

As Abbey Life, Hambros and Allied Dunbar before it, SJP is the child of Mark Weinburg who has been responsible for the training of most of the financial advisers in this country (me included).

The advisory stock is not that great, (down from 240,000 at its peak to around 30,000 registered advisers today). Without the training from Weinburg companies, both the quantity and quality of advisers would be much diminished.

SJP’s charges are high, but so are its peers, its demise could have major implications for the sector for whom St James’s Place is a standard bearer – for margins.

The SJP service isn’t cheap , but nor is it cheap to build and maintain.

If you believe wealthy people need and want advice (as SJP has proved they do) then the ongoing investment in training and innovation that has been planned at SJP needs to happen. The fall in the capitalisation of SJP threatens that program and that should be a worry to the FCA.

With a day range of the share price from 509p to 410p, yesterday was tough for SJP. We do not want a further implosion, this is a company that is the bedrock of wealth management and much as it some would like it, it must not become another “Openwork”.