SJP – trusted with wealth

The value of SJP’s total assets under management increased to £179bn, up from £154bn a year ago, owing to strong investment performance. SJP takes revenue from assets under management, its partners and associates are paid from the annual management charges. In normal times , SJP’s most recent results should be a good news story.

But when the market saw SJP’s most recent results, its share price dropped by 3%. This is nowhere near the size of recent falls resulting from challenges to its charging model , but it shows its market perception is that it manages money rather than give advice.

Put another way, SJP is still measured by analysts by its sales and the most recent sales performance is below expectations. This from the FT

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

This time last year, SJP were raking it in and the money was sticky. Now money is being withdrawn , SJP say customers are feeling the pinch of the cost of living crisis, cynics may point to low returns and high charges on many SJP funds.

But it’s not the outflows that are the worry, the worry is that a sales organisation isn’t winning new business relative to its rivals – its market share is falling

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.

This suggests that SJP’s business model is no longer cutting the mustard with the mass affluent. This is what will concern the partners and associates. The business model is based almost exclusively on annual management charges on funds under management. Fee charging as an independent exercise is virtually unheard of. The bundling of advice into the fund management fee means the value of advice cannot be measured. What is not measured cannot be managed.

What is needed at SJP is a radical rethink of its connection to its customer. Is it a wealth manager or a financial planner? Right now it is judged purely on its capacity to sell wealth management but there are signs that it might in future be valued for its advice

David McCann, analyst at Numis, 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.

And SJP is growing the number of advisers, at a time when adviser numbers generally are in decline.

The hard trick for SJP to pull off , is to reduce dependency on funds and to build a new business dependent on the quality of its advice. That is the difficult second album which none of its rivals has yet to produce.

Not valued for advice