St James’s Place to pay overcharging victims up to £426m as shares collapse

St James's Place

The chief executive of St James’s Place has apologised to customers for a £426m overcharging scandal as shares in the firm tumbled to their lowest point in a decade.

The wealth manager revealed it had set aside millions of pounds for potential client refunds following a surge in complaints over advice fees and the City watchdog rolling out new regulations last year.

Shares plummeted by 31pc on Wednesday as it shared a post-tax profit of £68.7m, down significantly from £410.1m in 2022.

In October, St James Place announced plans to overhaul its fee structure, agreeing to cap advice and fund charges in order to comply with the Financial Conduct Authority’s new ‘fair value’ rules.

It also agreed to remove controversial exit fees for clients leaving the business early.

The measures came after an  investigation by The Telegraph found that some customers were paying annual fees for advice they were not receiving.

St James’s Place yesterday said £426m has been put aside for victims who were overcharged – a significant increase on the previous £3.4m estimate. Thousands of customers are believed to have been affected.

Boss Mark FitzPatrick apologised for “getting it wrong”, as shares tumbled 31pc on Wednesday.

He said: “In the rare occasion where advisers have not serviced clients and clients have been charged for that, I have no issue with saying to the client, ‘We are very sorry, we got that wrong.’ Because that shouldn’t be the case.”

He promised that he would “fix issues” and said:  “I am fixated on doing the right thing for clients. If you look after clients well, everything else falls into line.”

The SJP boss denied that the “historic issue” would impact trust between clients and advisers, pointing to the company’s retention rate, which has stayed above 95pc.

Mr FitzPatrick said: “Clients are looking and feeling actually, you know, I am really happy that my portfolio is doing really well. And the performance is very strong.

“At the end of the day, what would you rather? See someone every year, and be nagged for a meeting every year, or see somebody when you want to see them?”

Lee Goggin, of comparison site Find A Wealth Manager, said: “It’s high time this happened. They’ve been getting away with murder for ages.”

In its 2023 results, the wealth manager – which has more than 900,000 clients – wrote that it would provide £426m, or £323.7m post-tax, for “potential client refunds linked to the historic evidencing and delivery of ongoing servicing”.

The company’s shares plummeted by 31pc to their lowest point in more than a decade to make the investment manager the worst performer on the FTSE 100 index on Wednesday morning.

Its post-tax result of £68.7m pales in comparison to its profit of £410.1m in 2022, but the wealth manager said this was solely the impact of the client refund provision.

Most financial services companies removed the so-called “early withdrawal fee” after the FCA introduced rules in 2012 to improve transparency.

Earlier this month, the watchdog announced it had written to 20 of the biggest advice firms requesting information about their ongoing services on the back of the consumer duty.

The watchdog asked firms how many clients received a review and how many paid for ongoing advice but whose fee was refunded because the review did not happen.

An FCA spokesman said the regulator has had significant engagement with St James’s Place ahead of the announcement and said the wealth manager was committed to resolving the issue.

The spokesman said: “St James’s Place has said it will contact those affected. As a result, there is no need for people to use claims management companies.”

The FTSE 100 company estimates that the roll-out of the new fee structure would cost between £140m and £160m, and the new structure should be implemented from the second half of 2025. No further fee changes are expected.

The advice payout announced on Wednesday means that St James’s Place had to halve its dividend to shareholders from 52.78p a share in 2022 to 23.83p a share in 2023.

The latest results came just days after Lord Jacob Rothschild, co-founder of St James’s Place, died aged 87.

In a post on the social media site X, SJP posted a tribute to the financier and said they were “deeply saddened” to learn of his passing.

It said: “Lord Jacob Rothschild leaves an extraordinary legacy in helping to shape the financial advice profession in the UK. Alongside this, Lord Jacob Rothschild was a patron of the arts and a passionate charitable supporter of a number of different causes.”

Were you overcharged by St James’s Place? Get in contact at money@telegraph.co.uk.