Yahoo Finance St James’s Place shares slump as pressure grows to scrap exit fees
Shares in St James’s Place slumped 14pc on Friday morning, as the company considers scrapping exit fees on clients trying to leave the business.
The company’s charges have come under intense scrutiny since the arrival of new consumer rules this summer which state companies must provide their clients with fair value for money or face action from city regulator the Financial Conduct Authority (FCA).
On top of management and administration fund fees, clients who receive ongoing advice pay St James’s Place a 0.5pc annual charge.
Clients who want to end their advice face paying an early withdrawal fee as high as 6pc for new clients, falling gradually after six years.
The company is considering the removal of these exit fees for new customers by mid 2025 and simplifying charges across a variety of its advisory and administrative services, according to a report from the Financial Times.
However, it noted the firm is concerned such a move could have a detrimental impact on its balance sheet.
Under the proposals reportedly being considered, clients who invested with St James’s Place before 2025 will still face the early exit charges.
Around £47bn, or 30pc, of the firm’s assets under management were subject to exit penalties as of June this year, according to the FT.
An earlier investigation by The Telegraph revealed St James’s Place advisers have already started writing to clients to warn they can no longer retain them as customers if they do not receive the advice they are paying for.
St James’s Place told investors on Friday morning that it was continuing to “build on the work completed for the consumer duty. This programme includes an assessment of our fees and charging models to ensure we operate with a simple and scalable charging platform for the long term.”
The company noted that while no decision has been made yet, it was confident all options under consideration would “ensure value for clients”.
Even small changes to St James’s Place fee structure has a serious impact on its profits.
A small change to its fees in July, which reduced its management fee cap on long duration bond and pension investments from 1pc to 0.85pc, is expected to knock 0.4pc off its profit margin for funds under management, according to the broker Jefferies.
A new charging structure could mean the company also faces a complete re-engineering of its IT systems, the FT suggested.
The sell-off in St James’s Place shares on Friday morning follow a long period of decline. In the past five years, the company has shed around a third of its market value.
The FCA was approached for comment.
