St James’s Place, Britain’s largest wealth manager, revealed that it would be taking a £426million hit to cover refunds for aggrieved clients.
The shares of the FTSE100 company fell by 115 1/4p or 18.6 percent, closing at 505 3/4p. They had dropped earlier by up to 33 per cent after the group revealed the unexpected provision that was made in its annual results. This led to the company posting a loss for the year and forcing it to reduce its dividend.
The sum was set aside after the wealth manager received a “marked” increase in complaints last year, fueled partly by claims management firms, regarding the service provided.
St James’s Place stated that it “engaged extensive” with the Financial Conduct Authority (the City regulator) about the issue and had come up with £426 as its “best estimation” for the costs of refunds. The group’s results were affected by this provision, as it went from a £407.2million profit in 2022 to a £9.9million post-tax loss last year.
St James’s Place has also reduced its dividend to 8p per share, down from 37.19p the year before. The company’s value dropped to less than £2.8bn.
St James’s Place has suffered a number of setbacks since last summer. The group had to alter its fee structure twice due to regulatory pressure.
Bank of America analysts said that the latest blow is the culmination of an “annus horribilis”. The business, based in Cirencester and Gloucestershire, oversees £168.2billion for almost one million clients. St James’s Place, which has cut its dividend for 2023, also announced that it would be reducing future cash returns, based on earnings, in order to reflect the impact of the new fees and to compensate shareholders.
This is a significant blow to the first set of company results under Mark FitzPatrick who took over as CEO from Andrew Croft at the start of December.
He said: “We acknowledge that this is an unfortunate outcome for all.”