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St James’s Place is the sort of company that defies the idea of efficient markets. Why are people so keen to pay a premium to invest their money when they can often achieve similar results from a few low-cost tracker funds? The answer: sometimes, wealth management is more about making customers feel wealthy than actually maximising wealth.
SJP has been the FTSE 100’s best-performing stock over the past 12 months. It is the second-best in the entire FTSE 350, driven by chief executive Mark FitzPatrick’s efforts to cut costs and rebuild a reputation damaged by criticism over opaque fees and complaints about poor service.
Stock prices are forward-looking; it makes sense for investors to give advance credit for a long-term plan if they have faith in the team delivering it. More surprising is that customers, too, are already flocking back. They put in £1.7bn more than they took out in the first quarter of this year. That is more than double net inflows in the same period last year, despite the fact that the new, more user-friendly fee structure has not even come into force yet.
The quick recovery suggests customers were put off more by the reputational stink surrounding SJP than the charges themselves. Well-off clients are happy to pay a bit, as long as they are not made to feel like chumps whose money funds corporate jollies at Gleneagles.
This should be a warning to the phalanx of banks and asset managers looking to break into wealth management. Lenders such as Lloyds and Barclays think a captive audience of existing customers is a useful tool for expansion, but SJP shows how valuable a good brand can be. Bankers may not be the pariahs they were after the 2008 financial crisis, but nor are they significant carriers of cultural cachet.
The recent rally has brought SJP’s market capitalisation to about 14 times expected earnings over the next 12 months — above the broader FTSE 100, but well below its 10-year average of almost 20 times. The recovery still has space to run, assuming it can avoid any more reputational own goals.
Beyond that, future growth will rely on luring more of the “mass affluent” — folk a rung or two below the very rich, with between £75,000 and a few million in investable assets. Retail banks tend to assume their digital-first platforms have an advantage at this level, where it is harder to make the economics of a dedicated financial adviser work. But SJP already manages on average about £180,000 per client, so it is not alien territory.
That SJP advisers pick up the phone for fortunes so small may surprise readers. But it just goes to show how good the company is at projecting exclusivity. Would it still be simpler and potentially cheaper for a newly affluent client to open an extra account with their existing bank? Sure. But where is the snob value in that?
nick.megaw@ft.com
https://www.ft.com/content/f2e828be-686f-460f-b8b2-82f455f4de1a
