Shares in St James’ Place tumbled on Wednesday as it slashed the dividend and announced huge charges related to soaring customer complaints.
At 436.3p per share, the financial services provider was last trading 29.7% lower in midweek business.
St James’ Place announced it has put aside £426 million to cover possible client refunds. This follows news of “a significant increase in complaints” at the FTSE 100 firm, and “particularly in the latter part of 2023.”
The wealth manager said that customer dissatisfaction was chiefly linked to its service levels.
It said that “our evidence of ongoing client servicing was less complete in the years preceding investment into our Salesforce CRM system in 2021, and we have therefore made a provision for potential client refunds to address this.”
The company added that “the investment we’ve made into Salesforce means we are confident this is a historic issue.”
Today’s news comes as the regulator takes a closer look at the practices of the asset management sector. Last year St James’ Place brought in changes to its fee structure amid growing scrutiny from the Financial Conduct Authority (FCA) over accusations of exorbitant charges.
Dividend Topples
Following those heavy charges, St James’ Place slashed the final dividend for 2023 to 8p per share. This was down significantly from the corresponding payment of 37.19p the previous year.
Consequently, the total shareholder payout for last year dropped to 23.83p per share from 52.78p in 2022.
The business also announced plans to peg shareholder distributions to 50% of the underlying full-year cash result moving forwards. For the next three years, this will comprise an 18p per share yearly dividend with the balance to be met through share buybacks, it said.
St. James’ Place said that it believes this policy “will continue to strike the right balance between investment for growth and returns to shareholders, while seeing shareholder distributions increase over time.”
Challenging Times
For 2023, the wealth manager posted a post-tax loss of £9.9 million. It had recorded a profit of £407.2 million a year earlier.
It also reported a cash result of £68.7 million over the course of 2023 due to those aforementioned charges. This was down sharply from £410.1 million in the previous 12 months.
Chief executive Mark FitzPatrick described 2023 as “undoubtedly challenging.” He said that high inflation and rising interest rates had “impacted some individuals’ capacity and confidence to invest… [while] those with capacity to invest may have been attracted to elevated short-term savings rates over long-term investing.”
FitzPatrick said that the business is taking the surge in customer complaints “very seriously” and has “engaged extensively with the FCA on this matter and the resulting assessment of historic client servicing records.”