St. James's Place Plc · LSE:STJ
St. James's Place — FY2019 Earnings Presentation
77 slides from St. James's Place's earnings presentation, Feb 26, 2020
Slide 1: Full Year Results 2019
F U L L Y E A R R E S U L T S – 2 019 PA RT N E R S I N M A N AG I N G YO U R W E A LT H
Slide 2: Contents
CONTENTS PART ONE – BUSINESS MODEL PART TWO – FINANCIAL RESULTS OUR STRATEGY 4 CASH & DIVIDEND PROFILE 66 THE PARTNERSHIP 19 OUR SHAREHOLDERS 72 INVESTMENT MANAGEMENT 29 ANALYST FOLLOWING 74 OUR CLIENTS 43 CLIENT SURVEY 47 THE ADVICE MARKET 50 COSTS & CHARGES 59 2
Slide 3: Part One – Business Model
PA R T O N E – B U S I N E S S M O D E L 3
Slide 4: St. James's Place Overview
ST. JAMES’S PLACE OVERVIEW • Leading UK Wealth Management Company – Established 1991 – UK listed with market cap of c.£6 billion – Over £117 billion in funds under management – Target market £50k to £5 million free investable assets • Differentiated advice led business model – Dedicated advice distr
Slide 5: Factors Driving Demand for Advice
FACTORS DRIVING DEMAND FOR ADVICE Growing demand for face-to-face advice, despite UK Retail wealth market large and growing proliferation of low touch, on-line offerings Flexibility and complexity presented by Advice gap and diminishing number of pensions freedom qualified financial advisers Complex
Slide 6: What Our Advisers Offer
WHAT OUR ADVISERS OFFER “ The first pillar of value, financial planning, starts with building a deep understanding of who the client is, and what they are seeking to accomplish – properly grounded in trust and transparency, it serves as the roadmap to achieving the clients financial goals. The true
Slide 7: What Our Advisers Offer
WHAT OUR ADVISERS OFFER • Holistic financial planning • Understanding a client’s goals and objectives • A personalised tax efficient financial plan and investment strategy • Keep clients informed and review circumstances throughout relationship • Peace of mind – being there at key moments of truth •
Slide 8: Global Investment Management Expertise
GLOBAL INVESTMENT MANAGEMENT EXPERTISE 39 funds 38 fund houses 35 exclusive strategies to UK retail investors 74 lead fund managers Red lines indicate fund managers from whom all the strategies we offer are exclusive to St. James’s Place clients in the UK retail space. 8
Slide 9: Whole of Market Approach
WHOLE OF MARKET APPROACH Although our advice is restricted to the products and services available through St. James’s Place, we take responsibility for the due diligence on all the providers whose products and services we make available to our clients, some of which are shown below. 9
Slide 10: Strategic Context – The Growth Model
STRATEGIC CONTEXT – THE GROWTH MODEL NEW BUSINESS Number of Gross Inflows Qualified Advisers per Qualified Adviser Experienced Adviser recruitment Personal and business development Academy Broadening Investment Portfolio Next Generation Business/Technical Support Asia Discretionary Fund Management D
Slide 11: Number of Qualified Advisers
NUMBER OF QUALIFIED ADVISERS 4,500 8% 8% 4,000 ars 4,271 0 ye nd 1 7% last5a 3,500 the 10% ver th o row 10% ound g 3,000 comp 10% p.a. 9% 13% 2,500 10% Number 7% 6% 2,000 8% 9% 10% 1,500 1,000 500 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 11
Slide 12: Gross Inflows by Quarter
GROSS INFLOWS BY QUARTER £bn 4.5 4.1 4.0 4.0 3.9 4.0 3.9 3.8 3.8 3.7 3.7 3.6 3.6 3.5 3.2 3.3 3.0 2.8 2.8 2.5 2.5 2.5 2.3 2.3 2.1 2.0 2015 2016 1.5 2017 1.0 2018 0.5 2019 0 Q1 Q2 Q3 Q4 2015 over 2014 +12% +17% +20% +20% 2016 over 2015 +16% +23% +21% +30% 2017 over 2016 +32% +29% +28% +26% 2018 over 2
Slide 13: Gross Inflows
GROSS INFLOWS 16 +8% +29% -4% 15.1 14 12 +23% 10 +17% £ billion +16% 8 +21% 6 +9% +9% +35% 4 +15% -9% 2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 13
Slide 14: Quarterly Net Inflows 2008–2019
14 Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018 Q3 2018 Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015 Q2 2015 Q1 2015 Q4 2014 Q3 2014 Q2 2014 Q1 2014 QUARTERLY NET INFLOWS 2008–2019 Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012 Q3 2012 Q2 2012 Q1 2012 Q4 2011 Q
Slide 15: Consistent Net Inflows
CONSISTENT NET INFLOWS 11 +8% 10 +40% -13% 9 9.0 8 7 +17% 6 +14% £ billion +20% 5 +28% 4 +10% +4% +30% 3 +31% 2 -11% 1 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 15
Slide 16: Funds Under Management
FUNDS UNDER MANAGEMENT 18% p.a. compound growth over the last 5 years and 19% p.a. over last 10 years (at 31 December 2019) 120 +22% 110 117.0 100 +5% +20% 90 80 +28% 70 £ billion 60 +13% +17% 50 +27% 40 +22% 30 +26% +6% +31% 20 -10% 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 1
Slide 17: 2019 – Fund Flow Information
2019 – FUND FLOW INFORMATION 12 months ended 12 months ended £ billion 31 December 2019 31 December 2018 Funds under management at start 95.6 90.7 Gross inflows 15.1 15.7 Investment return 12.4 (5.4) 123.1 101.0 Regular income withdrawals/maturities (1.9) (1.6) Surrenders/part surrenders (4.2) (3.8)
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Slide 19: The Partnership
THE PARTNERSHIP 19
Slide 20: Dedicated Distribution – The Partnership
DEDICATED DISTRIBUTION – THE PARTNERSHIP • High quality self-employed team of 4,271 Qualified Advisers - Average age is 47 - 90%+ per annum retention rate • Aim to grow Adviser numbers by 6% to 8% per annum • Aim to increase productivity each year • Average industry experience is 19 years 20
Slide 21: Geographic Distribution of Advisers & Clients
GEOGRAPHIC DISTRIBUTION OF ADVISERS & CLIENTS 31 December 2019 ADVISERS CLIENTS 6% 6% 2% 2% 23% 22% 25% 12% 14% 14% 4% 4% 4% 3% 4% 4% 4% 4% 21% 21% 22% 9% 10% 14% 12% Overseas Advisers: 6% Overseas Clients: 2% 21
Slide 22: Qualified Advisers by Age Band
QUALIFIED ADVISERS BY AGE BAND 31 December 2019 EXISTING ADVISERS NEW ADVISERS 65+ 65+ 3% <35 55-65 1% 14% 8% 55-65 19% <35 45-55 38% 21% 35-45 29% 45-55 35% 35-45 32% 22
Slide 23: UK Qualified Advisers
UK QUALIFIED ADVISERS Bank & Building Society Financial Adviser Other 50,000 40,000 RDR 30,000 20,000 10,000 0 Dec 10 Dec 11 Jun 12 Dec 12 Jun 13 Jan 14 Oct 14 Nov 15 Dec 16 Nov 17 Jun 18 Dec 18 Source: Financial Conduct Authority 23
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Slide 25: St. James's Place Asia
ST. JAMES’S PLACE ASIA ASIA • Offices in Singapore, Hong Kong and Shanghai • 167 advisers • SJP Funds under management: £934 million, up 49% 31 December 2019 25
Slide 26: St. James's Place Academy
ST. JAMES’S PLACE ACADEMY • Over 600 have graduated from the Academy • Currently 458 in the programme • 172 graduated in 2019 • Four Regional Academies (London, Manchester, Solihull & Edinburgh) • Typical intake 15–20 per programme • 42% from financial services background • 58% from non-financial se
Slide 27: St. James's Place Academy
ST. JAMES’S PLACE ACADEMY • Average age 34: previous earnings c£61,000 • 71% male/29% female • 60% are Partner referrals • 14% are Staff referrals • 15% directly from Academy website 27
Slide 28: Rowan Dartington
ROWAN DARTINGTON • Specialises in Discretionary Fund Management (DFM) and stockbroking services • Growth model – acquiring and retaining client investments • Strong persistency – long-term retention data similar to SJP – 95% • 16 offices, 280 employees, 54 investment executives • Assets under manage
Slide 29: Investment Management
INVESTMENT MANAGEMENT 29
Slide 30: Our Approach to Investment Management
OUR APPROACH TO INVESTMENT MANAGEMENT ‘INDEPENDENT EXPERTISE’ THE INVESTMENT COMMITTEE David Lamb Chairman Peter Win Davina Steven ‘MANAGES THE MANAGERS’ Dunscombe Robbins Curling Daniels Decisions: Appoints the Sets performance Risk management Change firm? fund managers objectives and strategy Chan
Slide 31: Stamford Associates and Redington: Independent Investment Consultancies
STAMFORD ASSOCIATES AND REDINGTON: INDEPENDENT INVESTMENT CONSULTANCIES • Analyse and identify Research fund Access to talented managers manager market whole market • Gather intelligence • Data analysis Monitor managers Qualitative and • Monitor activity and Portfolios quantitative • Workplace analy
Slide 32: Global Investment Management Expertise
GLOBAL INVESTMENT MANAGEMENT EXPERTISE 39 funds 38 fund houses 35 exclusive strategies to UK retail investors 74 lead fund managers Red lines indicate fund managers from whom all the strategies we offer are exclusive to St. James’s Place clients in the UK retail space. 32
Slide 33: Growth Portfolios
GROWTH PORTFOLIOS DEFENSIVE PORTFOLIO CONSERVATIVE PORTFOLIO BALANCED PORTFOLIO Low Risk Lower-Medium Risk Medium Risk Portfolio Portfolio Portfolio asset mix: asset mix: asset mix: Global Fixed Interest 28.9% International Equities 0.1% Global Fixed Interest 36.2% International Equities 0.7% Global
Slide 34: Growth Portfolios (continued)
GROWTH PORTFOLIOS (continued) MANAGED FUNDS PORTFOLIO STRATEGIC GROWTH PORTFOLIO ADVENTUROUS PORTFOLIO Medium Risk Medium Risk Upper-Medium Risk Portfolio Portfolio Portfolio asset mix: asset mix: asset mix: Global Fixed Interest 19.0% International Equities 0.9% Global Fixed Interest 21.7% Internat
Slide 35: Income Portfolios
INCOME PORTFOLIOS IMMEDIATE INCOME PORTFOLIO BALANCED INCOME PORTFOLIO DEFERRED INCOME PORTFOLIO Lower-Medium Risk Medium Risk Medium Risk Portfolio Portfolio Portfolio asset mix: asset mix: asset mix: Global Fixed Interest 67.7% International Equities 0.1% Global Fixed Interest 37.8% International
Slide 36: Funds Under Management
FUNDS UNDER MANAGEMENT 18% p.a. compound growth over the last 5 years and 19% p.a. over last 10 years (at 31 December 2019) 120 +22% 110 117.0 100 +5% +20% 90 80 +28% 70 £ billion 60 +13% +17% 50 +27% 40 +22% 30 +26% +6% +31% 20 -10% 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3
Slide 37: Annualised Performance of St. James's Place Portfolios
ANNUALISED PERFORMANCE OF ST. JAMES’S PLACE PORTFOLIOS 37
Slide 38: Annualised 3 Year Performance
ANNUALISED 3 YEAR PERFORMANCE St. James’s Place Portfolios vs ARC Private Client Indices 9% St. James’s Place ARC PCI 8% 6.8% 6.9% 7% 6% 5.7% 5.7% 5.3% 5.2% 5% 4.8% 4.1% 4.1% 4.1% 4% 3.5% 3.2% 3% 2.7% 2.7% 2.7% 2% 1.5% 1% 0 Defensive Conservative Balanced Managed Adventurous Immediate Balanced Defer
Slide 39: Annualised 5 Year Performance
ANNUALISED 5 YEAR PERFORMANCE St. James’s Place Portfolios vs ARC Private Client Indices 9% St. James’s Place ARC PCI 8.1% 8% 7.2% 7% 6.4% 6.2% 6.2% 6% 5.7% 5.5% 4.9% 5% 4.5% 4.5% 4.5% 4.3% 4% 3.0% 3.0% 3.0% 3% 1.9% 2% 1% 0 Defensive Conservative Balanced Managed Adventurous Immediate Balanced Defer
Slide 40: ARC Private Client Indices Universe
ARC PRIVATE CLIENT INDICES UNIVERSE 40
Slide 41: Funds Under Management by Asset Class, Region and Wrapper
FUNDS UNDER MANAGEMENT: SHOWN BY ASSET CLASS, REGION AND WRAPPER 31 December 2019 Fixed UK Interest 17% 18% Investments Pensions 27% 45% Alternatives 8% Asia & Pacific 12% Property 3% Cash 6% Other Assets 3% US 21% European 12% Unit Trusts, ISAs & DFMs 28% 41
Slide 42: Benefits of Investment Management Approach
BENEFITS OF INVESTMENT MANAGEMENT APPROACH • No in-house managers, so no conflict of interest • Benefit from Investment Committee experience & expertise • Ability to appoint the best fund managers with wholesale purchasing power • Easy to change manager • Clients free to switch funds • Significantly
Slide 43: Our Clients
OUR CLIENTS 43
Slide 44: Geographic Distribution of Client FUM
GEOGRAPHIC DISTRIBUTION OF CLIENT FUM 31 December 2019 CLIENTS 5% 1% 23% 21% 14% 13% 3% 4% 3% 4% 4% 25% Male 53% 22% 10% Overseas Clients: 3% Female 47% 15% Average age 56 44
Slide 45: Clients by FUM Value Band
CLIENTS BY FUM VALUE BAND 31 December 2019 <£50k 5% £1m+ 22% £50k-£250k 32% £500k-£1m 19% £250k-£500k 22% 45
Slide 46: New and Retained Clients by Age Band
NEW AND RETAINED CLIENTS BY AGE BAND 31 December 2019 EXISTING CLIENTS BY AGE BAND NEW CLIENTS BY AGE BAND <30 70+ 30-40 <30 5% 9% 6% 13% 70+ 65-70 23% 6% 30-40 12% 40-50 60-65 17% 10% 65-70 10% 55-60 40-50 60-65 50-55 15% 21% 12% 13% 55-60 50-55 14% 14% 46
Slide 47: Client Wealth Account Survey
CLIENT WEALTH ACCOUNT SURVEY 2019 47
Slide 48: Client Wealth Account Survey
CLIENT WEALTH ACCOUNT SURVEY What is your view of the St. James’s Place proposition in terms of value for money? Excellent 34% Good 46% Reasonable 15% Poor 5% St. James’s Place Annual Wealth Account Survey, 2019 48
Slide 49: Client Wealth Account Survey
CLIENT WEALTH ACCOUNT SURVEY Thinking about your overall experience, would you recommend St. James’s Place services to others? Yes, but I have Yes I would, yet to do so and have already 39% done so 55% No 6% St. James’s Place Annual Wealth Account Survey, 2019 49
Slide 50: The UK Advice Market
THE UK ADVICE MARKET 50
Slide 51: UK Aggregate Wealth
UK AGGREGATE WEALTH 30% 27% £50k to £5m of investable wealth 25% 24% 23% • 11.5 million individuals 20% with £2.2 trillion investable wealth 15% • Projected to grow to 10% 10% 13.2 million individuals 10% with £2.6 trillion investable wealth 5% by 2023 3% 3% 0% • Excluding property and 0 occupationa
Slide 52: Increasing Tax Burden
INCREASING TAX BURDEN • UK tax rules often described as ‘Fiendishly Complex’ • Record number of higher rate tax payers • 2018-19 IHT receipts £5.4 billion – up 68% in 5 years • HNW population up 20% • Finance Act 2017 – 674 pages (second largest in history) 52
Slide 53: Projected Growth in Retirement Income Assets
PROJECTED GROWTH IN RETIREMENT INCOME ASSETS (£BN) 600 400 300 15% 35 200 15 225 210 0% 121 0 2005 2010 2015E 2020E 2025E 2030E Individual Annuities Income Drawdown/Alternative products • In 2015, there were circa 12 million people of retirement age in the UK • By 2030, this figure will be nearly 14
Slide 54: Demonstrating Value – Behavioural Assurance
DEMONSTRATING VALUE – BEHAVIOURAL ASSURANCE Recent FT article – ‘Time in’ the market KEEP CALM AND STAY INVESTED The cost of dipping in and out of the market Trying to be too clever costs money FTSE All-Share returns over the past 20 years (%) • ‘If you had been out of the 300 FTSE All-Share index f
Slide 55: The Value of Advice
THE VALUE OF ADVICE Value of advice Trusted personal Investment Client net including personal tax optimisation relationship returns outcomes ...so much more than just an investment return 55
Slide 56: £2.8 Trillion of Wealth Available for Transfer
£2.8 TRILLION OF WEALTH AVAILABLE FOR TRANSFER OVER THE NEXT 30 YEARS £6.6 TRILLION Total wealth Wealth consumed on £4.2 TRILLION lifetime spending Calculations for total wealth available for transfer over the next Additional wealth spent on £0.2 TRILLION 30 years from united long-term care kingdom
Slide 57: The SJP Opportunity
THE SJP OPPORTUNITY • ISAs – Cash £270 bn (April 2019 – HMRC) – Stocks & shares £337 bn (April 2019 – HMRC) • Bank and Building Society deposits £1,411 bn (Jan 2020 – Building Societies Association) • National Savings and Investment £176 bn (Jan 2020 – Building Societies Association) (NS&I) deposits
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Slide 59: Costs & Charges
COSTS & CHARGES 59
Slide 60: The Advice Market... Transparent?
THE ADVICE MARKET... TRANSPARENT? The fees a client may have to consider when trying to compare advice and products based on publicly available information for a variety of firms and providers. % of initial investment Tiered fee based on amount invested + VAT Initial advice fee or hourly rate (£) Ra
Slide 61: USA – Annual Cost of Advice and Investment Services
USA – ANNUAL COST OF ADVICE AND INVESTMENT SERVICES (EXCLUDING INITIAL PLANNING FEES) Example charges for a $500,000 - $1 million portfolio The total bill to investors Median annual cost financial advice and investment services, 0.45 by portfolio size. Below $250,000 1.85 0.20 $250,000 to $500,000 1
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Slide 63: Part Two – Financial Results
PA R T T W O – F I N A N C I A L R E S U L T S 64
Slide 64: 2019 – Full Year Financial Summary
2019 – FULL YEAR FINANCIAL SUMMARY • EEV new business profit of £793.0 million • EEV operating profit of £952.0 million • Underlying cash result of £273.1 million • Full year dividend of 49.71 pence per share, up 3% • Underlying cash earnings per share 51.4 pence 65
Slide 65: Cash & Dividend Profile
CASH & DIVIDEND PROFILE 66
Slide 66: Underlying Post-Tax Cash Result
UNDERLYING POST-TAX CASH RESULT 350 300 309.0 -12% 281.2 273.1 250 200 £ million 199.5 182.1 150 173.8 139.9 100 84.0 50 63.4 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 67
Slide 67: Estimated Return on Funds in Gestation
ESTIMATED RETURN ON FUNDS IN GESTATION Year Maturing Additional Cumulative annual Invested annual post-tax contribution to post-tax cash (£m) cash result (£m) 2014 2020 36.1 36.1 2015 2021 45.2 81.3 2016 2022 53.2 134.5 2017 2023 67.6 202.1 2018 2024 80.0 282.1 2019 2025 onwards 74.2 356.3 Value of
Slide 68: Gestation FUM – Underpinning Future Returns
GESTATION FUM – UNDERPINNING FUTURE RETURNS Contribution to the cash result from maturing FUM £400m • FUM in gestation provides £350m visibility around growth in net income from FUM £300m • Based on simplified modelling assumptions, current balance £250m of £40.2bn of gestation FUM £200m to contribu
Slide 69: Continual Dividend Growth
CONTINUAL DIVIDEND GROWTH +3% 50 +12.5% 49.71p 45 +30% ars 40 0 ye t1 las r the 35 e h ov +18% wt gro 30 nd +20% pou om .c Pence 25 p.a +46% % 27 20 +50% 15 +33% 10 +33% +33% +2.5% +18% +2% 5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 70
Slide 70: Conclusion & Outlook
CONCLUSION & OUTLOOK • The advice market is big • Established and well-respected brand/business • Favourable demographics • Experienced and stable management team • The tax burden is increasing • Experienced and stable advisory team – • Move from state to individual ‘The Partnership’ responsibility
Slide 71: Our Shareholders
OUR SHA REHOLDERS 72
Slide 72: Our Shareholders
OUR SHAREHOLDERS Balance 1 M&G 6.01% 12% UK 2 Allianz Global Investors 5.26% 50% 3 BlackRock 4.72% Europe 4 Baillie Gifford 4.43% 18% 5 Vanguard Group 3.64% 6 Norges Bank Investment Management 3.42% 7 Aviva Investors 3.35% 8 Merian Global Investors 3.21% 9 Legal & General 3.11% North America 10 BLS
Slide 73: Analyst Following
A NALYST FOLLOWING 74
Slide 74: Analyst Following
ANALYST FOLLOWING • Trevor Moss Agency Partners • Ashik Musaddi JP Morgan Cazenove • Andrew Crean Autonomous • Charlie Beeching KBW • Thomas Howarth Barclays Capital • Fahad Changazi Mediobanca • Chris Turner Berenberg • Jon Hocking Morgan Stanley • Andrew Sinclair BoA Merrill Lynch • David McCann N
Slide 75: Investor Relations Contacts
INVESTOR RELATIONS CONTACTS If you have a query or require more information, please get in touch with one of the contacts below: Craig Gentle Tony Dunk Hugh Taylor Chief Financial Officer Director, Investor Relations Director, Investor Relations Telephone: 0207 514 1963 Telephone: 0207 514 1963 Tele
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Slide 77: FEB RUA RY 2 02 0
FEB RUA RY 2 02 0 78 SJP6001 Q4 (02/20)