St James’s Place (SJP) has been blasted by one of its shareholders over ‘excessive pay’ and its ‘disappointing’ share price performance.
Primestone Capital has the wealth manager in its crosshairs and is calling for SJP to slim down its staff, sell its lossmaking Asian business and boost returns for its ‘long-neglected owners’.
Primestone, which owns a 1.2 per cent stake in SJP worth £60m, said the business could more than double its share price if it cut costs to increase profits.
In an open letter to SJP chairman Iain Cornish, Primestone’s Benoît Colas and Damian Hahnloser said: ‘SJP has delivered tremendous value for clients, advisers, employees and management but not so much for shareholders over the last five years. It is time for the company to address its high cost base and change its culture.’
It is feared, however, that pressure to boost profits could see SJP raise fees for savers.
Justin Modray, of Candid Financial Advice, said: ‘A greater focus on cutting costs and boosting shareholder returns doesn’t sound encouraging for SJP customers.
‘SJP’s fees are already rather high on larger portfolios. Any increase in charges could prove the straw that breaks the camel’s back. SJP customers should also be wary that cost cutting might lead to a fall in service levels.’
However, Modray added that SJP’s business model was ‘archaic’ and needed updating.
In what appeared to be a bid to reassure customers, Primestone said that any changes need not come ‘at the expense of other stakeholders’.
Instead, it said that a change in culture ‘will provide SJP’s clients and advisers with a leaner, more agile and more reactive SJP’.
A source familiar with Primestone’s plans added: ‘Primestone is not advocating or recommending the increase of fees to clients to boost shareholder returns. It only wants the company to boost its profitability by optimising its cost base without any negative impact for clients and advisers.’
The intervention comes after years of criticism of SJP over incentives offered to its partners, including luxury holidays and white-gold cufflinks.
Colas and Hahnloser criticised the business for ‘failing to deliver meaningful value for shareholders over the last five years’. They said: ‘SJP has a bloated organisational structure that stems from excessive hiring. A quarter of SJP employees earn more than £89,000 per year. This is a staggering statistic, and places over 600 SJP employees among the UK’s top 4 per cent earners.’ Primestone urged SJP to improve its financial reporting, which it said investors and analysts were struggling to understand.
Shares in SJP, which was founded by Lord Rothschild, financier Sir Mark Weinberg and the late Mike Wilson, were 929.6p last night. That is around the same level they were at five years ago, even though the amount of money it is managing for savers and wealthy investors has doubled to more than £115billion.
Primestone usually prefers to have conversations with management behind closed doors.
However, it decided to publish the open letter after Primestone and other investors raised SJP’s poor cost management several times on phone calls with the company, ‘without [it] ever being addressed head on’.
SJP said that it ‘proactively engages with shareholders with regards to group strategy and structure and looks forward to commencing a dialogue with Primestone in regard to the views outlined in its letter’.
Other major shareholders including M&G, Columbia Threadneedle, Baillie Gifford and Aviva declined to comment on Primestone’s suggestions.