Specialist
IFA at Richstone Park Financial Planning Ltd
Agenda
- FUM (funds under management) growth trends and St James’s Place (LON: STJ) fee composition
- IFA (independent financial advisor) portfolio acquisition trends and incentives
- IFA decision-making criteria for platform portfolio migration
- Fee evolution and client churn potential
Questions
1.
How could SJP [St James’s Place] FUM [funds under management] evolve? Obviously, the company took a GBP 12bn hit recently. How do you see that playing out throughout the rest of 2022?
2.
Do you think a 7% growth for 2022 in FUM is plausible for SJP by the end of 2022?
3.
How would you encourage clients to join you at SJP as an IFA [independent financial advisor]?
4.
How much oversight does the investment committee have on IFA recommendations to clients?
5.
What would lead existing clients to make higher deposits with SJP?
6.
How much of increasing client spend with SJP is related to macroeconomic head- or tailwinds? Would clients be spending more money with SJP now?
7.
Presumably, SJP is mainly acquiring new financial advisors’ portfolios. How do you incentivise an IFA to join the company?
8.
In essence, SJP has three core routes to acquiring advisors – the SJP partnership academy, established advisor acquisition and acquiring more mature advisors. Do you know how costly the academy is to the company? What’s the typical ramp-up period for an IFA? How long would they be training in the academy for?
9.
What time horizon would it take for SJP to recoup the cost of training an IFA?
10.
What percentage of IFAs stay or leave after the training’s finished and bear that financial cost?
11.
We touched on some clients not wanting to receive advice from a younger IFA. SJP’s H1 2022 report said 25% of new advisors from January to June 2022 were under 30. Might that pose a risk to the quality of investment advice they’re giving?
12.
Do you think hybrid learning is appropriate as part of the training programme when becoming an IFA? It seems quite complex.
13.
How long does it take for a new IFA to become productive? I know you said training programmes can last 1-3 years. When would they start adding value to SJP?
14.
SJP is trying to win a younger client base. How much more likely does having younger advisors make younger clients to join SJP vs using retail trading apps such as Trading 212 or eToro?
15.
How do new advisors win new business, or is some of that parcelled out from the acquired retiring IFAs?
16.
What’s the typical financial incentive SJP would offer when looking to acquire more established IFAs’ portfolios?
17.
Are there any additional incentives SJP would throw in? Is the company generous on its portfolio valuations?
18.
Why would you move or not move your portfolio and clientele to SJP?
19.
Do you think SJP will have to offer third-party investment products to keep growing its business?
20.
How do you view True Potential or Quilter vs SJP? Would you be more likely to move your clients to one of SJP’s competitors?
21.
What would a normal offer be to acquire a more mature IFAs’ portfolio?
22.
Do you think there’s upward pressure on 4-5x multiples on recurring income potentially in 2023 or 2024? Will they be having to offer 6x or 7x?
23.
How aggressively are retiring IFAs being solicited?
24.
Might negative market performance in 2022 lead to more advisors looking to sell their portfolios or retire?
25.
How much leakage occurs when a retiring or a mature IFA sells their portfolio to SJP, so clients not wanting to join SJP and going elsewhere?
26.
What’s the benefit communicated to clients, especially if fees are increasing with moving over to SJP?
27.
SJP offers a smaller universe of products and charges higher fees, and clients can look at historical fund performance. Three of the company’s funds were doing very badly recently and not delivering any value for money, and overall, 41 of its 47 funds are said to be broadly delivering value, which may not offer that much value in the grand scheme of things, once fees are taken out. What do clients say about this and why do they just go along with the higher fees?
28.
What percentage leakage do you think occurs across SJP’s business when the IFAs it acquires are moving their portfolios?
29.
Could you discuss the mechanics of SJP fees? How much does an IFA get and how much does the company make on the client pass-through?
30.
Do you expect downward pressure on fees over time?
31.
We’ve mentioned some clients are happy paying higher fees. What drives outflows at SJP? We mentioned some people will leave and they’re not happy with that performance. Do IFAs leave?
32.
How much of outflows would be from natural crystallisation of benefits such as pensions and cashing out a bit of money from funds? What percentage of that would be from IFAs moving their portfolio, and what percentage would be from clients choosing to leave?
33.
Do you think PE’s growth and it being a little more accessible to less-high-net-worth individuals is a threat to SJP and other wealth management advisory services?
34.
Are there any key tail or headwinds that you’d like to draw attention to for SJP and its IFA business?
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