David Lamb
St. James’s Place
8 December 2010
1
How we see the RDR
opportunity benefiting
St. James’s Place
2
Agenda
• Introduction to St. James’s Place – a truly
integrated wealth management business
• How we see RDR playing out in our space and
in the wider market
• St. James’s Place post RDR
• Questions?
3
St. James’s Place: overview
• Leading UK Wealth Management Company
– Established 1991
– UK listed with market cap of c.£1.3bn
– Over 200,000 clients and £24.8bn in FUM
• Differentiated business model
– Own dedicated distribution - the Partnership
– Distinct investment management approach
– Manufacturer and distributor
• Well positioned to benefit from long-term market growth
– Favourable demographic trends
– Increasing tax burden (on individuals)
4
Our Client Proposition
• We provide financial advice to mass affluent
/high net worth investors
• How do we differ from others?
–
–
–
–
Emphasis on long-term relationship-based approach
Provision of face-to-face advice
Not just a fund platform
Both manufacturer AND distributor of investment
products
– Outsource investment management
5
Our products and services
Comprehensive range
• of Pension, Investment and Savings ‘wrappers’
Our focus
• is on our own products and funds
• but we also distribute non-core products of others
Whilst avoiding
• capital intensive products
• guarantees and options
• overly complex, fashionable or high risk structures
6
St. James’s Place is (or will be)
Whole of market in:
•
•
•
•
Protection (Term and Whole Life)
Annuities
Mortgage lending
Employee Benefits
Whilst selecting our investment managers from the whole
market (not restricted to the UK)
7
The SJP model - Two USPs
• Dedicated distribution
– The Partnership
• Investment Management
– Products manufactured in-house
– Investment management outsourced
8
Dedicated Distribution – the Partnership
• High quality self-employed team of c.1500
advisors
– Average experience 17 years
– High productivity
– 90%+ per annum retention rate
• Previous backgrounds
– IFA
– Bank
– ML, Goldman Sachs
9
The Growth Model
Target
15 – 20% pa
New Business
CAPACITY
No of Partners
PRODUCTIVITY
New Business
Per Partner
10
Growing Number of Partners
1600
+9%
Number of Partners
1400
1200
+8%
+3%
1506
+7%
+5%
1000
800
600
400
200
0
2006
2007
2008
30 June
2009
2010
11 7
Compound APE Growth – rolling five years
Growth
25.5%
20%
15%
17.4%
17.4
22.7%
18.8%
Jul 02 - Jun 07 Jul 03 - Jun 08 Jul 04 - Jun 09 Jul 05 - Jun 10
12
Funds18%p.a.
under
management
compound growth over the last
5 years and 17%p.a. over 10 years
24
21
18
15
12
9
6
3
0
+31%
+18%
+25%
+5%
-10%
+29%
+11% -6%
2001
2002
+34%
2003
+20%
2004
2005
2006
2007
2008
2009
2010
(30 June)
13
Benefits of our own distribution
• New business and expenses are more
predictable
• Spread of production
• Less exposed to market pressures
• Greater control over quality of new business
• Ability to build and maintain distribution led
culture
• Better retention of business
• Ability to build stronger client advocacy
14
Investment Management
15
Our approach to investment
management
Investment Committee
Input / advice from
Stamford Associates
'Manages the Managers'
Appoint the
Fund Managers
Decisions:
Sets Performance Risk Management
Change Firm?
Objectives
& Strategy
Change Manager?
Aim for Top 25%
No Change?
16
Stamford Associates
Independent Investment Consultancy
Research Fund
Manager Market
Monitor Managers
and Portfolios
Advise Investment
Committee
Access to
Whole Market
Qualitative &
Quantitative
Focus on Future
Outperformance
• Analyse & Identify
Talented Managers
• Number Crunching
Recommend:
• Monitor Activity
• Potential changes
•Behavioural Psychology
• New Managers
• Gather Intelligence
• Workplace Analysis
17
The Investment Committee
Sir Mark Weinberg
Peter Dunscombe
Sarah Bates
David Lamb
Michael Sorkin
Andrew Humphries
Vivian Bazalgette
Chris Ralph
Andrew Croft
18
Evolving our fund range
• 2008 launches and managers
–
–
–
Alternative Asset Fund
High Octane Fund
Cash Unit Trust
• 2009 launches and managers
–
–
–
–
Corporate Bond Fund
Gilt Unit Trust
Income Unit Trust
New managers
• 2010 launches and managers
–
–
–
–
–
–
–
Global Emerging Markets
International Corporate Bond
UK Absolute Return
UK & International Income
Global Managed Fund
Global Unit Trust Fund
UK Equity Income UT
- BlackRock
- Oldfield/Thornburg
- State Street
- Invesco Perpetual
- Wellington
- Axa Framlington
- Burgundy/Liberty Square/JO Hambro
- First State
- Babson Capital
- BlackRock
- Artemis
- Artisan
- Artisan
- RWC
19
Our fund managers
20
Relative investment performance
Funds under management – rolling 5 years
1st Quartile
2nd Quartile
57%
67%
67%
69%
80%
61%
65%
62%
78%
3rd Quartile
15%
16%
4th Quartile
9%
12%
9%
19%
2009
16%
16%
7%
10%
11%
9%
6%
4%
2008
2007
2006
8%
5%
13%
17%
9%
10%
12%
11%
9%
6%
2005
2004
13%
2003
16%
6%
2002
2001
21
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
• Continuous monitoring plus quarterly reviews
• Easy to change manager – reduced churn
• Free switching for clients
• Significantly improved retention of funds
22
How do we see RDR playing
out in our space and in the
wider market?
23
Retail Distribution Review
• Professional standards
• Status disclosure
• Adviser remuneration
24
RDR – What do the FSA want to achieve?
• Raise the standards of all advisers
• Clear disclosure of adviser status
• Removal of product and provider bias
(influencing the adviser)
• Information on cost of advice to explain advice
isn’t free and to show how the cost of advice
relates to the cost of the product
• Any ongoing adviser charges to be supported
with ongoing service
25
Status Disclosure
• Broader market test for Independence
• If not Independent, then Restricted
26
What is Independent?
• Whole of market
• All retail investments, including Investment
Trusts, passive funds (ETFs)
• National Savings
• Structured Products
• etc
27
Adviser Charging
• Remove provider bias – prevent product
providers from paying commission
• Remove product bias – required tied offices to
remove product bias
28
Adviser Charging
• Adviser remuneration agreed between IFA and
client
• Can take many different forms
• Must be clear
• Cannot be influenced by product providers
• Can by paid by cheque
• Or ‘bundled’ with product charges, but no
factoring
29
Life after RDR - Distribution
• Fewer advisers, but better qualified
• Continued demand for advice (for those who
can pay)
• Client/Adviser relationship key
• Fewer Independent Advisers, some become
Restricted Advisers
… access to distribution will be important
30
Small firms with less than five sales staff
dominates the UK IFA market
0%
11%
1%
2%
11%
75%
Source: Datamonitor, Matrix-data
31
Turnover of IFA Firms (2009)
Turnover
£1m to £50k
£50k - £100k
£100k - £500k
£500k - £1m
£1m - £5m
>£5m
Unknown
Source: Data Monitor
Firms
247
3,342
4,714
584
310
77
1,097
10,371
%
2%
32%
45%
6%
3%
1%
11%
100%
32
Life after RDR – Asset Managers
• Greater competition for distribution
• Brand important
• Price will matter
– But margins intact? Price Pressure?
– Rebates may disappear?
• Further consolidation?
33
Life after RDR – Insurers
•
•
•
•
Greater competition for distribution
Can no longer buy business
Brand important
Factory Gate Pricing
– margins intact (?) but much more visible?
• More consolidation in the industry
• Product commoditisation
34
Life after RDR - Platforms
• Major route to market
• Inevitable consolidation among Platform
providers
• Transparency and unbundling will impact
margins – today fund charges can vary by 80%
between platforms (Citywire 26 April 2010)
• Restrictions likely on some of the current
payments (unbundling)
35
Life after RDR - Clients
•
•
•
•
•
Better quality advisers (?) – but fewer advisers
Less transparency on total costs
Cost of advice may increase
Cost of product may reduce
Impact of tax on advice costs (VAT, Pensions
Relief)
36
What about SJP?
Pre RDR
No Provider Bias
No Product Bias
Tied Advice
Guaranteed Advice
Trusted and Professional
Highly Capitalised
Control of Distribution
Competitive Charges
Investment Approach
Adviser Remuneration
Post RDR
No Provider Bias
No Product Bias
Restricted Advice
Guaranteed Advice
Trusted and Professional
Highly Capitalised
Control of Distribution
Competitive Charges
Investment Approach
Adviser Charging
37
“… but opportunities to capitalise on
market disruption – especially vertically
integrated companies and companies
with the right types of tied model.”
Towers Watson. April 2010
38