St James’s Place came under fire by one of its shareholders for its ‘outrageous pay’ and ‘disappointing’ stock price performance
St James’s Place (SJP) has come under fire by one of its shareholders for its “outrageous pay” and “disappointing” share price performance.
Primestone Capital has the asset manager in its sights and is calling on SJP to downsize its workforce, sell its loss-making Asian operations and increase returns for its ‘long-neglected owners’.
Primestone, which owns a 1.2 percent stake in SJP worth £ 60 million, said the company could more than double its share price if it reduced 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 to customers, advisors, employees and management over the past five years, but not so much to shareholders. It’s time the company tackled its high cost base and changed its culture. ‘
However, it is feared that under pressure to increase profits, SJP could increase fees for savers.
Justin Modray, of Candid Financial Advice, said, “A greater focus on reducing costs and increasing shareholder returns does not sound encouraging to SJP clients.
‘SJP’s rates are already quite high for larger portfolios. Any increase in costs could prove the drop that breaks the camel’s back. SJP customers should also be wary that cost savings can lead to a drop in service levels. ‘
However, Modray added that SJP’s business model was ‘archaic’ and needed updating.
In what appeared to be an offer to reassure customers, Primestone said any changes would not be ‘at the expense of other stakeholders’.
Instead, it said a culture change will “provide SJP’s clients and advisors with a leaner, more flexible, and more responsive SJP.”
A source familiar with Primestone’s plans added: ‘Primestone does not advocate or recommend increasing fees to customers to increase shareholder returns. It just wants the company to increase its profitability by optimizing its cost base without negatively impacting clients and consultants. ‘
The intervention comes after years of criticism of SJP over incentives offered to its partners, including luxury vacations and white gold cufflinks.
Colas and Hahnloser criticized the company for “failing to deliver meaningful value to shareholders in the past five years.” They said, ‘SJP has a bloated organizational structure that stems from over-staffing. A quarter of SJP employees earn more than £ 89,000 a year. This is a staggering statistic and places more than 600 SJP employees in the top 4 percent of UK earners. Primestone urged SJP to improve its financial reporting, which it said investors and analysts struggled to understand.
Shares in SJP, founded by Lord Rothschild, financier Sir Mark Weinberg and the late Mike Wilson, were 929.6p last night. That’s about the same level as five years ago, although the amount of money it manages for savers and high net worth investors has doubled to over £ 115 billion.
Primestone prefers 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 during phone calls with the company, ‘without [it] ever addressed head-on ‘.
SJP said it is “proactively engaging with shareholders regarding the group’s strategy and structure and is looking forward to entering into a dialogue with Primestone regarding the views set forth in its letter.”
Other major shareholders, including M&G, Columbia Threadneedle, Baillie Gifford and Aviva, declined to comment on Primestone’s suggestions.