St. James's Place plc (STJ) Earnings Call Transcript

Hello, and welcome to St. James' Place 2026 Half Year Results Q&A session. My name is Carla, and I will be coordinating your call today. [Operator Instructions]. I would now like to hand you over to your host, Mark FitzPatrick.

Thank you, and good morning, everyone, and thank you for joining us. Before we open for questions, a few brief opening remarks from me. Firstly, I'm very pleased that we've achieved a strong set of results for the first half. Good operating and financial performance, continued strategic progress and further growth in both our client and adviser base. We delivered positive net inflows of GBP 2.7 billion, grew funds under management to a record GBP 240.8 billion and continued to see strong engagement between clients and advisers. These outcomes reflect the enduring demand for trusted financial advice and the strength of our advice-led model. We also continue to make good progress on our strategic journey. Over the last few years, we are focused on strengthening and simplifying the business through a series of major programs. During the period, we made substantial progress in our historic ongoing service evidence review. And this has enabled a further provision release, which we will be returning in full to shareholders through a buyback. Alongside all of this, we continue to strengthen both our client and adviser proposition invest in technology and productivity tools and enhance the pay and benefits and support available to advisers across the partnership. Looking ahead, we remain confident in the long-term outlook for financial advice in the U.K. The advice market remains underpenetrated, client needs to becoming ever more complex and the value of trusted advice continues to grow. As we move through the latter stages of the spending phase of our strategy, our focus is increasingly turning towards the opportunities ahead and the transition to amplify. We believe St. James's Place remains the most compelling place in the U.K. to build, grow and realize value from a successful financial advice business. This enables our advisers to deliver the trusted advice service and support our clients value. This leaves us well positioned for the next phase of growth. With that, let's open up for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. And our first question comes from Andrew Lowe with Citi.

I've got two. The first is on your adviser retention rate in the first half. Could you clarify what that was in the first half and how that compares to the 91% retention rate that you saw in 2025. It seems likely to have gone down rather than that, but your adviser numbers are up 0.3% in the first half, and there have been unquantified planned exits from underperforming advisers. Can we conclude that you're doing more lateral hires from other advice firms or has the gap been bridged by a step-up in the number of advisers graduating from the SJP Academy where presumably day 1 productivity may be lower. So any color there would be great. And then the second question is just on your pass-through of your fees to Europe advisers. There's been a lot of debate on this during the past couple of weeks. And how you have ceased to be retaining more of the adviser fees versus other platforms who seem to be talking about passing through 80% to 85% of the growth fees to their advisers. So if I take the 25 basis points ongoing advice fee the as a percentage of the 80 basis points that you charge your clients that the or retaining your advisers are keeping 70%. But I'm conscious that there may be further pass-through that we don't see in the financial disclosure. So could you just clarify exactly what your as high the retention is and whether you think that, that figure is like-to-like, [indiscernible], thanks.

Okay, Andy. Thank you. So hitting the topic I expect and we spend a little bit of time on today. I think maybe just some broader comments around the whole element to partner, partner retention in the back and then I will get to those explicit components. Firstly, I think I would say the reality for us every wealth manager around the world is the ebb and flow of advisers. We've seen it for decades in St. James's Place, and it's not particularly [indiscernible]. So our partner retention number is running at 90% at the moment. Last year, it was 91%. So it's a marginal 1% delta which [indiscernible] I think, ends up at about 50 advisers in terms of the difference. So it's very much at the margin in terms of what project. We unfortunately lose advisers to a broad range of firms and many retire or leave the profession. However, we also recruited advisers from a very broad range of forms, including IFS, and we have a phenomenal recruitment team. So the adviser retention levels that we've seen over the course of the first half is -- and additions are a combination of natural highs experienced lateral hires. We've done that from day 1, as I said, we have a very, very good team. And if anything, we actually we've recently strengthened the team earlier this year, we sent in the team, we bought some additional proton because we initiated back in February, our ambition to be able to see the Pfizer numbers grow from 2027. Therefore, there's normally a bit of a time lag in the pipeline in terms of building up on that. So we've started investing in that piece. And the other component is the Academy. And the academy over the first half of this year has been very, very busy. We're seeing good numbers coming through in terms of graduation and we're seeing great demand for advice and a real positive reaction to our campaign of trying to encourage more women into the advice profession. So we've been active in that regard and we're seeing real pick up in interest in that for the longer term. But over the course of the last 6 months, the Academy has actually contributed significantly in terms of our advisory numbers. In terms of the broader pass-through component, again, just a little bit of color and context. We set out as part of our strategy in 2 that 1 of our key pillars is having the leading and file offering. And we want to make sure the St. James' Place is the best place for the best advisers to join developing and build a successful Korean business and we are laser focused on this. Also that the vast majority of our investments of over GBP 250 million over the next few years is focused on improving our offering for advisers and in space. Now no one else in the market is investing in anywhere near the scale. And we think that's also why we have nearly 20% of the U.K. advisers within St. James's Place and nearly half of all new advisers to the profession come through our category. Now remuneration is of adviser pays one of the components of effectively the offering that we have to advise us. There are so many other components to it. But to answer your question directly, the partner elements that advisers retain of the advice fees we pay. It's about 80%. And I think the figure that's a lot higher than the many folks assume. So it's -- our focus as an organization as an executive team is on ensuring we have the leading adviser offering, ensuring we continue to retain, attract, grow our adviser base because we see the total addressable market is growing in the U.K. There is a huge opportunity. Our growth algorithm, we think factors on two key components, one of which is productivity increases, and we're going to continue to stay focused on that, supporting our advisers in that regard. And the second is adviser numbers. So we're focused on both, and we expect to be able to deliver both over the medium term. So hopefully, that answers your question. Maybe a little bit more fulsome, but hopefully, it just gives everyone a bit of sense of the broader color on how we're focusing on these matters.

Thank you, and the next question comes from Nasib Ahmed with UBS.

Maybe I just want to follow up on the two parts that you just made, Mark. Can you give us the numbers? So you've basically hired 500 advisers. What's the split between Academy hires and Natural hires to the 50-50, 300, 200? And then on the 80% retained by advisers, I mean, it's hard to get the math. I mean, you've given us the number, but can you -- another way of asking the question would be the 25 basis points that you retained, how much of that is actually resumed in helping advisers on business rates interment insurance, et cetera, right? So just trying to see the 25 basis points or emerging how much of that are you retaining net of costs for advice. And then on Slide 24, you showed at kind of the EY chart, which is helpful. Quilter have a similar chart and they've got 1.56% on the 10-year basis with a $500,000 part instead of the 100,000 parts. So they don't seem to be on the chart, so I don't know what I'm missing there. I don't know if you can comment on that?

So I'll ask Caroline to give a little bit more color on the element of the 80% and how that is how that's come part. On the chart, I think we've got 16 competitors. I don't think we named them, et cetera, set out who they are. I would expect them to be -- to have all the usual suspects in them on that way. So I can't comment on what others have done and how they have compiled their numbers. On the element to the breakdown of the adviser numbers, we're not looking to kind of give granularity on the category or the recruitment element in terms of specific numbers other than to say, I think both play an active role. And the ratios shift and change broadly over the course of the years within a fairly tight corridor. So we haven't seen anything majorly change in that regard. But we are looking at that, and we are looking to spend more in the academy in terms of increasing the number of cohorts that we have going in. So over the fullness of time, we'd expect to have more people coming in through the academy. In addition, we'd also expect to have more natural higher. We think that the new fee structure that we set out in and we've pivoted to in -- from August last year actually means that there are surprises we previously weren't necessarily fans of the old regime in the marketplace who would now be receptive to a conversation with St. James's Place. And then finally, I'm also very confident of the fact that there's been a lot of consolidation, a lot of movement around the market. and not be advised, that's been subject to some of those acquisitions are thrilled by those. So there's an opportunity for us to be able to lift out a few advisers on some of those organizations. So we're spending considerable time and energy around that. So I think it's fair to say that as a team, we are very focused on retention, we are very focused on acquisition, and we're very focused on creating a long-term pipeline full of profession through the academy. Caroline, do you want to give a little bit of extra color on the [indiscernible]?

Yes. Yes. So if we look at the 80%, you have to consider, obviously, together all the initial and ongoing advice that we paid to partners plus the allowances we give them so we paid out 2/3 of initial advice charges to advisers. This one increased substantially all in toward [indiscernible] you add the other allowances we paid to the partnership. So that's consistent with what you said under our new charging structure the sort of new business makes minimal profit. When you add in the amount we pay on an ongoing basis, there's two elements to this. There's obviously the 55 out of 80 basis points under the new charging structure. But then you've also got under the old charging structure advisers got all the ongoing pipes. So it's a combination rather than specifically picking out any of the specific costs. So you have to take all that together in

And once you're off gestation, can you just confirm that your -- that 80% become 75% or greater than 75%?

[indiscernible]

So you're paying out 100% on all of the firm that's in gestation, but once that runs off and, let's say, 2022, that 80% becomes 75%?

It reduces not [indiscernible] uses a little bit, yes.

Thank you. And the next question comes from Andrew Crean Red Autonomous.

Three questions, if I can. Caroline, on slide 8 you make the point that results were lower in the first half of 25% because of the lower initial ongoing margins. Then you say whether this affect to full year 2026 will depend on how markets develop in the second half. I just wanted to explore the implications of that. If markets are normal, is the implication of what you're saying that the second half profit will be higher than the second half. That's the first question. Second and third question is just can you update us a bit more on the high net worth initiative and also on the Flagstone cash transmission if I'm transferring cash now from Flagstone into a state, how long will it take me?

Perfect. All right. Well, why don't I start with the high net worth piece and the Flagstone and then Caroline can pick up on the second piece. So [indiscernible] will continue to be part of part of our strategy over the course of the last 6 months, we got a dedicated high net worth program and leadership team. have begun a significant increase in high-quality private client events to be able to deepen engagement with expanding our sensor adviser support to enhance the servicing upon it worth. We've launched a pilot highlight work training program with one of the largest practices paving the way for a broader rollout next year. increasing the volumes of high-quality practices serving the complex high net worth client. So the high net worth component continues to be a very important aspect. And I think our investment in this area and the energy and commitment of resources, we think will deliver more consistent and somewhat differentiated high net worth experience. In terms of Flagstone, so in the second half of this year, we are expecting to dramatically change, and we're working closely with an on dramatically changing the length of time it takes to move money from Flagstone into St. James's Place. So I would expect we'll be able to report that, that is all done and dusted when we chat you again. It's a key component of the engagement with Blackstone. In the meanwhile, with Blackstone, what they've done is they've massively facilitated take on procedures. So most of the information is now as auto populated from across from St. James's Place. And the rate that time for getting has been -- has improved the level at which clients invest has been lowered a bit to make it more accessible. And we're seeing an increase, I think it's just GBP 5.9 billion between the team, yes? GBP 5.9 billion now in Blackstone. So a meaningful increase clearly, just talking about clients in the markets generally, in U.K. markets, confidence in global economy and the uncertainty and wishing to have some in cash in. This is an incredibly effective and efficient way of being able to get your cash to work a little bit. But ultimately, as we all know on this call, the U.K. has a broader issue and that people are overinvesting and underinvested. So at least through Blackstone, our advisers have got visibility of [indiscernible] and as part of the general engagement with clients are exploring the size of scale of what's in Blackstone and what possibly could be -- should be invested because the opportunity cost of being in cash versus being in the market. is quite significant, as I'm sure you're aware. Caroline?

Yes. Thank you, Andrew. Yes, look, I think I'm actually not sure what the normal market is any more or actually some. But so I can put that aside, we think it's something normal second half of the year, yes, we would expect will be the half 2 '26 profits will be higher than half 225 profit. But I said, it all depends on the market.

Thank you. And our next question comes from David McCann with Deutsche Bank.

Two things, please. The first one to follow up on the adviser retention piece. Obviously, a few questions had already about the split of shareholder and adviser economics, but I just want to drill into that a bit more. Obviously, you question really focused on what is the current split? The question really is, do you see this change going forward, given the comment you made about the competitiveness of the market and there's obviously what we're all seeing now adjacent to that point, are you still expecting roughly overall adviser numbers over the whole year? And then the second question is on flows more generally. It's fair to say they remain at the softer and I think where most people would have to like to see them. Maybe you can drill into why is that the case? What do you think it will take for them to positively inflect? And indeed, do you have any medium-term aspirations of where you like them to be for the business of our size.

David, thank you. In terms of advisory retention adviser numbers just generally, I think, as I said at the end earlier on, the element of advisers and our leading advice offering is fundamental to who we are as an organization. So we are laser-focused on ensuring that we have the very best offering to advisers in the round. So when we talk to partners, advisers about why they join us, why they stay with us, they tell us the academies are so valuable to them. the element of really joining a community. They been alone isolated their part is so much bigger, longer in technical support, training, advice, et cetera, we also have the highest concentration of financial -- chartered financial planners in the U.K. So it's another way of saying we have the highest quality financial advisers, the unique investment management approach, the BSP program kind of growth and succession component. We also guarantee our advisers advice, which is really important for the advisers and their clients, gives them great confidence and a massive recognizable and supported brand all of those components are part and parcel of what the leading adviser offering component is. And we will ensure that we continue to have a leading adviser offering. So we're constantly looking at it, constantly looking to see what we need to do to ensure that we are providing the best all-around offering. Part of that is around the element of how we support around technology and how we make the overall profitability of our advisers and partners businesses better. So the element of how we do more for them, how we facilitate how we support them will continue to be really, really important. As for advice numbers going forward, I think our ambition would be that we would look to see kind of numbers flattish as we said at the beginning of the year. And in 2027, would look to be seeing great kicking off again in terms of either numbers based on the elements I mentioned earlier this morning around the fact that we have invested further in the Academy, and we've invested further in our recruitment team and all of these by efficient have got an element of a lead time so [indiscernible] to come through later this year, early next year. in terms of their contribution of that investment. Caroline, do you want to comment on the first, please?

Yes, absolutely. Thanks, David. So look, if I take the flows apart into the component parts. I mean if you take the gross flows, we attracted GBP 10.5 billion of gross loans for the half, which is consistent with our record results, which we achieved in half 1 2025. So and that's despite the sort of heightened macroeconomic and sort of geopolitical uncertainty during the period. So we're happy with that, but advisers a bid case volumes are up 9% on H1 2025, okay, size down a little bit about the same amount. So that I mean outflows in absolute terms are up because that's given the strong sort of fund growth. So average fund in H1 2020 was up 18% on the previous half but our flow for increased by 16%. So our retention rate for the half was 95.4%, up from 95.3% in last year, so it's above our 95% ambition. And total outlets also fail period-on-period from 6.9% of average fund last year to 6.7% this year in half 1. So that's a little bit. But then if you come to net flows, which we know is obviously the sum of the 2, with average funds higher, 8% higher than the year ago, it was obviously a really good result for our clients. We're pleased with that, but inflows don't scale at the same extent as out which generally increase with band. So this one has been obviously reflected in our net flows. But they are in the 2% to 3% if, which is sort of our expectations right now. So that's good. But I think as you go forward, to your point going forward, obviously, there are 2 factors we look at here Obviously, partner numbers and adviser numbers and obviously productivity we're switching our tension Academy and [indiscernible] invested into. And also we're batting to amplify we're continuing our work and increasing our work on the products that you work with in Amplify. So what I would say is the 2% to 3% is definitely not a cap.

And the next question comes from Christiane Hostein with Bank of America.

My first question just following on from the discussion on adviser attention, sorry. So I wanted to ask, there's been a lot of media speculation about a potential exit from volatile practices [indiscernible]. I was just wondering if you're able to provide an update here and whether they've actually provided notice to leave. And then how do you also intend to retain advisers and some in the event of a practice or partnership leading. My second question is relating to AI. So I was just wondering how you think about shared economies of scale from your productivity benefits relating to AI? And how do you also intend on reinforcing your large-scale advantages versus peers? And then I just had a follow-up question as well on net flow expectations. So you were talking about how you've done quite a bit in terms of the Academy and improving productivity. Pricing is obviously not lower now remediation is pretty much behind. So in terms of accelerating this 2% to 3% net flows, given it seems like a lot of the building blocks are in place, how long until you expect to see this start to improve? And yes, what are your expectations there for the more medium term?

Okay. A nice cross section of questions, Christiane. So firstly, unsurprisingly, we're going to comment on an individual partner business within St. James' don't monopoly understand the reasons for that along that. I think just a couple of things just to remind or maybe inform people about Firstly, when an adviser lease. And as we say, it is normal that we will lose some and would much rather not lose advisers, but we understand everybody's got the right personal reasons for all that. It doesn't mean that the clients -- and the clients often find that actually what they have with St. James's Place is incredibly attractive for all the reasons that I've set out earlier in terms of investment performance, in terms of service in terms of support, in terms of the brand, the advice guarantee, all these different components. They really match it to clients. And so we generally find that we retain on average, on a 50% of client fund. Now another key component is that when a partner that has multiple advisers and a practice leaves we do have those as well. And as I said, we don't get a triad encourage that, but we even much rather than to say. But if they do go, we tend to retain at least 50% of their advices. That's just what the factor. So the element of -- there is some location, there is kind of time and attention that needs to be spent with much rather than not have it. but it's not an immediate flow that if somebody leaves all their business leaves with it. And that, I think, just talks to the testimony of the strength the relationship we have with multiple partners and advisers and with clients as well and what it is at Capital. On the question of AI and technology and thank you for the question. Share scale of economics and the economies of scale is like scale benefits for us really coming through in a few ways. One is in terms of our ability with fund managers to be able to expect greater margins. And unfortunately, you and others on the call will be just generally seeing that across the sector. Two is an element of -- because of our size and scale, most of the big global IT brands work with us, talk to us. And because of our scale, we can negotiate very good prices for either ourselves or for and for the partners and advisers making sure that they pay well below rack rate for any of the kits that they use or that they need, whether it be conventional technology or whether it be some of the newer AI capabilities and technologies. And effectively, the scale benefits we look to put back into the business. So the scale benefits and just general kind of efficiencies are part and parcel of how we've been able to pay for and fund the elements of the changes we made to the fees that we're paying to the advisers from later this year and for next year. It also going forward, I think, will be how we will look to reinvest back into the business in terms of technology because the pace of technology is constantly evolving. It truly is exponential, not linear. And therefore, I think how we continue to evolve our technology stack and how we continue to ensure that advisers get the most streamlined process as possible is going to be really, really important because ultimately, what advisers love doing is being in front of their clients. The admin piece is generally speaking an avid around the world. That's not what they do what they do. So wherever we can, minimize that component, maximize the opportunities as bending front of clients because that's where the buzz. That's where the gene. That's where the rush comes from. So that's the piece that we are really laser-focused on. We have mapped out the client journey. We've mapped out the Pfizer journey. We understand where the pain points are. And one by one, we are knocking these on the head to give the advisers more time greater efficiency and greater ability to improve. And part of the pilots that we've been running have shown increases in new client acquisition for those parts of the business that have been part of the pilot. We've seen some of the smaller tractors where they're using some of the AI, a significant uptick in terms of client numbers and a significant increase in terms of productivity. So as we roll these new technology and capabilities out throughout the partnership. And then as we help them optimize that technology into their processes into their systems, we'd expect to see the advisers being able to do more and actually be able to support their profitability at one of the earlier points. And then on the net flows expectations, one of the things that we have tracking quite carefully is to partner productivity. And partner adviser productivity, we have seen from a case count increased quite significantly. So last year was a very busy year. We all know it was a vacancy. It was a very busy year. And last year -- first half last year and first half this year, we've seen a 9% increase in the number of cases that advisers are talking to clients about and engaging with Platform. The case size is down 10%. And largely, I think that's a function of the confidence in the economy. And we're seeing a lot more in Flagstone as we mentioned earlier, talking to induce answering this question. So we do think that actually the advisers are very busy. When I talk to them, they tell me how focused they are on what they're doing and how they're growing their practice, and how they're looking for new advisers and how they really feel they're making a difference in society. And to me, that's why I'm here because I want to facilitate and enable more of that because what we do, what our advisers do matters. It's really important that helps people's life. So no expectations over the medium term, I would expect them to start pushing through the 3% level. On the basis, again, we need to be very alive to what happens in the economy, what's happening with confidence, et cetera. Because we don't operate in a vacuum. But we are moving into the amplified phase next year. The amplified phase is a serious growth rate. You've seen the consensus numbers in terms of the profitability. We're looking to continue investing in the firm. And St. James' Place is very different from what it was a year ago, and it will be very different in a year's time and in 2 years' time. We're getting better and better at what we do.