St James's Place  

Activist shareholder 'pleased' as SJP reviews operating model

Activist shareholder 'pleased' as SJP reviews operating model

A shareholder in St James’s Place has praised the advice giant for "productive and constructive dialogue" around its costs and operating model.

In its second open letter to the board of SJP today (December 11) PrimeStone Capital, which owns 1.2 per cent of SJP's stock, claimed the adviser had expressed "fundamental alignment" over the concerns it raised earlier this year.

In October PrimeStone wrote to SJP warning of a "bloated organisational structure" as it called for an overhaul of its costs to improve investor returns. 

But following a meeting with SJP directors the shareholder said in today's letter it was "particularly excited" about plans to "re-create" operating leverage at the advice firm.

The shareholder also claimed SJP had recognised the importance of carefully managing its costs and was currently reviewing its "organisational design and operating model". 

One of the concerns PrimeStone expressed in October centered around SJP's "overly generous" compensation package which was "well above" its peers. 

SJP has frequently come under fire for its policy of rewarding partners with lavish perks such as cruises, but earlier this year announced it was overhauling its incentive packages to reward "the right behaviours".

In October the advice giant announced its inflows had dropped by a third this summer amid a "challenging external environment". 

In its latest letter PrimeStone added: "We sincerely hope your efforts will allow St James’s Place to translate strong continued growth into value for shareholders.

"As we have emphasised on multiple occasions, growth and profitability should not be a trade-off for SJP – profitable growth is achievable and is what shareholders are looking for."

In its original open letter the shareholder, which began investing in SJP last year, claimed the company had "failed to deliver value for shareholders" over the past five years. 

Whilst it said SJP was a "fundamentally strong" business which had delivered value for clients, partners and employees, it warned its shares had underperformed in recent times. 

The wealth manager's third quarter figures showed net inflows had fallen by 33 per cent, from £2.1bn in the same period last year to £1.4bn in September. 

rachel.mortimer@ft.com 

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