Advisers who have either missed a debt repayment to St. James's Place, or are currently trying to refinance their loans, owed the company £44.6mn at the end of 2023, according to the wealth manager’s most recent accounts.
FT Adviser previously reported that St James Place advisers owed hundreds of millions of pounds as a result of taking out loans to buy up the practices of retired or exiting partners.
SJP's accounts showed that at the end of December 2023, £340mn was owed directly to St James Place, up from £315mn at the start of 2023.
A parcel of loans were also securitised and sold on to third parties, the amount of these loans was £67.2mn at the end of 2023.
St James's Place is not liable for these securitised loans if the adviser fails to make repayments.
There was an additional £289.2mn of loans taken out by St James's Place advisers with banks.
While it is the advisers' responsibility to repay these loans, St James's Place acts as a guarantor, and must repay some or all of the loans here if the adviser defaults.
The total of loans marked in St James's Place's accounts as “underperforming" was £44.6mn at the end of December 2023, up from £17.7mn the prior year.
The interest rate on the loans is levied at 3.5 per cent above the Bank of England base rate, on declining balances.
At the present 5.25 per cent base rate, the interest rate charged is 8.75 per cent.
That £44.6mn figure will relate to the parts of the loan book which are not securitised.
With regard to how St James's Place decides a debt should be classified as non performing, a statement in the accounts reads: “The significant increase in credit risk which triggers the move from performing to underperforming for these assets is when they are more than 30 days past due, in line with the presumption set out in IFRS 9 Financial Instruments, or when the loan facility has expired and is in the process of being renegotiated.
"Business loans to partners are classified as non-performing when the loan is to a partner who has left the St. James’s Place Partnership, or when the loan is to a partner whom management considers to be at significant risk of leaving the partnership and where an orderly settlement of debt is considered to be in question.”
With regard to the general state of health of the book of loans, a statement in the accounts reads: “Loans and advances are managed in line with the group’s secured lending policy.
"Loans are secured on the future renewal income stream expected from a partner’s portfolio, and loan advances vary in relation to the projected future income of the relevant partner.
"Outstanding balances are regularly reviewed and assessed on a conservative basis. Support is provided to help partners manage their businesses appropriately.”
The typical loan repayment period is 10 years. The interest payments on the debt are tax deductible, the repayment of the principle is not.
St James's Place previously told FT Adviser that the loans help “succession planning” at the firm.
david.thorpe@ft.com
