st. james’s place wealth management
DESCRIPTION
ST. JAMES’S PLACE WEALTH MANAGEMENT. DECEMBER 2008. Current trading update Strategy The Partnership Investment Management Our clients Our market Analyst following History & Board Foundation. Page No: 2 20 26 35 44 50 58 60 63. Contents. - PowerPoint PPT PresentationTRANSCRIPT
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ST. JAMES’S PLACEST. JAMES’S PLACE
WEALTH MANAGEMENTWEALTH MANAGEMENTDECEMBER 2008
2
ContentsContents
Current trading updateStrategyThe PartnershipInvestment ManagementOur clientsOur marketAnalyst followingHistory & BoardFoundation
Page No:
2
20
26
35
44
50
58
60
63
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Current trading updateCurrent trading update31 December 200831 December 2008
4
Full Year Results 2008Full Year Results 2008
Highlights:• New Business (APE) of £419.0 million• Total single investments of £3.1 billion• Continued 95% retention of FUM• FUM at £16.3 billion with net inflows• Partnership numbers 1,340 up 7%• EEV new business profit £123.5 million• EEV operating profit at £204.3 million• EEV net asset value of 232.4 pence
5
New business by quarterNew business by quarter
69.4
97.8 98.791.5
115.7122.0
85.1
101.9101.9 103.1113.2
96.4
20
40
60
80
100
120
140
Q1 Q2 Q3 Q4
£’m APE (Annual premiums plus 10% of single premiums)
2007
2006
2006 over 2005 +57% +54% +63% +59%2007 over 2006 +41% +26% +20% +10%2008 over 2007 +1% +5% +0% -15%
2008
6
Investment new business by Investment new business by quarterquarterSingle premiums
2007
2006
2006 over 2005 +71% +47% +49% +36%2007 over 2006 +22% +39% +30% +16%2008 over 2007 -4% -4% -20% -24%
2008
512.2444.7
476.0432.3
593.5578.4
664.5
528.6
449.0461.3
633.6
507.7
0
100
200
300
400
500
600
700
Q1 Q2 Q3 Q4
£’m
7
Pensions new business by Pensions new business by quarterquarter
£’mSingle premiums
2007
2006
2006 over 2005 +83% +78% +106% +147%2007 over 2006 +105% +52% +27% -4%2008 over 2007 +9% +10% +19% -3%
2008
286.2
187.8
113.0
161.0
275.8
238.0244.8231.7
267.4282.4268.4
251.5
0
50
100
150
200
250
300
350
Q1 Q2 Q3 Q4
8
Pensions new business by Pensions new business by quarterquarter
£’m
Regular premiums
2007
2006
2006 over 2005 +31% +80% +132% +93%2007 over 2006 +83% -10% -7% +18%2008 over 2007 +7% +37% +48% -4%
2008
17.616.6
21.8
9.3
20.6
15.5
19.717.0
19.722.8
26.9
18.3
0
5
10
15
20
25
30
Q1 Q2 Q3 Q4
9
Funds under managementFunds under management
0
5
10
15
20
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
+31%
-6%+10%+47%
Fu
nd
s £
’bn
+34%+20%
+25%
+29%
+18%
+24%
16%p.a. compound growth over the last5 years and 18%p.a. over 10 years
-10%
10
Fund flow informationFund flow information
FUM at start 18.2 15.4
New money invested 3.0 3.1Investment return (3.6) 0.9
17.6 19.4Regular income withdrawals/maturities (0.4) (0.3)
Surrenders / part surrenders (0.9) (0.9)
FUM at close 16.3
18.2 Implied surrender rate as %of average FUM 5.2% 5.1%
£’bn 2008 2007
11
Analysis of life, pension & unit Analysis of life, pension & unit trusttrust
pre-tax operating profitpre-tax operating profit
New business contribution
123.5
150.9
Profits from existing business
- expected 80.5 77.7
- experience variance 16.9 16.2
- operating assumption changes
(0.9)
(2.8)
Investment income 4.9
6.9
Operating profit 224.9
248.9
20082008£’m 20072007
12
Pre-tax EEV profit
Life & pension 174.1 189.9Unit trust 50.8
59.0Other operations (20.6) (4.2)
Total Operating profit 204.3 244.7
Investment variance (320.6) (14.5)Economic changes 0.4
0.2
Pre-tax result (115.9) 230.4
£’m 2008
2007
13
Final dividend of 2.55 pence maintained
DividendDividend
14
Analysis of adjusted post tax Analysis of adjusted post tax profitprofit
Net annual management fee 122.2 123.2Unwind of surrender penalties (44.4) (44.6)New business strain (10.0) (7.7)Establishment expenses (72.2) (67.3)Investment income 10.1 10.5Other 18.4 11.8
Underlying cash flow 24.1 25.9One off - 7.2
24.1 33.1
£’m 2008
2007
15
Analysis of underlying post tax Analysis of underlying post tax cashflowcashflow
£’ m 2008 2007
Arising on in force business 91.4 84.7Arising from new business (67.3)
(58.8)
24.1 25.9
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Year end capital positionYear end capital position
£’m LifeOtherRegulated
Other
Total
Solvency position
Solvency net assets 151.9 19.3 88.8 260.0
Solvency requirement 41.1 14.6
Solvency ratio 370% 132%
17
Year end capital positionYear end capital position
£’m LifeOtherRegulated
Other
Total
Analysis of solvency net assets UK Govt. gilts 23.0 - - 23.0Other Govt. backed debt 26.3 - -
26.3AAA rated money market funds 137.0 15.6 20.5
173.1Bank balances 26.3 20.1 15.3 61.7Fixed assets - - 12.2 12.2Actuarial reserves (32.2) - - (32.2)Other assets / liabilities (28.5) (16.4) 40.8 (4.1)
Solvency net assets 151.9 19.3 88.8 260.0
Adjustments to IFRS basis 256.3 (8.3) - 248.0
IFRS net assets 408.2 11.0 88.8 508.0
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Group expensesGroup expenses
20082008£’m 20072007Paid from policy margins
Partner remuneration 176.9 191.8
Investment expenses 59.6 68.4
3rd party administration 27.8 24.7
Direct expenses
264.3
284.9
Other production related costs 42.2 44.4
Establishment expenses 97.6 91.9
Contribution from 3rd party product sales
(13.1) (14.4)
126.7 121.9
391.0 406.8
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Uniquely placed in growing Uniquely placed in growing marketmarket
• Proven growth record over longer term• Organic growth, not acquisitive• Niche market• Dedicated distributor with manufacturer
margins• Positive reputation (wealth manager awards)• Successful investment approach• Not exposed to industry issues• Clear focus on business model• Longer term demographics are positive (with
fewer advisers)
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OutlookOutlook• Respected and well positioned brand / business
• Loyal client base (Partners and investors)• 3rd consecutive year of strong recruitment• Opportunities for further growth in Partnership
(RDR, reputation, city redundancies)• Investment Management Approach more resilient• Strong solvency position• Strong market for advice• Economic uncertainty / stock market weakness• But strong / early growth on market recovery• Uniquely placed business
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StrategyStrategy
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St. James’s Place: overviewSt. James’s Place: overview• UK wealth management company• FTSE 250 market cap c £1bn• Target mass affluent / high net worth market• UK centric• Dedicated distribution through our own wealth managers• Strong retention of clients and Partners• Focus on areas where management adds value
– Outsource administration– Outsource investment management– Joint ventures for non-core activities
• Minimise shareholder financed overheads• £16.3bn funds under management and a further £1.5bn
under advice• Charitable Foundation• Simple Group structure
23
Structure of St. James’s Structure of St. James’s PlacePlace
6060%%
LLOYDSLLOYDSLLOYDSLLOYDS
100100%%
ManufacturingManufacturing DistributionDistribution
St. James’s Place
SJP GROUP
Wealth Management
SJP Life andUnit Trust Companies
SJP Partnership
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The growth modelThe growth modelTarget
15 – 20% pa
New BusinessNew BusinessNew BusinessNew Business
CAPACITYCAPACITYNo of PartnersNo of Partners
CAPACITYCAPACITYNo of PartnersNo of Partners
PRODUCTIVITYPRODUCTIVITYNew BusinessNew Business
Per PartnerPer Partner
PRODUCTIVITYPRODUCTIVITYNew BusinessNew Business
Per PartnerPer Partner
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Our wealth management Our wealth management servicesservices
• Pensions• Investment• Estate protection• Estate creation• Inheritance tax
solutions• ISAs• Offshore bonds
• Mortgages• Employee benefits• Trust & Estate
planning• Protection• General insurance• Annuities• Portfolio
management• Banking• Stakeholder• Private medical
insurance
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What we don’t haveWhat we don’t have• No with profits• No guaranteed annuity options• No solvency assets invested in
equities• No final salary pension scheme• No longevity risk• No split level trusts• No derivative-based “precipice” funds• No mortgages / sub prime• No monoline reassurance• No hybrid debt
27
The PartnershipThe Partnership
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The PartnershipThe Partnership
• High quality self-employed team of 1,340 advisers• Only experienced advisers: average 17 years• Bring existing client bases• High productivity – 2.5 x industry average• Average age of Partner – 48 years old• Male : Female – 90 : 10• Focus on higher value clients• Growth in specialisms• Stability (including retirees) - 97% p.a. retention by value (APE) - no single Partner represents over 1% of APE• Academy starting to bear fruit
(Own dedicated distribution)
29
Number of PartnersNumber of Partners
0
200
400
600
800
1000
1200
1400
1600
19981999200020012002200320042005200620072008
Associate Partner Partner Double Partner +
Nu
mb
er
of
Part
ners
+10%+9%
+8%+7% -2% +2% +1% +2% +5%
+8%+7%
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PartnersPartners ClientsClients
7%
23%
13%
3%
22%
15%
9%
3%
2%
6%
24%
14%
4%
25%11%
11%
3%
2%
Overseas Clients: 3%
Geographic Geographic DistributionDistribution
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Changing face of the Changing face of the PartnershipPartnership
£250-750k14%
£750k+2%
<£50k33%
£50-250k51%
2004
2008
(APE)
£250-750k33%
£750k+8%
<£50k15%
£50-250k44%
32
Partners by Age BandPartners by Age Band
Existing Partners
<356%
35-4530%
45-5540%
55-6522%
65+2%
New Partners
<3520%
35-4539%
45-5534%
55-657%
65+0%
33
The AcademyThe Academy
•First 8 academy members join the Partnership
•45 people currently training in the academy
•Average age 39
•Two additional intakes of 15 to 20 planned for 2009
•Refining process as we progress
•Successful event targeting city fall out/ other events planned
34
Benefits of our own Benefits of our own distributiondistribution
• New business more predictable• Spread of production• Less exposed to market pressures• Greater control over quality of new business• Better retention of business• Our clients – cross selling opportunities• Control over brand• Can incentivise distribution• Strong client advocacy
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Why join SJP?Why join SJP?•Brand recognition for preferential, trusted advice•Guarantee•Unique exit /retirement options•Meritocracy•Client service focus (SJP culture)•Financial and regulatory stability of principle•Investment management approach
36
Investment ManagementInvestment Management
37
Investment management Investment management approachapproach
Investment CommitteeInvestment Committee
Select, monitor and changeSelect, monitor and changeinvestment housesinvestment houses
19 investment management 19 investment management houseshouses
(select individual managers)(select individual managers)
Stamford Associates (Consultants)
38
External investment External investment managersmanagers• Core managers – managed funds
– AXA Framlington – GAM – Invesco Perpetual– Jupiter– Newton– Polaris– Schroder Investment Management– Taube Hodson Stonex Partners
• Specialist managers– Aberdeen (Far East, Ethical)– BGI (Alternative Assets)– Insight (Tracker)– Invesco Perpetual (Corporate Bond)– Invista (Commercial Property)– Oldfield / Thornburg (High Octane)– Reed Connor Birdwell (North American)– RWC Partners (UK Growth)– State Street (Cash)– S W Mitchell (Continental European)– Wellington (Gilts & International Bond)
39
Advantages of investment Advantages of investment approachapproach
• No in-house investment managers – no conflict of interest
• Selection of managers (“best of breed”) – wholesale purchasing power
• Spread - 8 core balanced funds with different styles
• Use only genuinely “active” managers• Monitoring - continuous analysis plus
quarterly presentations• Changing managers
– ease of change– improved persistency
40
The role of StamfordsThe role of Stamfords
• Stamfords work with the Investment Committee to help achieve superior investment results over time.
• They provide:– Dedicated research and advice– Manager research & assessment– Regular monitoring of managers– Regular portfolio analysis– Advice on changing managers
41
Funds under managementFunds under management
0
5
10
15
20
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
+31%
-6%+10%+47%
Fu
nd
s £
’bn
+34%+20%
+25%
+29%
+18%
+24%
16%p.a. compound growth over the last5 years and 18%p.a. over 10 years
-10%
42
Funds Under Management: Shown by Asset Class and Funds Under Management: Shown by Asset Class and RegionRegion
Cash and Other Assets14%
European18%
US9%
Far East10%
International4%
UK38%
Property4%
PABs/FABs3%
43
Relative investment performance Relative investment performance of funds under management – 1 of funds under management – 1
yearyear
16% 14%
4%
20%12%
8%3%
15%
6% 8%
12% 15%
15%
7%
5%
23%
9%
1%
10%
24%
22%
34%
28%
10%
11%
39%23%
38%13%
49% 47% 45%
73%
57%
49%
61%
46%
55%
20082008 2006 2005 2004 2003 2002 2001 2000 1999
1st
2nd
3rd
4th
14%
58%
2007 2006 2005 2004 2003 2002 2001 2000 1999
44
Relative investment performance Relative investment performance of funds under management – of funds under management –
rolling 5 yearrolling 5 year
12% 8%4% 4% 2%
10% 8%13%
17%
9%12%
8%2%
3%
8% 8%
16%15%
13% 13%
8%14% 20%
15% 19%
10% 5%
67% 67%
80% 79% 76%68% 65% 61% 63%
2008 2007 2006 2005 2004 2003 2002 2001 2000
1st
2nd
3rd
4th
2008 2007 2006 2005 2004 2003 2002 2001 2000
45
Our clientsOur clients
46
Our clientsOur clients
• 82,000 wealth management clients• Average age: 60• Average funds under management:
£180k• Average duration as SJP client: 7.4 years• Strong clients advocacy• Clients vote us Wealth Manager of the
Year
47
Geographic Distribution of Client FUMGeographic Distribution of Client FUM
5%
19%
12%
4%
24%18%
10%
3%
1%
Overseas Clients 4%
48
FUM by Value of ClientsFUM by Value of ClientsFum by Client Band
>£1m14%
£50k to £1/4m40%
<£50k18%
£1/4m to £1/2m17%
£1/2 to £1m11%
49
New and Retained Clients by Age BandNew and Retained Clients by Age Band
New Clients by Age Band
<308%
30-4017%
40-5025%
50-5511%
55-6012%
60-6511%
65-706%
70+10%
Existing Clients by Age Band
<303%
30-4020%
40-5026%
50-5510%
55-6010%
60-6510%
65-707%
70+14%
50
Clients vote us Wealth Manager Clients vote us Wealth Manager of Yearof Year
51
Our market
52
Our marketOur market
• The market is big• Favourable demographics• The tax burden is increasing• UK high net worth individuals want
face to face advice
53
The SJP Market PlaceThe SJP Market PlaceUK Individuals with between €50k and €3m of liquid assets
6,772,000
7,876,102
8,533,210
9,109,6028,734,968
8,396,304 8,276,3098,732,890
9,256,186
9,927,622
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Year
Nu
mb
er
of
Ind
ivid
ua
ls
Source: Datamonitor Global Wealth Model
54
The SJP MarketplaceThe SJP MarketplaceAmount of liquid assets held by UK individuals with between €50k and €3m
€1,201bn
€1,351bn
€1,545bn
€1,670bn €1,637bn €1,603bn €1,597bn
€1,700bn
€1,818bn
€1,967bn
-
500
1,000
1,500
2,000
2,500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Year
€b
n
Source: Datamonitor Global Wealth Model
55
The SJP OpportunityThe SJP Opportunity
•£78bn held in Stocks & Shares ISAs (HMRC as at 5/4/2008)
•Around £10bn new money into Stocks & Shares ISAs in 2008(IMA Dec 2008 Data and ABI End Q3 data extrapolated)
•SJP £0.5bn – around 5% share
56
The SJP OpportunityThe SJP Opportunity
• £163bn in cash ISAs (Building Society Association December 2008)
– Low interest rates– Can be transferred
• Average interest rate on instant access accounts 0.81% (Bank of England, 4 Feb 2009)
“savers have lost an estimated £27 billion in income since December 2007, when Bank rate stood at
5.5%”(The Times, 3 Feb 2009)
57
The SJP OpportunityThe SJP Opportunity
• Pensions– 52% of open defined benefit schemes
expect to close to new members within 5 years National Association of Pension Funds, 23 January 2009
– More than 59% of UK workers are not confident that they will have enough money during retirement Club VITA survey
– Almost 1.7m are relying on property to fund their retirement USwitch
58
The SJP opportunityThe SJP opportunity
The average UK high net worth … is particularly focused on tax optimisation and his financing needs, and has a
markedly lower knowledge of financial products than his European counterparts. Face to face relationship management is very important to him, and he is
reliant on recommendations from someone he knows in choosing his wealth manager.
Datamonitor – Wealth Management in the UK, 2008
59
Analyst followingAnalyst following
60
• Craig Bourke• Roman Cizdyn• Rakshit Ranjan• Raghu Hariharan• Colin Simpson• James Pearce• Blair Stewart• Barrie Cornes• Eamonn Flanagan
• Blue Oak Capital Ltd• Blue Oar Securities• Clear Capital• Fox-Pitt Kelton• Goldman Sachs• JPMorgan Cazenove• Merrill Lynch• Panmure Gordon• Shore Capital
Analyst Analyst followingfollowing
61
History & BoardHistory & Board
62
HistoryHistory1992 Management team left Allied Dunbar Assurance, UK’s largest unit-linked assurer (now part of Zurich Financial Services)
J. Rothschild Assurance Group launched (backed by Scottish Amicable and Lord Rothschild)
1997 J. Rothschild Assurance Group reversed into St. James’s Place Capital plc (listed on London Stock Exchange)
2000 HBOS acquired 60% interest in St. James’s Place J. Rothschild Assurance Group rebranded St. James’s Place
2009 Lloyds Banking Group assume holding as part of HBOS transaction
63
Board of directorsBoard of directors
ChairmanMike Wilson
Executive directorsDavid Bellamy (CEO)Andrew CroftIan GascoigneDavid Lamb
Non executivedirectorsSarah BatesSteve Colsell (Lloyds)Jo Dawson (Lloyds)Derek NethertonMike PowerMichael SorkinRoger Walsom
64
Foundation
65
St. James’s Place FoundationSt. James’s Place Foundation• Foundation established in 1992 based on simple belief
that those of us who have should give to those who have less or who suffer in some way
• Supporting the Foundation is a key cornerstone for the SJP culture
• Every employee and Partner is encouraged to take part in, and contribute towards fund raising events
• Over 80% of the community make monthly payments by deed of covenant
• Company matches funds raised• In 2008 raised £2.5 million in a record year• Major grants made to Children’s Trust, Help the Hospice,
Teenager Cancer Trust and Hope & Homes• Hundreds of small grants are made each year
6624 February 2009