St James’s Place has seen short-term profit hit by an “unplanned and frustrating” rise in its Financial Services Compensation Scheme (FSCS) levy.
The firm’s first-half results for 2020 revealed its contribution to the FSCS levy increased “substantially and disappointingly” over the first half of the year to £27.8m, up from £16.1m in H1 2019 and £22.3m for the year to 31 December 2019.
An additional £4.5m of fees took the firm’s overall spend on the FSCS levy and regulatory fees to £32.3m in H1.
It said the “significant” FSCS levy increase was over and above the 15% rise it expected at the beginning of the year.
‘Unplanned and frustrating’ rise in FSCS levy
As a result, the firm’s underlying cash position for the six-month period stood at £114.4m, down from £125.1m for the six months to 30 June 2019.
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“Over the medium to long-term, our ability to both attract and retain new client investments, and thereby build group funds under management, will result in increased cash profitability,” SJP said in the results.
“However, in the short-term our profit has been impacted by a more challenging new business environment together with a planned increase in our investment expenditure and the unplanned and frustrating rising costs associated with the Financial Services Compensation Scheme levy.”
AUM drops slightly on Covid hit
SJP reported a slight drop in its assets under management from £117bn to £115.7bn during the first half of the year as the Covid lockdown affected the way it conducted business.
Gross inflows over the period amounted to £7.3bn, down slightly from the £7.4bn in 2019.
Gross new business for SJP’s discretionary manager Rowan Dartington was £213m, 27% lower than in the first half of 2019. Its funds under management dropped by 7% to £2.6bn which SJP said was due the negative impact of investment market movements.
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CEO expects Q3 flows to be lower
SJP chief executive Andrew Croft (pictured) said he anticipates a period of recuperation in the UK as lockdown measures continue to be eased. But based on the firm’s experience in July, it expects new business flows for Q3 to be similar or slightly lower than in Q2.
“We are then hopeful that, as the country returns from the summer break refreshed and ready for a return to the office, and supported by the high levels of client service provided by the Partnership since lockdown, we will see momentum build through the final quarter.
“Overall then, 2020 is set to be another year of major net inflows as our business model proves resilient in a really difficult period. We are more confident than ever that we will deliver growth over the longer term given the strengths of St James’s Place and the dynamics of our market.”
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