A number of St James's Place advisers are concerned about the valuations of their practice, particularly in the context of the level of debt many of the advisers took on to expand their firms.
In an email seen by FT Adviser, one adviser directly contacted the company’s chief executive Mark Fitzpatrick with their concerns.
The adviser wrote: “To what degree do SJP believe that the partner valuations provided reflect achievable figures? Can you please outline, practically, what support is available?
"Are SJP raising funds to support the market? Are SJP willing to act as a buyer of last resort? Is there a consistency across practice sizes in how support is provided?”
In response to the above queries, a representative of St James's Place said: “Business Sale and Purchase (BSP) support has benefitted partnership succession planning, client service continuity and business growth for many years. Providing continuity of client servicing if and when advisers retire and being able to occasionally move client relationships around the partnership is really important to SJP.”
They added: “Valuations provided through BSP support have always been for guidance only, with the price of any purchase a matter to be agreed between the buying and selling partners.
"The final transaction price takes into account the specific characteristics of the practice, but also the commercial environment, which will naturally vary.
"After a strong period for sale prices, the external environment has been more challenging recently – the recent economic environment resulting in tighter prices, which have sometimes been lower than the valuation metric.
"However, SJP believes running an advice business continues to offer an attractive commercial opportunity for partners and expects that prices will, over time, begin to reflect the possible improvements in the economic environment and in customer sentiment.”
The St James's Place representative added that the company is sometimes willing to act as a buyer of last resort if an adviser is in financial distress, but added that this is only in cases where “welfare” issues are at play.
SJP has no plans to raise additional funds to buy practices.
Debts
FT Adviser previously reported that partners at the company have built up debts, either directly to St James's Place or to banks with loans guaranteed by the FTSE 100 wealth manager, of hundreds of millions of pounds.
The interest rate on the loans is 3.5 per cent above the base rate, and partners must repay 10 per cent of the principle each year, currently that equates to 18.75 per cent a year on a declining balance.
The loans are used to buy the practices or books of business of retiring or exiting St James's Place partners. A department exists within St James's Place, known as the business sale and purchase team to facilitate such transactions.
The most recent set of accounts for St James's Place showed the company has declared £44mn of the loans to be underperforming, from a total loan book of around £900mn.
