A NN UA L R EPORT A ND ACCOUN TS 2019
We are St. James’s Place
We are a leading FTSE 100 wealth
management group that puts long-term
relationships and advice that clients trust
at the heart of everything we do, giving
peace of mind in an uncertain world.
Clients
Client retention rate
733,000
97%
Total St. James’s Place advisers
Adviser retention
4,271
Up 8%, supported by 5,637 Partnership
support staff, and 2,634 employees
93%
Total amount raised since 1992
£93.1m
(2018: £81.0 million)
£93.1m is the total amount
raised for good causes
through the St. James’s Place
Charitable Foundation since
1992
See page 68 for further
information
+15%
93.1
81.0
71.0
46.4
54.0
2015
2016
2017
2018
2019
What we do
We plan, grow and protect the financial
futures of businesses and individuals
across the UK by providing an end-to-end
wealth management proposition. We offer
clients access to our full range of wealth
management products and services
exclusively through face-to-face advice
delivered by the Partnership, our
4,271-strong workforce of advisers.
Client investments are managed using our
distinctive Plan, Design, Review approach,
which focuses on tailoring investments to
match clients’ financial goals and draws
on the skills of the best investment
managers from around the globe.
Employees who feel proud
to work at St. James’s Place
94%
Employee engagement in
community programmes
96%
Percentage of profit before
tax used to support our
communities and good causes
4%
ST. JAMES’S PLACE PLC 1
Other Information
Shareholder Information ............... 212
How to Contact us and Advisers ... 213
St. James’s Place
Partnership Locations .................... 214
Glossary of Alternative
Performance Measures ................. 216
Glossary of Terms ........................... 219
Financial Statements
Independent Auditors’
Report to the Members
of St. James’s Place plc ................. 132
Consolidated Financial
Statements under International
Financial Reporting Standards .... 138
Parent Company Financial
Statements under Financial
Reporting Standard 101 ................ 196
Supplementary Information:
Consolidated Financial
Statements on a Cash
Result Basis (Unaudited) .............. 203
Contents
Strategic Report
Chief Executive’s Report .................... 4
Governance
Board of Directors .............................. 74
Market Overview ................................... 8
Chair’s Report ..................................... 76
Our Business Model .......................... 10
Corporate Governance Report ...... 78
Report of the Audit Committee ..... 89
Report of the Risk Committee ....... 95
Report of the
Nomination Committee ................... 99
Report of the
Remuneration Committee ............ 102
Directors’ Report .............................. 126
Statement of Directors’
Responsibilities ................................ 129
Our Strategy ......................................... 12
Clients ............................................... 14
The Partnership ............................. 16
Investment Management ........... 18
Financials ........................................ 20
People ............................................... 22
Our Social Value Report ................... 24
Chief Financial Officer’s Report .... 38
Financial Review ................................. 42
Risk and Risk Management ............ 60
Section 172(1) Statement ................ 66
Approval of the Strategic Report .... 67
St. James’s Place Charitable
Foundation .......................................... 68
2019 Performance
Highlights
St. James’s Place (SJP) remained resilient in 2019, continuing to report
substantial gross and net inflows in challenging market conditions.
Underlying cash result
£273.1m
(Down 12% from £309.0 million in 2018)
Gross inflows
Net inflows
Dividends per share
£15.1bn
(Down 4% from £15.7 billion in 2018)
£9.0bn
(Down 13% from £10.3 billion in 2018)
49.71p
(Up 3% from 48.22 pence in 2018)
Funds under management
IFRS profit after tax
£117.0bn
(Up 22% from £95.6 billion in 2018)
£146.6m
(Down 16% from £173.5 million in 2018)
+22%
117.0
90.7
95.6
75.3
58.6
2015
2016
2017
2018
2019
European embedded value (EEV)
operating profit
£952.0m
(Down 5% from £1,002.0 million in 2018)
The Underlying cash result and EEV operating profit are alternative performance measures (APMs). The Glossary of Alternative Performance Measures on pages 216 to 218
defines these APMs and explains why they are useful. The Underlying cash result is reconciled to International Financial Reporting Standards (IFRS) on pages 47 and 48.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
“ Our vision is to create a vibrant place to work
where difference is recognised as a strength
and where talented people can flourish and
achieve their highest potential.”
VICKI FOSTER, Head of Inclusion and Diversity
2
01
Strategic Report
Chief Executive’s Report ......................... 4
Market Overview ........................................ 8
Our Business Model ............................... 10
Our Strategy .............................................. 12
Clients .................................................... 14
The Partnership .................................. 16
Investment Management ................ 18
Financials ............................................ 20
People ................................................... 22
Our Social Value Report ........................ 24
Chief Financial Officer’s Report ........ 38
Financial Review ...................................... 42
Risk and Risk Management ................ 60
Section 172(1) Statement ................... 66
Approval of the Strategic Report ........ 67
Our vision for a people business
St. James’s Place is a leading wealth manager
whose success is built on establishing long lasting,
highly personal relationships. We believe that being
the best place to have a career is reliant upon
creating a truly inclusive and diverse environment
where broad perspectives are embraced and
people can be themselves.
Our vision is to create a vibrant place to work
where difference is recognised as a strength and
where talented people can flourish and achieve
their highest potential. We know that talent is not
dictated by race, ethnicity, gender or gender
identity, disability, sexual orientation, age, religion,
social class or background.
We understand that diverse teams and inclusive
environments provide the foundations for creativity,
innovation and business growth. That’s why we will
aim to attract, retain and develop the best people
from all walks of life and from all backgrounds.
Our focus is on building a community with equal
opportunities where everyone has clarity of
purpose and feels valued.
See pages 22 to 23 and 29 to 31 for further
information
S T. J A M E S ’ S P L A C E P L C
STRATEGIC REPORT
3
A N N U A L R E P O R T A N D A C C O U N T S 2 0 19
w w w. s j p . c o . u k
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 4
Chief Executive’s Report
Introduction
Last year was challenging for the UK wealth
management sector with investor sentiment
being impacted by the uncertain macro-
economic indicators, the US/China trade
dispute, and the domestic political
environment. Therefore, I am pleased to
report a solid set of results, once again
demonstrating the resilience of the
St. James’s Place business.
Gross new inflows for the period, at
£15.1 billion, were some 4% lower than
2018, while strong retention of client funds
contributed to net inflows of £9.0 billion,
equivalent to some 9% of opening funds
under management. These positive net
flows, together with the impact of positive
investment markets, resulted in closing
funds under management of a record
£117.0 billion, up 22% since the beginning
of the year.
ANDREW CROFT, Chief Executive
Funds under management
£117.0bn
(2018: £95.6bn)
Gross inflows
£15.1bn
(2018: £15.7bn)
Net inflows
£9.0bn
(2018: £10.3bn)
“ I am pleased to report a
solid set of results, once
again demonstrating
the resilience of the
St. James’s Place
business.”
Business performance
and dividend
Over time, increasing funds under
management will generate increased
returns, but in the short term our profit has
been impacted by the more modest gross
flows relative to the planned higher cost of
our investment in the business to underpin
future growth. The Underlying cash result
for the year at £273.1 million (2018:
£309.0 million) was therefore lower
than the same period last year.
The fundamentals underlying the business
remain strong, so the Board remains
confident in our prospects, supported by a
growing Cash result that will benefit from
the contribution of client investments
attracted in previous years. Given the
progression of funds under management
and our confidence for the future, the Board
proposes a final dividend of 31.22 pence per
share (2018: 29.73 pence per share) making
for a full year dividend of 49.71 pence per
share (2018: 48.22 pence per share), growth
of 3%. This will provide for a pay-out ratio
of 97% against the Underlying cash result,
higher than our stated medium-term aim
of an 80% pay-out ratio.
The final dividend, subject to approval of
shareholders at our AGM, will be paid on
22 May 2020 to shareholders on the register
at the close of business on 17 April 2020.
A Dividend Reinvestment Plan continues
to be available for shareholders.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT Clients
The continued success of St. James’s Place
is built on establishing and maintaining long
lasting, highly personal relationships with
our clients through the St. James’s Place
Partnership. Our aim is to put positive client
outcomes at the heart of everything we do,
with our advisers helping their clients to
fulfil their ambitions and aspirations through
sound financial planning advice, together
with our distinctive investment management
approach, backed by a FTSE 100 company.
From the 39,000 responses we received
from last year’s Wealth Account Survey,
89% of those clients who responded tell
us that they were either satisfied or very
satisfied with their overall relationship with
St. James’s Place. Encouragingly, more
than 93% said they would recommend
St. James’s Place to others, with 54%
suggesting that they had already done so.
Furthermore, when asked to describe our
proposition in terms of value for money,
96% of the clients who responded, said
‘reasonable’, ‘good’ or ‘excellent’. These
results underpin the strong retention of
client investments noted earlier.
We are naturally very pleased with these
responses, but we are not complacent and
have already responded to the feedback
with further improvements to our service
and proposition. In the past year we have
broadened access to the Flagstone cash
management service, which provides a
simple and secure solution for clients
wishing to hold cash savings, and added
new propositions related to lifetime care
plans to help clients ensure care fees can
be met if a need were to arise in the future.
We now have more than 733,000 clients,
an increase of some 51,000 during the year,
and I would like to take this opportunity to
thank all of these individuals for entrusting
us with their long-term investments and
financial planning needs.
Full year dividend
49.71 pence per share
(2018: 48.22 pence per share)
Awards
I am pleased to report that St. James’s Place
has once again received numerous awards.
Two highlights were being voted the Wealth
Management Company of the Year in the
2019 City of London Awards and Best
Wealth Manager in the 2019 Share Awards.
Both awards are voted by members of the
public and I would like to thank our clients
who voted for us.
The St. James’s Place Partnership
After another year of strong recruitment,
the St. James’s Place Partnership now
numbers 4,271, growth of 8%. We continue
to attract experienced high-quality advisers
to the Partnership whilst at the same time
172 individuals graduated from our
Academy and Next Generation Academy.
We continue to invest in the Academies
and there are currently 458 people in the
programme who are not included in the
Partnership numbers but who will graduate
over the coming years.
This sustained growth in the Partnership
provides us with confidence in our ability to
both service existing clients well and attract
new clients to St. James’s Place. However,
the increasing scale of the Partnership
requires us to continue to invest in the
supporting infrastructure. Consequently,
during the year we opened a new office in
Cardiff, and we consolidated the Academy,
our previous City office, and a number of
corporate functions into a new office in
Lombard Street in the City. Both offices
have very good environmental credentials.
We also continue to invest in the
professional development of our advisers
and take pride in the fact that last year
one in four of all new qualified Chartered
Financial Planners were St. James’s Place
advisers. We now have more than 900
advisers with Chartered status across
the Partnership.
The Partnership is a key differentiator for
St. James’s Place and we will continue to
ensure we provide support for our advisers
so that they can, in turn, provide an excellent
service to clients.
5
We are a sound
investment
We are a leading
wealth management
group focused on
delivering value for
all stakeholders.
1.
We are strong: We are a financially
strong, FTSE 100 Group driving
growth underpinned by a resilient
balance sheet.
2.
We are distinctive: We are a
vertically integrated wealth
management business, offering
clients an end-to-end wealth
management proposition.
3.
We are growing: We have a clear
strategy to enable us to capitalise on
the long-term market opportunity in
advice-led UK wealth management
and drive growth in funds under
management.
4.
We are investing: We continue
to invest in our capacity and
infrastructure so we are well placed
to support our clients and advisers,
and capitalise on the market
opportunity ahead.
5.
We are responsible: We are a
business built on trust. That means
we invest and behave in a responsible
manner with a focus on ‘doing the
right thing’ for all our stakeholders.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 6
Chief Executive’s Report continued
Investment markets
2019 saw a strong performance across
major investment markets with a reversal
of the falls experienced in the final quarter
of 2018; the FTSE 100 was up some 12%,
the S&P 500 up 29% and the MSCI World
up 20% over the year as a whole. Against
this backdrop our clients have benefited
from very good returns with all our
portfolios delivering strong growth.
In early June we took the decision to
move the investment management of
our segregated mandate from Woodford
Investment Management (WIM) to a
combination of RWC and Columbia
Threadneedle. This was possible as the
core tenet of our investment proposition is
to appoint managers to specifically manage
our own funds through a sub-advisory
mandate, rather than by investing into
third-party funds. Our segregated mandate
with WIM limited the investments to liquid
stocks and did not allow investments in
unquoted stocks, and consequently our
clients continued to have full access to
their investments.
We also continue to make good progress
on our Responsible Investing approach and
build on our integration of Environmental,
Social and Governance (ESG) factors into
our fund managers’ investment decision
making. It is therefore pleasing that we were
awarded an A+ rating in the latest United
Nations Principles for Responsible
Investment annual assessment. Further,
we continue to influence positive change
elsewhere with some 90% of our investment
managers now signatories to the United
Nations Principals for Responsible
Investment (UNPRI), up from 70% this
time last year.
We recognise that climate change poses a
risk to our business and to client outcomes.
Therefore, in 2019 we became a supporter
of the Taskforce for Climate-related
Disclosures (TCFD) and have committed to
implementing the TCFD framework across
our business.
Investment for growth
We continue our investment in our business
in Asia and Rowan Dartington (RD) with
good progress made during 2019.
Asia reported gross inflows for the year
of £252 million, some 7% lower than
the corresponding period in 2018 having
been impacted by investor concerns over
heightened market volatility, the US/China
trade rhetoric and the demonstrations
in Hong Kong. However, boosted by the
recovery in stock markets, St. James’s Place
funds under management increased to
£934 million, growth of 49% during the year.
It has been a good year for growth in the
SJP Asia Partnership with a net increase
of 34 Partners and advisers taking the total
to 167, a 26% increase since the start of the
year. In addition, there is a strong pipeline of
individuals who have applied to join our Asia
business, boding well for future recruitment.
RD reported gross inflows of £514 million
for the year, marginally lower than last year
by 1%, whilst total funds under management
increased by 24% to £2.81 billion. After
a period of investment, the number of
Investment Executives remained stable
at 54 during the period and is expected to
remain so in the short term as we continue
to focus on increasing the quantum of
funds managed by each executive.
St. James’s Place Asia funds
under management
£934m
(2018: £625m)
Rowan Dartington funds
under management
£2.8bn
(2018: £2.3bn)
Back-office infrastructure
2019 has been a significant period for our
multi-year back-office infrastructure project
as we successfully completed the smooth
migration of all our core UK business to the
new Bluedoor platform. We also completed
all the remaining internal system changes
required during the second half of the
year and are now in the process of
decommissioning the legacy system.
All our core UK business is now processed
on a modern IT platform which provides
us with the scalability to accommodate
our growing business needs and greater
operational resilience, as well as enabling
us to offer an improved service to clients
going forwards.
This was a significant milestone for the
business and the whole project team, both
internal and external, have done a terrific job
on what has been a complex multi-year
project with little disruption.
The St. James’s Place Charitable
Foundation and community
engagement
Embedded in our culture is a desire to
achieve a positive social impact with the
Charitable Foundation being the beating
heart. Our whole community is committed
to supporting the Charitable Foundation
from fund raising events with over 80% of
Partners and employees giving monthly to
the Charitable Foundation from their pay or
earnings.
I am delighted to say that in 2019 we raised
£12.1 million which includes the Company
matching every pound raised. Since 1992,
we have now raised £93.1 million, enabling
the Charitable Foundation to distribute
this amount to a wide variety of charitable
causes. We are very proud that according
to the Association of Charitable Foundations
the St. James’s Place Charitable Foundation
(the Charitable Foundation) is now the sixth
largest Corporate Foundation measured
by giving.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 7
Outlook
Looking ahead, the fundamental financial
planning requirements of individuals remain
considerable whilst, at the same time, the
availability of high-quality professional
financial advice continues to be limited. The
strength, depth and quality of the growing
Partnership, together with the investments
we are making in the business and our
distinctive investment proposition, affords
us real competitive advantage.
The Parliamentary majority following the
December 2019 General Election provides
for greater political stability, which has
translated into improved investor sentiment.
This has consequently resulted in an
increase in activity across the business
with new investments seeing a return
to good growth in the early part of 2020.
Uncertainties remain for the UK and
there are market concerns as a result of
coronavirus, but we are encouraged by this
start to the year which, together with the
strength and scale of our business today,
gives us confidence that we are well placed
to continue to grow.
ANDREW CROFT
Chief Executive
26 February 2020
Amount raised by our community
for the St. James’s Place Charitable
Foundation in 2019
£12.1m
(2018: £10.0 million)
Percentage of Partners and
employees who donate to the
St. James’s Place Charitable
Foundation monthly through
their pay or earning
Over 80%
“ The continued growth
and resilience of the
business does not occur
by chance but rather the
hard work and dedication
of our Partners, their staff,
our management teams
and all our employees
and administration
support teams.”
Alongside the Charitable Foundation, we
also continue to enhance our corporate
footprint in areas such as diversity, inclusion,
volunteering, responsible investing,
sustainability and the environment. An area
of focus is on providing Financial Education
in schools and in 2019 we worked face-to-
face with 9,600 young people through over
300 volunteers giving around 1,800 hours.
We have also recently extended the
programme to provide Workplace Financial
Education. Further details on the Charitable
Foundation and our community engagement
are set out in Our Social Value Report on
pages 24 to 37.
New Non-executive Directors
I am delighted to welcome Rosemary Hilary,
Dame Helena Morrissey, Emma Griffin and
(from 1 June 2020) Lesley-Ann Nash to
the Board as new Non-executive Directors.
All bring extensive experience and a fresh
insight, and I look forward to working
with them.
Our community
The continued growth and resilience of the
business does not occur by chance but
rather the hard work and dedication of our
Partners, their staff, our management teams
and all our employees and administration
support teams. In 2019 the Board has
worked to make explicit the culture and
values that underpin our success: refer to
page 78 for details. On behalf of the Board
and shareholders I would like to once
again thank the entire St. James’s Place
community for their continued hard work,
dedication and commitment to all aspects
of our business.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 8
Market Overview
The UK wealth market
Rising affluent wealth
Total UK retail wealth is large and growing,
with third-party data suggesting that
retail liquid assets alone account for
some £3.2 trillion (as at the end of 2019),
of which around 70% is controlled by those
individuals with £50,000 to £5 million of
liquid assets (source: GlobalData).
This is in addition to wealth in the form
of personal pension assets and insurance
wrapped savings, which are estimated to be
a further £1.2 trillion. The Office for National
Statistics (ONS) suggests that 51% of total
UK personal wealth is concentrated in the
hands of savers between the ages of 45
and 64, with an additional 36% controlled
by those aged 65 and above. This illustrates
the extent of asset decumulation ahead
and the potential scale of intergenerational
wealth transfer to come.
Increasing demand for financial
advice
We estimate that there are c.11.5 million
individuals in our target market in the UK,
and only around half are currently seeking
some form of financial advice. Although
there has been a proliferation of low-touch,
tech-focused propositions in recent years,
demand for personal, face-to-face advice
has continued to grow as individuals with
neither the time, inclination or ability to
manage their financial affairs seek help in
managing their financial affairs. We expect
the demand for face-to-face advice to
continue going forward.
Our core market
St. James’s Place’s core target market
is UK individuals with between £50,000
and £5 million in investable assets.
There were estimated to be 11.5 million
such individuals at the end of 2019,
and this number is projected to grow to
13.2 million by 2023. The liquid assets
of this group are projected to increase
from £2.27 trillion to £2.52 trillion in
this time. While there are no typical
St. James’s Place clients, what all
of them share is a desire for trusted,
face-to-face financial advice
(source: GlobalData).
Factors driving this continued demand for
advice include:
• the decline of defined benefit pension
UK individuals with between £50,000 and £5m
of investable wealth
Million
15
Forecast
schemes;
• the flexibilities and complexities afforded
to individuals via ‘pensions freedoms’;
• the scale and projected growth of the UK
10
5
savings gap;
• the complexity of personal taxation; and
• the desire to transfer wealth across
generations.
While demand for advice continues to
increase, the population of financial
advisers across the UK is forecast to decline
markedly in the years ahead as a significant
number of experienced advisers approach
retirement. As a result, the ‘advice gap’
looks set to widen.
Against this backdrop, St. James’s Place is
established as the leading advice-led wealth
management business in the UK with 4,271
advisers at the end of 2019. It is also a
business with a proven track record of
attracting and retaining experienced
financial advisers, as well as those looking
to establish new careers via our Academy
programmes.
2017
2018
2019
2020
2021
2022
2023
Source: GlobalData
Active membership of private sector occupational
pension schemes by structure
Million
10
Defined benefit
schemes
Defined
contribution schemes
5
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: ONS
Number of retail investment advisers
Thousand
Bank & Building Society
Financial Advisor
Other
50
30
10
12/10 12/11 06/12 12/12 07/13 01/14 10/14 11/15 12/16 11/17 12/18
Source: FCA
<£50,000
£50,000–£250,000
£250,000–£500,000
£500,000–£1 million
>£1 million
32%
Client FUM by value
31 December 2019
5%
22%
19%
22%
ST. JAMES’S PLACE PLCSTRATEGIC REPORT
9
Market trends
The UK wealth management market is constantly evolving, providing both opportunities and challenges to market participants.
Below are five key trends that are shaping the UK wealth management landscape of tomorrow:
5. GREATER FOCUS ON RESPONSIBLE
INVESTING (RI) AND SOCIAL VALUE
Beyond the aims of preserving and/or
growing capital, or generating income,
the prominence of RI is increasing
consumer demand for more
sophisticated ethical, environmental,
social and governance approaches
from investment managers. This trend
is now mainstream, with the Investment
Association (IA) reporting that 26% of
total UK assets under management
are now subject to a RI approach.
This growing consumer awareness
highlights not only the need for wealth
managers to be RI focused, but also the
need for wealth managers themselves
to be regarded as companies that
create and foster broad, social value.
1. CHANGING DEMOGRAPHICS
An ageing UK population means that
lifetime income, investment and pension
savings may have to last much longer
than in the past. Meanwhile, the decline
of defined benefit pension schemes in
favour of defined contribution schemes
is placing greater responsibility on
individuals to provide for their retirement
savings. At the other end of the scale,
young adults entering the workforce are
likely to have lower levels of investment
saving compared with prior
generations – due in part to elevated
housing costs and their contributions
to auto-enrolment schemes.
Intergenerational wealth transfer
will therefore become increasingly
important in the years ahead.
2. PERSONAL FINANCE COMPLEXITY
The environment for managing one’s
own personal financial affairs is
becoming ever more complex and
uncertain. At a macro level, slowing
global growth, low inflation, low interest
rates, international trade wars and
protectionism have contributed to
investment decision making becoming
ever more complex. Similarly, at a micro
level, the increasing burden placed on
individuals for retirement funding, a
complicated personal taxation regime,
and changes to the pensions landscape
in recent years have served to heighten
the challenges individuals face when
considering their finances.
3. DECLINE IN THE POPULATION
OF FINANCIAL ADVISERS
Although FCA-approved investment
adviser numbers have recovered from
a low of c.30,600 advisers reported in
November 2015, this upward trend is not
expected to continue. Instead, a number
of commentators suggest that investment
adviser numbers will decline over the
medium term as advisers either retire or
sell their businesses in the face of a range
of external pressures including regulation,
economic volatility and cyber crime.
Amidst a growing need for advice, firms
with a strong record of adviser recruitment
and retention will be well placed to thrive,
as will those able to attract and develop
individuals to become advisers.
4. TECHNOLOGY AND INNOVATION
Across the industry, the deployment of
technology to deliver operational and
administrative efficiency and scalability, to
cater for clients’ preferred communication
channels and to improve their experience,
continues apace. Client expectations are
rising, based on the user experience they
receive from leading online businesses.
This experience is based not only on ease
of interaction, but also the tailoring of
content to the individual. Industry
initiatives such as Open Banking offer the
opportunity for providers to make strides
in this area in the coming years but
establishing client trust remains a clear
barrier for pure technology-driven
investment services.
Opportunities for St. James’s Place
The UK wealth management landscape
is evolving so we must focus on
adapting and enhancing our business
to better serve our clients and advisers
in the years ahead. This means that we
will need to continue to innovate,
whether through the use of technology
or in how we develop our proposition
for advisers and clients of
St. James’s Place, so that we are even
better at forging strong and enduring
relationships. We must also capitalise on
our scale and market position to promote
positive societal change, both through our
influence as a custodian of client
investments and through the broader work
of the Partnership and the entire
St. James’s Place community, to create
real social value.
Find out more in Our Social Value
Report on pages 24 to 37.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 10
Our Business Model
What makes us different
We are a vertically integrated wealth management
business, offering holistic wealth management and
financial planning services, delivered exclusively
through the St. James’s Place Partnership.
Clients
We place our clients at the
centre of everything we do.
This is core to our culture.
733,000
Clients
The Partnership
We promote our trusted face-to-face approach
to financial advice exclusively through the
St. James’s Place Partnership, with whom we
enjoy a close and symbiotic relationship.
4,271
Advisers
St. James’s Place
We offer clients a comprehensive suite of wealth management products
and services, and a distinct investment management approach. We
provide the Partnership with the tools and support for them to build
their businesses and develop long-term client relationships.
£117.0 billion
Funds under management
Social value
Through working as a responsible business, we strive
to positively change lives and build better futures.
We understand that these futures are inextricably
linked to the world around us.
Responsible investment
Environmental sustainability
and supply chain
Inclusion and diversity
Employee wellbeing
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 11
We generate
We enhance
We deliver
We operate a fee-based income model
where we receive fees based on the level
of client funds under management.
Client
wealth
Financial
advice
Assets
invested
Assets
managed
Annual
management fee
based on client
funds under
management
Financial education
and employability
Strategic charity partners
and volunteering
The St. James’s Place
Charitable Foundation
WE ATTRACT
We offer a comprehensive
investment, product and service
proposition that is exclusive to
the St. James’s Place Partnership
and clients, and a support
proposition that allows Partner
businesses to thrive.
WE RETAIN
We forge close, trusted
relationships with our advisers
and make their relationships with
clients our priority. We evolve and
adapt our Investment
Management Approach to
reinforce client outcomes and
improve the adviser and client
experience.
WE IMPROVE
We engage with stakeholders to
better understand the strength of
our proposition as well as areas
for improvement. We develop our
back-office infrastructure and
embrace technology. We provide
Partner-specific support to
underpin business ambitions.
WE INVEST
We sow the seeds for long-term
growth through targeted
investment. We continue to
expand our Academy initiatives,
develop our technology, and
invest in St. James’s Place Asia
and Rowan Dartington.
WE IMPACT
In becoming a responsible
business, we take a long-term
view of how we can positively
change the lives of our clients
and wider society. This is through
growing our investments,
considering our environmental
impact and expanding our
community engagement.
2019 growth in advisers
8%
2018: +8%
Find out more on page 16.
2019 percentage of employees
who feel proud to work at
St. James’s Place
94%
2018: 88%
Find out more on page 22.
2019 dividend growth
3%
2018: +12.5%
Find out more on page 4.
Amount raised for good causes
through the St. James’s Place
Charitable Foundation since inception
£93.1m
Find out more on pages 37 and 68.
Individual charities supported by the
charitable foundation during 2019
1,109
Find out more on page 68.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 12
Our Strategy
Our key business aim
How we achieve this
Our key aim is to attract, retain and grow client funds
under management (FUM) through offering a high-quality
service to the Partnership and clients. We therefore pursue
a simple growth and support strategy, underpinned by a
series of clear and focused strategic objectives.
We have clearly defined growth and support strategies
that enable us not only to attract new client
investments to St. James’s Place, but also ensure we
sustain high client satisfaction and resulting retention
of client assets for the benefit of all stakeholders.
Our key aim
is to grow
funds under
management
£15.1bn
Gross inflows in 2019
Our growth strategy
Our growth strategy for delivering
increasing gross inflows involves:
• Growing the size of the Partnership;
• Improving adviser efficiency; and
• Broadening our client proposition.
96%
2019 retention rate of FUM
Our support strategy
Our support strategy for delivering
sustained retention of FUM involves:
• Delivering high quality service to
advisers and clients;
• Driving consistently good investment
performance; and
• Ensuring we remain a robust and
resilient business that clients trust.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 13
Our strategic objectives
We focus our long-term strategic objectives
around five core areas, all subject to a consistent
and rigorous approach to risk and governance,
and our desire to be a responsible business.
CLIENTS
Deliver positive
outcomes to clients
More on page 14
PEOPLE
Attract, retain
and develop
talent
More on page 22
THE PARTNERSHIP
Grow and develop
the Partnership
More on page 16
Social value
More on page 24
FINANCIALS
Achieve
sustainable
growth in profits
More on page 20
INVESTMENT MANAGEMENT
Increase funds under
management
More on page 18
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 14
Clients
We are delivering positive
outcomes to clients.
Our approach
Putting clients at the heart of everything
we do is core to our culture and enables
us to work together to run a genuinely
client-focused business. We strive to foster
long-term relationships anchored in trust
and mutual respect, where advice is tailored
to our clients’ individual circumstances.
Clients of St. James’s Place have access
to a wealth of financial solutions, including
the provision of funds and investment
portfolios, and expert advice around
retirement planning, intergenerational wealth
transfer, estate planning and protection.
To complement our own range of solutions,
clients also have access to carefully selected
external providers for other services such as
protection, general insurance or mortgages.
Clients benefit from the security of investing
with a business of St. James’s Place’s scale.
We have the capacity to perform in-depth due
diligence on fund managers, third parties, and
alternative investment providers as part of
our Investment Management Approach (IMA)
and we undertake rigorous quality assurance
on the advice delivered by the Partnership.
This gives us the confidence to guarantee
the suitability of advice delivered by the
Partnership, thereby providing clients
with additional peace of mind.
The value of our proposition
We want to help our clients achieve financial
wellbeing and live the life they want. We
firmly believe that the provision of trusted,
long-term face-to-face advice can help to
deliver this, and industry studies show that
people who take advice are financially better
off over the longer term. 1
Our advisers work closely with their clients
to understand all aspects of their financial
and personal goals, including an assessment
of their current financial position, their family
situation, and various aspects around their
attitude to risk. Drawing on this insight and
analysis, our advisers will then develop a
financial plan tailored to meet the client’s
short-, medium- and long-term goals. This
will be designed to utilize the value of their
tax allowances and will be underpinned by
appropriate products and investment
strategies, as well as whatever other
financial, insurance and banking options
might be required to support the client to
achieve their goals.
Importantly, our advisers remain in close
contact with clients over the long term,
helping to guide them on their financial
journey and provide appropriate advice
and intervention in order to better ensure
clients remain on track to achieve their
goals. Advisers are also there to provide
ongoing advice as well as support around
milestones and unexpected events that
may occur throughout a client’s life.
The combination of long-term financial
advice, a long-term investment approach,
and the comfort of having a personal
relationship with a trusted adviser, is one
that helps drive positive client outcomes
and create tangible value for all
St. James’s Place stakeholders.
Costs and charges
We provide an integrated wealth
management service for clients and believe
that the costs and charges we disclose are
fair, clear and transparent. Importantly, we
commission independent experts to
benchmark our costs and charges against
comparable offerings across the UK wealth
management industry, and these find that
St. James’s Place is towards the lower end
of the range when comparing total costs for
the provision of holistic financial planning
and wealth management.
Risk management
To ensure we consistently deliver positive
client outcomes we work hard to identify,
and appropriately mitigate, the risks that our
client proposition fails to meet the needs,
objectives and expectations of our clients,
and that we fail to provide quality, suitable
advice or service to clients. Examples of our
risk management activities in these areas
are as follows:
1. Providing a wealth management solution
that clients value. We strive to
continually evolve and enhance our
client proposition. A key input to this is
our monitoring of direct client feedback,
both formal and ad-hoc, in order to
ensure we understand client sentiment
and changing client needs. Other inputs
include engaging with the Partnership
to gather their views on the evolution of
the client proposition, and examining
the broader market landscape to study
developments that may have relevance
for our clients.
2. Delivering quality advice. We place great
emphasis on ensuring the Partnership
is suitably qualified and experienced
to understand how their clients’ needs
and objectives can be met. We maintain
a robust advice framework, which is
regularly reviewed to ensure it
continually promotes positive client
outcomes. Additionally, we invest
heavily into our business assurance
function which verifies the suitability of
advice given, and we have our business
assurance processes independently
assessed on an annual basis.
Our charges explained
• We charge for initial advice and for
ongoing advice delivered by a
St. James’s Place adviser. Up to 4.5%
of an initial investment is charged for
initial advice and 0.5% per annum is
charged for ongoing advice,
irrespective of which product is
recommended.
• In addition, we levy initial product
charges and ongoing charges for the
product (known as annual product
management charges) and for
managing the investment funds
selected:
– For investment and pension
business the initial product charge
is 1.5%, whereas for ISA/unit trust
business it is 0.5%;
– Ongoing charges vary depending
on the funds invested in; and
– The annual product management
charge is waived for the first six
years for investment and pensions
business. It is charged from the
first year of investment for ISA/unit
trust business.
• If a client chooses to encash an
investment or pension product in the
first six years, there will be an early
withdrawal charge of 1% of the value
of that investment.
Further details of our standard charges
for investment, pensions and ISA/unit
trust business are set out on our
website at www.sjp.co.uk/charges.
1 What it’s worth: revisiting the value of financial advice. International Longevity Centre UK, 2019
ilcuk.org.uk/wp-content/uploads/2019/11/ILC-What-its-worth-Revisiting-the-value-of-financial-advice.pdf
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 15
Social value
Supporting our
vulnerable clients
Recognising a growing need to better help
vulnerable clients achieve positive client outcomes,
St. James’s Place has partnered with the Chartered
Insurance Institute to launch a new Inclusive
Financial Planning qualification. This is aimed at
increasing an employee or adviser’s understanding
and sensitivity to a wide range of vulnerable client
issues, supporting holistic and inclusive financial
planning, and enhancing client outcomes.
The qualification focuses on consumer vulnerability
and corporate responsibility strategies, looking
specifically at:
• analysing the issues and needs that may affect
the provision of financial advice for vulnerable
clients;
• evaluating the appropriate financial planning
advice for vulnerable clients, including that
relating to investments, pensions and protection;
• establishing relevant supervision and oversight
to enable advisers to deliver fair outcomes to all
clients; and
• developing an appropriate business strategy that
includes partnering arrangements with charities
and other groups in order to better support
vulnerable clients.
The development of this innovative qualification,
which comprises three separate assessments and
recommended study time of 150 hours, demonstrates
our commitment to put clients, and their individual
needs, at the heart of everything we do.
Objective: Deliver positive outcomes to an increasing population of clients
Key metrics
Progress during 2019
Client numbers
(thousands)
Client retention
(percentage)
Client advocacy
(percentage that would
recommend SJP to
someone else)
Our business model is based on managing client wealth and so the number
of clients is a key measure of the health of the business. As well as reflecting
past performance, it also indicates future opportunity, as our experience
suggests that over 90% of new business comes from existing clients or their
referrals. As a result, increased client numbers during 2019 is a strong
positive indicator for the future.
Our business is long-term and client retention feeds directly into the financial
results. However, it is also an indication that minimum standards have been
met. We are therefore delighted that retention was again above 95%,
continuing the trend of recent years.
Our reputation is vitally important to our business model and this is best
expressed through the experience of our clients. Our Wealth Account survey
provides an excellent insight into client experience. Responses to the
question ‘would you recommend St. James’s Place to anyone else?’, have
been very positive over time, with the most recent survey indicating that 93%
of clients would recommend SJP.
Our performance
2019
733.0
2018
682.0
2017
633.0
97.0
96.4
96.3
N/A 1
93.0
N/A1
1 Client advocacy data is unavailable for 2019 and 2017, as Wealth Account surveys of our complete client population are undertaken biennially. The next survey will be
conducted in relation to the 2020 Wealth Account.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 16
The Partnership
We are growing and developing
the Partnership.
Our approach
We choose to promote our services
exclusively through the Partnership, a group
comprising 4,271 professional, highly
qualified financial advisers. This reflects the
confidence we have in our advisers’ ability
to build and maintain long-term working
relationships with their clients. Our advisers
look after clients by offering broad and
skilled advice covering financial and tax
planning as well as investment. They also
act as financial life coaches, particularly
for milestones such as retirement and
inheritance planning and in volatile financial
markets. Available when needed to provide
support through unexpected events, they
can trigger action to help clients achieve
their goals and ambitions.
St. James’s Place works hard to support
these client-adviser relationships.
The value of our proposition to
the Partnership
The Partnership represents an increasingly
diverse group of financial advisers spread
across 2,564 separate Partner practices
ranging from small, sole proprietor
businesses to some of the UK’s largest
financial advice firms. Importantly, we give
Partner practices the freedom to organise
their businesses in a way that suits them,
but we provide support to them in areas
such as advice and technical guidance,
marketing and client literature, professional
development, investment and product
solutions, business processing, risk, and
technology.
Our support for Partner practices also
includes a strong business assurance
function to make sure that the advice our
advisers give is suitable, up to date and
appropriate for the client’s needs. In
addition, Partner practices benefit from our
distinctive Investment Management
Approach and their association with a
strong and recognised brand that
guarantees the suitability of the advice they
give when recommending any of the wealth
management products and services
provided by companies in the Group.
Growing the Partnership
Increasing the number of advisers within
the St. James’s Place Partnership is core
to our growth plans and we have three
principal routes to achieving this. We have:
• a dedicated central recruitment team that
seeks to identify experienced financial
advisers across the UK with the right
Our focus for 2020
• Continue to attract high-quality,
experienced advisers to join the
Partnership.
• Expand our Academy programme to
15 annual intakes and graduate 200
advisers (including Next Generation
advisers).
• Improve adviser retention, particularly
new joiners to the Partnership.
• Expand our regional hubs, bringing
together specialist support from our
head office in Cirencester and our
field management team to deliver
enhanced support for Partner
practices.
• Support our Partners to develop
responsible businesses and engage
with society.
skills, experience and cultural fit to
complement the Partnership;
• attracted applications from individuals
referred from Partner practices that are
seeking to grow their own businesses; and;
• our Academy and Next Generation
Academy programmes where we provide
an opportunity for second-careerists or
younger potential advisers, respectively, to
develop as wealth professionals and join
the Partnership with us. Currently we have
four UK centres for our Academies: in
Edinburgh, London, Manchester and
Solihull.
In 2019 we welcomed a net 317 new
advisers to St. James’s Place, representing
growth of 8% in the Partnership. 145 of
these were as a result of experienced
adviser recruitment, while 172 in total
graduated from our St. James’s Place
Academy and Next Generation Academy
programmes during the year. In addition,
56 Partner support staff became fully
diploma-qualified having passed through
our Paraplanning Academy.
In line with our expectations, we enrolled
254 new students into our Academy and
Next Generation Academy in 2019, helping
to underpin our ability to attract and service
clients of St. James’s Place in the years
ahead.
Risk management
Attracting, and then retaining, high-quality
advisers is key to our Partnership growth
ambitions, and so we closely monitor and
mitigate risks to adviser recruitment and
retention. Two such risks and the way they
are managed are as follows:
How we engage
Our communication and engagement
approach with the Partnership has two
dimensions: information that is
delivered directly to them via our
electronic weekly bulletin, special
bulletins on key topics, and our intranet
site; and face-to-face engagement
activity led by St. James’s Place
management. The latter can range from
individual meetings to regional
conferences and our Annual Company
Meeting. We also host regular Partner
Consultation Meetings where we seek
the views of the Partnership on key
topics.
1. Our Partner proposition is compromised
or devalued. We place great emphasis
on engaging with the Partnership in
order to continually develop our Partner
proposition to make it ever more
attractive for prospective and existing
Partner practices.
2. A lack of supply of experienced, qualified
advisers who could join SJP. Having
foreseen the contraction of the UK
financial adviser market and so the
pool of experienced advisers able to
join the Partnership, our Academy and
Next Generation Academy programmes
were established to provide a source
of organic, ‘home-grown’ advisers.
Developing the Partnership
Reflecting our shared objectives, we
commit to providing ongoing support so
that advisers and Partner practices can
grow and develop over time. At its simplest,
this can include providing online, workplace,
or classroom-based professional
development and coaching opportunities
to ensure our advisers remain appropriately
qualified, technically able and equipped
to deliver a first-class service. We also
encourage and provide support for advisers
who choose to pursue further qualifications,
with more than 21% of our advisers having
already progressed to Chartered status, the
‘gold standard’ qualification for professional
financial advisers in the UK.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 17
Social value
Social value
Our promise to financially educate children
Our promise to financially educate children
We pride ourselves in supporting clients to feel
We pride ourselves in supporting clients to feel
confident in their financial future. Our belief in
confident in their financial future. Our belief in
the value of face-to-face advice, combined with
the value of face-to-face advice, combined with
our desire to educate, has driven our financial
our desire to educate, has driven our financial
education programme. For over a decade
education programme. For over a decade
our employees have provided free, unbranded
our employees have provided free, unbranded
face-to-face financial education to primary
face-to-face financial education to primary
school, year 9 and sixth form students. In 2019 we
school, year 9 and sixth form students. In 2019 we
extended this to incorporate the natural expertise
extended this to incorporate the natural expertise
In 2019 we reached 9,672 students through the
In 2019 we reached 9,672 students through the
combined endeavours of 110 advisers and 215
combined endeavours of 110 advisers and 215
employees. Further information is provided on
employees. Further information is provided on
page 37.
page [].
of our Partnership, enabling them to support
of our Partnership, enabling them to support
local secondary schools by delivering one-hour
local secondary schools by delivering one-hour
modules accredited by the Money Advice Service.
modules accredited by the Money Advice Service.
Objective: Continue to grow and develop the Partnership
Key metrics
Progress during 2019
Adviser numbers
Adviser retention
(percentage)
Gross inflows
per adviser
(£’Million)
Without our advisers, we would have no clients. We are therefore pleased to
have delivered growth in line with our long-term aspirations, supported by
Academy graduates and recruitment in Asia. Adviser numbers grew from
3,954 in 2018 to 4,271 in 2019.
Adviser retention reflects advisers’ continuing satisfaction with our
proposition. We are therefore pleased to note that retention has remained at
a high level of 92.5%.
Gross inflows per adviser is a measure of their success as businesspeople,
but also feeds into success for the Group. In 2019 gross inflows per adviser
decreased from £4.0 million to £3.5 million, reflecting the challenging market
conditions which continued in 2019.
Our performance
2019
4,271
2018
3,954
2017
3,661
92.5
93.4
92.4
3.5
4.0
4.0
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 18
Investment Management
We are continuing to evolve
our Investment Management
Approach (IMA).
Our approach
At St. James’s Place we aim to deliver a
distinctive investment proposition that
aligns to and supports the high-quality,
tailored advice provided by our Partnership.
The result provides our clients with the
best opportunity to meet their long-term
financial goals, whilst recognising our
responsibility to leave a lasting and positive
impact on the world we live in.
Our approach provides us with the freedom
and flexibility to access the skills of the best
investment managers around the globe.
We do not employ in-house investment
managers. Instead, our Investment
Committee carefully selects and contracts
with a number of external managers to
manage our range of funds on behalf of our
clients. In doing so, we are able to provide
our clients with unique access to fund
management expertise that is often only
available to large institutional investors or
overseas retail investors.
We draw on the expertise of a large and
diverse team of dedicated investment
professionals within St. James’s Place,
including Rowan Dartington, our specialist
discretionary fund manager, and these
capabilities are further supported by
specialist investment consultancy
firms – including Stamford Associates
and Redington – each contracted for their
expertise in particular investment markets.
Our client investment proposition
Our client investment proposition focuses
on establishing financial goals and mapping
these into a personal financial and
investment journey that evolves as
circumstances change, through the
framework of Plan, Design, Review:
Plan
Our advisers start with a clear focus on their
clients’ goals, building a financial roadmap
to meet short- and long-term objectives.
Design
Advisers then design a tailored portfolio,
taking into account risk, timeframe and
preferences, drawing on our broad range
of investment solutions to match individual
client needs. Our approach to portfolio
construction, overseen by our Portfolio
Committee, ensures that clients hold the
right blend of investments to meet their
identified objectives. Our range of
investment funds draws on the skills of
Our focus for 2020
• Target all of our fund managers
becoming signatories to the UNPRI
so that 100% of our assets are
managed in accordance with UNPRI.
• Develop carbon footprint reporting
across all of our funds.
• Deliver new decumulation investment
solutions that will better support
clients who want to convert pension
savings into an income in retirement.
• Support technology developments to
aid the client investment journey.
the best investment managers around
the globe, in a process overseen by our
Investment Committee.
Review
Once plans have been implemented,
advisers regularly review them with clients
to ensure they remain on track to meet their
goals and that the roadmap remains fit for
purpose, allowing for any changes in
circumstance. This helps to ensure that
clients maintain a long-term investment
mindset and are not swayed by short-term
market events.
Research, analysis and
monitoring
The data below illustrates the breadth of
research, analysis and monitoring
conducted during 2019 by the various
functions that support the Investment
Management Approach, which includes the
Investment Committee, the teams at
Stamford Associates, Redington and the
dedicated investment professionals at our
offices in Cirencester and London.
Fund manager monitoring
meetings conducted in the
UK and overseas
Investment Committee
meetings held during the year
Investment professionals
working exclusively on behalf
of St. James’s Place clients
Years of industry experience
of Investment Committee
members
2019
2018
627
492
22
21
63
59
250+ 240+
How we engage
The role of the Investment Committee
is to ‘manage the fund managers’ on
behalf of our clients. Having selected
the best managers, the Committee
monitors our fund managers to ensure
they continue to meet our expectations,
especially on risk, performance and
their approach to responsible investing.
We interact with our managers
primarily through a programme
of regular, scheduled engagement
meetings with key investment
personnel. These meetings, which
are conducted across the world,
involve our Investment Committee,
the St. James’s Place analyst teams
and our external consultants.
Risk management
Managing risks associated with investment
performance is a key area of focus for us.
1. Managing investment managers:
Through our IMA we continuously
monitor and challenge our fund
managers to ensure that their
behaviours and investment choices
correspond with our expectations of
their mandates, including risk,
performance and approach to
responsible investing. Where these
factors fall below our expectations, we
undertake a further detailed review of
fund manager strategies, and will replace
managers where necessary.
2. Distinct investment mandates: Our
segregated, sub-advisory investment
mandates enable us to better safeguard
client outcomes. Clients invest in
St. James’s Place funds that have
distinct investment mandates compared
to seemingly similar offerings available
via retail fund platforms, differing for
example in such areas as liquidity and
single-stock exposure.
Developing our IMA
During 2019, we placed renewed emphasis
on strengthening the infrastructure and
governance of the investment team to
support the evolution of our investment
approach, while also developing investment
propositions to further enhance the future
client experience.
We have also built on the already well-
established foundations of our approach to
responsible investing (RI), which is an area
of growing interest among clients and
broader society. We have established a
dedicated responsible investing team that,
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 19
Social value
Responsible investing
RI is widely understood as the integration of
environmental, social and governance (ESG) factors
into investment processes. These factors cover a
wide spectrum of issues that traditionally have not
been part of financial analysis yet may now have
financial relevance. Today it is estimated that
around a quarter of all professionally managed
assets around the world take such factors into
account within the investment process in an
explicit and systematic manner.
At St. James’s Place, our IMA takes ESG factors
into account throughout the lifecycle of our clients’
investments. We factor ESG into our pre-investment
process by assessing an investment manager’s
approach to ESG, as well as building it into our
post-investment assessment by reviewing an
investment manager’s on-going monitoring and
engagement process.
Over the last five years, we have seen a marked
improvement in the ESG processes of our chosen
range of investment managers. In 2014, based
on our proprietary assessment process, 33% of
our investment managers were rated ‘good’ or
‘excellent’, but this figure has risen to 70% in 2019.
This, in part, reflects an evolving landscape, but
also the impact of our on-going engagement with
investment managers in promoting robust practices.
combined with a top-down Board-level
commitment to progressing RI, has worked
to embed ESG factors into our manager
selection and monitoring and portfolio
construction processes. As a result of our
engagement, more than four-fifths of our
investment managers are now signatories
to the United Nations Principles of
Responsible Investment, with several
managers becoming signatories during
2019.
Client communication has been another
area of focus as we strive to deliver our
investment messages through more
engaging and relevant content and delivery
channels. We have utilised new technology
to create flexible and simple investment
content that instils confidence and trust
in our investment proposition.
Objective: Increase FUM
Key metrics
Progress during 2019
Gross inflows
(£’Billion)
Net inflows
(£’Billion)
FUM
(£’Billion)
Gross inflows are the gross new
investment and pension business
(principally single premium) received
during the year. We aim to grow gross
inflows by 15% per annum over the long
term. In 2019, gross inflows fell by 4%.
This reflected the challenging market
conditions.
Retention of funds is a result of satisfied
clients and is essential if FUM is
to continue to grow. Net inflows reduced by
13% in the year, largely due to higher stock
markets in 2019 compared to 2018,
meaning outflows were at a higher value.
The profitability measures of the Group are
ultimately driven by the income we earn
from FUM, which has exhibited compound
annual growth of 19% over the last ten years.
Our performance
2019
15.1
2018
15.7
2017
14.6
9.0
10.3
9.5
117.0
95.6
90.7
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 20
Financials
We are driving profitable growth.
Our approach
Our financial business model is
straightforward. We generate revenue by
attracting clients through the value of our
proposition, who trust us with their
investments and then stay with us. This
grows our funds under management (FUM),
on which we receive:
• advice charges for the provision of
valuable, face-to-face advice; and
• product charges for our manufactured
investment, pension and ISA/unit trust
products.
Further information on our charges can
be found in the Clients section on page 14.1
A breakdown of our fee and commission
income, our primary source of revenue
under International Financial Reporting
Standards (IFRS), is set out in Note 4 on
page 153.
Most of the initial and ongoing advice
charges received are offset by
corresponding remuneration for Partners,
and so an increase in these revenue
streams will correspond with an increase in
the associated expense and vice versa. This
means that advice charges are not a major
driver of the Group’s profitability.
Neither are initial product charges, which
are levied when a client first invests into one
of our products. Under IFRS initial product
charges are spread over the expected life of
the investment through deferred income
Gross inflows into FUM
Gross inflows for
most investment and
pension business
(DIR – see page 46 for further detail), and
the contribution to the IFRS result from
spreading these historic charges can be
seen in Note 4 as amortisation of DIR. Initial
product charges contribute immediately to
our Cash result through margin arising on
new business.
The primary source of the Group’s profit is
the income we receive from annual product
management charges on FUM. As a result,
growth in FUM is a strong positive indicator
of future growth in profits. However, most
of our investment and pension products
are structured so that annual product
management charges are not taken for the
first six years after the business is written,
so the ongoing benefit of these gross
inflows into FUM for a given year will not be
seen until six years later. This means that the
Group always has six years’ worth of FUM in
the ‘gestation’ period. FUM subject to annual
product management charges is known as
‘mature’ FUM. More information about our
fees on FUM can be found in Section 1 of
the Financial Review on page 43.
Our income is used to meet overheads,
the ongoing product expenses and to invest
in the business. Overhead expenditure is
carefully managed with clear growth targets
set for the core costs of running the Group’s
infrastructure, which are known as
‘establishment expenses’. Other ongoing
expenses, including payments to Partners,
increase with business levels and are
generally aligned with product charges.
The Group invests in order to:
• continue building adviser capacity and
attracting new funds;
• enhance the Group’s future capability
to grow over the long term through
the Academy, our discretionary fund
management proposition, and
St. James’s Place Asia; and
• develop administration systems and
processes that will accommodate growth,
contribute to future improvements in
Partner and client experience, and reduce
the cost of business processing. Our
most significant investment in this area
is our new Bluedoor administration
platform. Final migrations during 2019
mean we now administer all of our core
UK business on Bluedoor.
Performance measurement
Whilst our financial business model is
straightforward, the impact of having a
life insurance company at the heart of
the Group results in accounting complexity
under our IFRS statutory reporting
framework. For this reason, we continue,
in our Financial Review on pages 42 to 59,
to supplement IFRS information with the
disclosure of alternative performance
measures (APMs). Our key APMs are the
Cash result and European Embedded Value
(EEV). A full Glossary of APMs is provided
on pages 216 to 218, in which we define
each APM, explain its use and, if applicable,
explain how the measure can be reconciled
to the IFRS Financial Statements.
Gestation FUM
Does not yet generate annual
product management charges
Business moves from gestation
FUM to mature FUM after 6 years
Gross inflows for
unit trust, ISA and
DFM business
Mature FUM
Generates annual product
management charges
1 Charges are also levied for managing the investment funds selected and are designed to match the associated expense, hence do not impact upon the profitability of the Group.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 21
Financial position
Our IFRS Statement of Financial Position,
presented on page 140, contains
policyholder interests in unit-linked liabilities
and the underlying assets that are held to
match them. To understand the true assets
and liabilities that the shareholder can
benefit from, these policyholder balances,
along with non-cash ‘accounting’ balances
such as DIR and deferred acquisition costs
(DAC), are removed in the Solvency II Net
Assets balance sheet.
This balance sheet is straightforward and
demonstrates that the Group has liquid
assets of £1,429.8 million (31 December
2018: £1,550.9 million), of which £1,131.8
million (31 December 2018: £1,297.0 million)
is invested in AAA-rated money market
funds. This deep liquidity represents 46%
of total assets on the Solvency II Net Assets
balance sheet (31 December 2018: 60%).
The Group’s core borrowing increased
marginally to £287.1 million (31 December
2018: £278.6 million), although the balance
sheet borrowings total also reflects
non-recourse securitisation loan notes of
£116.6 million (31 December 2018: £70.0
million) which are backed by a ring-fenced
portfolio of business loans to Partners.
The holders of these loan notes have no
recourse to the Group’s other assets.
Further information on why we believe the
Solvency II Net Assets Balance sheet is
helpful to users of the Financial Statements
is set out on page 45. Further detail
about liquidity and borrowings, including
securitisation, are provided on pages
53 and 54 respectively.
Cash generation and usage
The Group’s primary source of net cash
generation is annual product management
charges on FUM. As noted on the previous
page in relation to profit generation, most
of our investment and pension business
experiences a six-year gestation period
where there is no cash generated after initial
charges. This means that the amount of
cash generated will increase year-on-year
as FUM in the gestation period becomes
mature and subject to annual product
management charges, as well as increasing
due to new business.
Cash is used to make both short- and
long-term investments in the business and
to pay the Group dividend.
Solvency
Our business model and risk appetite
results in the Group holding assets to fully
match the encashment value of our clients’
investments. This means that movements
in equity markets, currency markets, interest
rates, mortality, morbidity and longevity
have very little impact on our ability to meet
liabilities. This, combined with a prudent
approach to investing shareholder funds
and surplus assets in highly rated liquid
assets, means that we have a resilient
solvency position capable of meeting
liabilities even in adverse market conditions.
Further information is provided on page 58.
Risk management
The key risks to our financial business
model are:
1. Failing to grow FUM and hence income:
our strategy is designed to ensure we
can continue to grow FUM, for example
by ensuring we deliver a valuable
proposition to clients, increasing the
number of advisers in the Partnership
and making them more productive. Our
distinctive IMA and face-to-face advice
approach help us to retain and continue
to grow FUM even during market
uncertainty.
2. Not appropriately managing our expense
base: we develop and track spend
against detailed budgets to manage our
expenses efficiently whilst continuing to
invest where appropriate to support
future growth in the business – for
example, our investment in Bluedoor.
3. A changing regulatory environment:
to manage regulatory risk we have an
open relationship with our regulators,
and liaise closely with them on existing
and emerging regulatory issues.
Objective: Achieve sustainable growth in IFRS profit before shareholder tax, the Underlying cash result and EEV
operating profit before tax 1
Key metrics
Progress during 2019
EEV operating profit
before tax
(£’Million)
Underlying cash result
(£’Million)
Dividends
(Pence per share)
The European Embedded Value (EEV) reporting basis assesses the full value
of the emergence of shareholder cash returns over the long term. New
business (gross inflows) is the most significant underlying driver of EEV
operating profit. The reduction in new business was partially offset by strong
retention, overall resulting in a 5% decrease in EEV operating profit before tax
year-on-year.
Underlying cash profit reflects the regular emergence of cash from the
business operations whilst also reflecting the impact of the strategic
investments we are making. Underling cash profit reduced 12% reflecting
the challenging market conditions and continuing investment.
Growth in profit measures, particularly cash, means the Company is able to
increase the level of dividend. We are pleased to confirm an increase of 3%
in dividend in the year.
Our performance
2019
952.0
2018
1,002.0
2017
918.5
273.1
309.0
281.2
49.71
48.22
42.86
IFRS profit before shareholder tax reflects the challenging external environment during 2019, and continuing investment in the business.
Similarly to the Underlying cash result, this led to a 12% reduction in IFRS profit before shareholder tax, from £211.9 million in 2018 to
£187.1 million in 2019 (2017: £186.1 million).
1 Each of these measures reflect the underlying performance of the business. IFRS profit before tax, and profit after tax, are not covered by the objective: information about why
these do not reflect the underlying performance of the business is set out on page 45.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 22
People
We are attracting, retaining
and developing talent.
Our employees
Our ability to attract, develop and retain
talent is essential to ensuring we can
meet both our existing and future business
needs. At 31 December 2019 we had 2,634
employees throughout the Group, working in
collaboration with our outsourced providers,
4,271 advisers in the Partnership and their
5,637 support staff all working to deliver
exceptional service to our 733,000 clients.
We believe our culture at SJP, brought to
life by our employees and our Partnership
community, is a key competitive advantage.
We are committed to making SJP a
destination employer and a company where
our people feel they are able to build a long
and rewarding career full of challenge and
opportunity, where diversity is celebrated
and where our people feel motivated and
supported to give their very best.
Our Partnership
We recognise that the value of effective
team-working across all of our communities
will contribute to the delivery of excellent
client outcomes. To this end we have
extended some elements of our corporate
development approach into the Partnership.
This includes the roll out of a team building
approach using an integrated psychometric
tool to individual Partners, and also in
some cases into their practice teams.
Using the same approach across all of
our communities helps build an inclusive
culture both within teams and across
the whole organisation, helping us work
together effectively.
Our people strategy
1. Attract and select the right talent with skills
and capabilities needed now and in the future,
for the right place at the right time
2. Create a learning culture by providing
employees with access to an inspiring range
of opportunities to develop their careers
3. Continue to develop a high performance culture
and commitment to service excellence
4. Sustain a highly engaged, effective and
motivated workforce where our people
feel exceptionally valued
5. Fit for purpose structures in place, fulfilling
roles with clarity of purpose and the technology
solutions which support all stages of the
employee life cycle
Our focus for 2020
• Increase focus on the delivery of
our Inclusion and Diversity (I&D)
objectives.
• Support a high-performance culture
through further investment into
our management development
programmes and equipping our
employees with better tools.
• Introduce a talent management
approach, supporting and
encouraging greater internal mobility.
• Further develop our reward
proposition.
• Create and implement a holistic
wellbeing strategy.
How we engage
We are moving to a more continuous
listening approach with our employees,
utilising a variety of physical and digital
engagement channels to focus on the
areas that matter most to our people.
This has led to some significant
changes to our policies that encourage
greater work/life balance, including
changes to flexible working and
significant enhancements to how
our staff can take time away from work
to support their families. Ensuring the
employee voice is heard at the Board,
we also introduced changes in 2018
with the creation of a Workforce
Engagement Committee.
Our culture and values
St. James’s Place is a relationship-focused
business and the recognition that people
are our most important asset is key to our
culture and a fundamental element of our
success. Members of our community tend
to share core values that are highly
compatible with the values that are central
to the business and established at the
outset – expertise, integrity and discretion.
They are passionate about our business
and believe in hard work and dedication.
Being an inclusive and diverse employer is
not just the right thing to do, it is a strategic
priority for us. We understand that our
people should reflect the society that we
serve and how important it is for us to
recruit, develop and retain talent from all
walks of life. They treat each other with
mutual respect, openness and fairness and
are driven by a desire to ‘do the right thing’
by all our stakeholders.
I n c lusive
5
Plan
1
Attract
4
Retain
2
Develop
e
v
i
s
s
e
r
g
o
r
P
3
Perform
Div
erse
Risk management
Our people and culture form a key competitive
advantage for the business. As such, it is
critical that we identify and manage people
risk to ensure we attract and retain the right
people. We respond to people risk by:
1. Reward and recognition: Offering
comprehensive total reward packages
and carefully guiding the career
progression for our employees, which
means we maintain a low level of turnover.
2. Managing key person risks: We avoid key
person dependencies to ensure we
retain knowledge within the business
and structure workflow. By maintaining
low staff turnover, we are able to better
leverage retained intellectual property
to help deliver outstanding service for
our Partnership and clients alike.
3. Inclusion and diversity: Ensuring an
inclusive and diverse business, actively
undertaking initiatives to support and
promote women and minority groups in
senior careers. We have zero tolerance
for discrimination in the workplace.
4. Equal pay: Working hard to narrow
our gender pay gap, as we expect
employees to receive equal pay for roles
of a similar level, irrespective of gender
or diversity.
Developing our people
Recent regulatory changes, including the
Senior Managers and Certification Regime,
have provided us with an opportunity
to reaffirm many of the values of
St. James’s Place and codify our continued
commitment to doing the right thing by our
stakeholders. We feel that the opportunity
to articulate the responsibilities and
accountabilities of our senior managers
with greater clarity will be a benefit to all.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 23
Social value
Workforce engagement
During 2019 we increased engagement with employees
identifying eight key topics, for example the experience of
working at SJP, to gain employees feedback on. We
created, or improved where already existing, three primary
channels to obtain employees’ views and feedback:
• Directors’ lunches – an established way for all of our
Directors to obtain feedback directly from Cirencester
employees on areas of importance to them. In 2019 we
also held Directors lunches with our Field Management
Team and Rowan Dartington. Feedback from employees
included the work of the St. James’s Place Charitable
Foundation, and reward and recognition;
• Employee surveys – we undertook short surveys of a
subset of employees on specific topics, for example the
SJP recruitment and onboarding process and approach
to flexible working. These surveys also gave a measure
of employee sentiment, identifying trends from the
biennial survey of all employees, and are a key input to
periodic Board reporting on employee engagement; and
• Focus groups – employees volunteered to be part of small
focus groups to explore a topic in detail, with our first
groups discussing flexible working. A group of employees
now meets regularly to ensure we strive to meet the
flexible working needs of employees where we can.
We report themes and sentiment that are important to our
employees both to the Board and to areas of the business
responsible for existing policies and practices, for
example the People and Development Division, to inform
their decision making around these policies and practices.
An example during 2019 was the recent advancements we
have made to our Time Off for Parents Policy, enhancing
the time off that can be taken for both men and women to
26 weeks full pay, which were significantly influenced by
feedback from employees.
Supporting our staff with their wellbeing
has continued to be a major focus for
us with continued investment in mental
wellbeing initiatives. We have doubled the
number of Mental Health First Aiders,
providing greater national coverage. These
key individuals can signpost to employees a
range of support from specialist counselling
and access to our own company doctor,
to services made available via an Employee
Assistance Programme. As a business
that prides itself on providing quality
advice to our clients, we recognise that our
employees’ financial wellbeing is also key,
and this year we have launched a series of
financial education programmes for the
benefit of employees and their families.
We appreciate the responsibilities our
people have to others outside of work so
we have increased the amount of paid leave
for staff who volunteer for the armed forces,
police and fire services, as well as those
closer to home with increased paid parental
leave of up to 26 weeks full pay available for
new mothers and fathers.
Objective: Attract, retain and develop talent
Key metrics
79%
of our employees say that working at
St. James’s Place makes them want to do
the best they can.
(2018: 85%)
94%
of our employees feel proud to work for
St. James’s Place
(2018: 88%)
83%
of our employees would recommend
St. James’s Place as a great place to work
(2018: 83%)
Taken from pulse surveys issued during 2019.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 24
S T R AT E G I C R E P O R T
Our Social Value Report
“ Our purpose to give peace of mind in an uncertain
world is underpinned by our culture of doing the
right thing. Everyone in our business can be part
of the contribution we make to society and they
can all make a difference by doing the right thing
in everything we do. Ultimately, we aim to grow in
a sustainable way, taking a long-term view, which
ensures we are a force for good for our people,
clients, stakeholders and the wider world.”
ANDREW CROFT, Chief Executive
Our approach
Our contribution to society is reflected in
all areas of our business. We ensure our
clients and their families have peace of
mind for their future, we support our
Partners to develop and grow sustainable
and responsible businesses, we support
our 2,643 employees in a thriving
sustainable business, we pro-actively
engage and support our local communities
around the UK, and we consider the global
impact of our funds under management,
investing responsibly and sustainably.
Governance
The Board is collectively responsible for establishing the purpose, values and strategy of the Group and satisfying itself that these
and its culture are aligned. This includes how to embed social value across the business, for which the Board is supported by the
Executive Board and a number of sub-committees highlighted below:
Responsibility
Culture, company and social value
mission and employee wellbeing
Managing
Committee
EXECUTIVE
BOARD
Executive Board
member
Andrew Croft
Social value and sustainability
strategy and oversight
SOCIAL VALUE
STEERING GROUP
Andrew Croft
Responsible investment
INVESTMENT
COMMITTEE
Robert Gardner
(David Lamb until
28 February 2019)
Remit
To ensure the strength and maintenance of the unique
social value culture throughout our community, and to
lead and manage our employees.
To set the Group’s social value strategy and approach,
supported by the social value working group which
oversees the management and integration of social
value operationally in the business.
The St. James’s Place Charitable
Foundation 1
CHARITABLE
FOUNDATION
TRUSTEES
To manage the St. James’s Place Charitable Foundation,
including overseeing grant-making and compliance with
the charity’s objectives.
1 The St. James’s Place Charitable Foundation is an independent charity, managed by its Trustees.
Non-Financial Information Statement
This section of the Annual Report constitutes the St. James’s Place Non-Financial Information Statement, produced to comply with
sections 414CA and 414CB of The Companies Act. The following table sets out where, within our Annual Report, we provide further
detail on the matters required to be disclosed under the sections above. In particular, it covers the impact we have on the environment,
our employees, social matters, human rights, anti-corruption and anti-bribery matters, policies pursued and the outcome of those
policies, and principal risks that may arise from the Company’s operations and how we manage those risks, to the extent necessary
for an understanding of the Company’s development, performance and position and the impact of its activity.
Reporting requirement
Anti-corruption and anti-bribery
Business model
Employees
Section(s) and page(s)
Our Social Value Report (page 29)
Our Business Model (pages 10 and 11)
People (pages 22 and 23), Our Social Value Report (pages 29 to 31), Section 172(1)
Statement (page 66), Workforce engagement (page 81)
Investment Management (page 18), Our Social Value Report (pages 32 to 35),
Section 172(1) Statement (page 66)
Clients (page 14), The Partnership (page 16), Investment Management (page 18),
People (page 22), Our Social Value Report (page 27)
Principal risks (pages 62 and 63), Strategic Report (pages 14 to 23)
Our Social Value Report (page 29)
Our Social Value Report (page 24 to 37)
Environmental matters
Non-financial key performance
indicators
Principal risks
Respect for human rights
Social matters
ST. JAMES’S PLACE PLC Social value
Our vision is to become a leading responsible business
PARTNERS
INVESTMENTS
CLIENTS
Financial
advice
Responsible
investment
Supporting
clients
EMPLOYEES
Wellbeing
Inclusion
and diversity
OPERATIONS AND COMMUNITY ENGAGEMENT
FINANCIAL
EDUCATION
THE CHARITABLE
FOUNDATION
VOLUNTEERING
SUPPLIERS
RELATIONS
ENVIRONMENTAL
IMPACT
STRATEGIC CHARITY
PARTNERS
External voice and influence
We aim to publicly communicate to clients, peers,
suppliers and other stakeholders about our social
value excellence.
25
Social value at SJP
• The Partnership
Providing financial advice
• Clients
Educating and supporting clients
• Investments
Responsible investing
• Employees
I&D and wellbeing
• Community engagement
Financial education, volunteering,
strategic charity partnerships and
the Charitable Foundation
• Suppliers
Building relationships
• Environment
Environmental management
Our 2020 vision
Whilst we reflect on our achievements over
the past year, it is also important to look to
the next chapter. In 2020 our aspirations
include:
• continuing to embed responsible
investing into our Investment
Management Approach (see also
Investment Management on page 18);
• supporting Partners to become responsible
businesses and engage with society (see
also The Partnership on page 16);
• delivering financial education nationwide
through our Partnership and employee
volunteering programme; and
• leveraging the St. James’s Place
Charitable Foundation to connect skills,
volunteering and business support to
strategic grant making.
What’s inside
Materiality study summary ...................... 26
Our lasting impact ......................................26
Our engagement ........................................ 27
Our volunteering: close
to home and further afield ........................ 28
Our employees are at the heart
of everything we do ................................... 29
Investing responsibly ................................ 32
Building relationships
with our suppliers ....................................... 33
Managing our environmental impact ...... 34
Supporting our communities .................. 36
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
26
S T R AT E G I C R E P O R T
Our Social Value Report continued
Materiality study summary
Acting responsibly is key to our stakeholders:
our shareholders, our clients, the Partnership,
our employees, our suppliers and our
communities. During 2019, we undertook
a dedicated independent materiality study
with Corporate Citizenship, an independent
sustainability management consultancy,
to further understand our stakeholders’
views and where their priorities lie.
Through the materiality study we engaged
with our stakeholders to ensure that we
manage and report on the issues that
matter the most to them. To understand
the external priorities, we engaged with
our fund managers, the charities we
support and our suppliers. To understand
the internal landscape, we engaged with
representatives from a range of functions
and roles including the Board and our
Strategy, Marketing, HR and Public
Policy departments.
The materiality study informs our social
value strategy and decision making at
an operational level. Culture, ethics and
people were found to be the most
important priority areas for both internal
and external stakeholders, closely followed
by customer service and sustained and
sustainable returns.
Our lasting impact
United Nations Sustainable Development Goals
(UNSDGs)
After aligning our strategic programmes to the Sustainable Development Goals in 2018,
we have further worked to integrate them into our long-term social value approach.
Sustainable Development Goal
Our promise
Our results
Goal 4.4
By 2030, substantially increase
the number of youth and adults
who have relevant skills, including
technical and vocational skills for
employment, decent jobs and
entrepreneurship.
Goal 8.5
By 2030, achieve full and
productive employment and
decent work for all women and
men, including for young people
and pensions with disabilities, and
equal pay for work of equal value.
Goal 10.2
By 2030, empower and promote
the social, economic and political
inclusion of all, irrespective of age,
sex, disability, race, ethnicity,
origin, religion or economic status.
To support schools in delivering
financial education and provide
programmes to meet all needs.
In 2019 we delivered face-to-face
financial education to 9,672 children in
over 237 sessions in over 80 schools.
This was delivered by 325 employees
and advisers over more than 1,800
hours.
To invest in our employees
through training and
development.
To work with schools and
charities to support
employability, positive work
experience and increase
aspirations.
We have further developed our
Internships, Apprenticeships and
Graduate Programmes and created
new key development initiatives.
308 employees supported 4,716
people before they embarked on their
careers, with office-based mentoring,
work experience and paid internships.
To raise funds through the
St. James’s Place Charitable
Foundation to support those
in need.
Since the Charitable Foundation’s
inception, £93.1 million has been raised
for over 3,600 of charities, directly
supporting 1.3 million people.
Goal 13.2
Integrate climate change
measures into national policies,
strategies and planning.
To control and reduce our
environmental impact and
promote sustainable business
practices.
We are carbon neutral. All emissions
are in line with the Greenhouse Gas
Protocol and are rated as ‘Grade B
Management’ by the Carbon
Disclosure Project.
ST. JAMES’S PLACE PLC 27
Our engagement
Proud to be members of
Employee engagement
Volunteering
We are not only proud but delighted to
yet again have 96.1% of our employees
engaged with our community
programmes in 2019. We believe
that everyone can make a difference.
Giving time and skills is a core part of our
culture. This year, our volunteering hours
reached 14,333, meaning the total value
of time our employees gave during work
equated to £0.9 million.
We value doing the right thing, so we
encourage employees to volunteer in
working hours to support the Charitable
Foundation, our corporate responsibility
activities, or to give their skills directly to a
charity or community organisation of their
choice. We also encourage and recognise
employees who volunteer in their own time,
with 143 £300 grants given to the charities
supported in this way.
Employees give their time and money
to fundraise and distribute grants
through the Charitable Foundation,
and to support our volunteering,
including skills-based volunteering,
programmes. All of our employees are
entitled to two days volunteering per
year within working hours. We actively
encourage everyone to use these two
days, and employees can also request
additional days within reason.
96.1%
Employee involvement
2018: 97.5%
Percentage of Group employees
involved in supporting our
communities and good causes
14,333
Volunteer hours
2018: 17,330
The total number of hours our
employees gave during working
hours in support of our community
engagement activities
Percentage of employees volunteering
for one day or more a year 2016-2019
plus 2020 target
t
n
e
c
r
e
P
35
25
15
5
2016
2017
2018
2019
2020
(target)
5.3 / 4.5 hours
the average number of hours given
during working hours / outside of
working hours
Cirencester foodbank
One of the charities we have
supported this year is the
Cirencester Foodbank.
Find out more
on page 28.
125
Food bank volunteers,
donating 1,098 hours
“This partnership has gone much further than volunteering days. Their
support has included Easter Egg, summer holiday and Christmas
food collections, ‘Save Your Acorns’ books and card games to give
to our young families to help them understand how to budget and
save, as well as Christmas cards to sell to raise money. We’re looking
forward to developing our relationship further in 2020. Thank you.”
CIRENCESTER FOODBANK
Community investment
We support our people to give time
and skills and back this up with
substantial giving and community
investment.
4.4%
Invested
2018: 3.3%
£8.3m
Total invested in communities
2018: £7.1m
Percentage of profit before tax invested in
supporting our communities and good causes
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
28
S T R AT E G I C R E P O R T
Our Social Value Report continued
Our volunteering:
close to home and further afield
Community
engagement
In 2018 we launched the ‘Great Place
to Work’ initiative within our Investment
Management division, which focused
on employee wellbeing and development.
During 2019 the division aimed to complete
1,000 hours of community engagement in
the year, which they achieved within ten
months. Their journey was mapped against
the 1,000 hours walking distance to Gunjur,
in The Gambia, which is the destination of
our international community programme.
Whilst individuals have supported numerous
causes, the official partner of this initiative
was Cirencester Foodbank. This year the
division looked to deepen their relationship
with the Foodbank through skills
volunteering, by donating Save Your Acorns
books and games which provide families
with financial education, creating Christmas
card designs to sell and providing the charity
with data-visualisation and human
resources support.
Global sustainability
In partnership with The Marlborough Brandt Group
(MBG), which has operated in Gunjur, The Gambia,
for 38 years, over 90 employees and advisers from
St. James’s Place lived and worked in Gunjur to support
plastic reduction projects in this coastal community.
Our volunteers, led by local builders, worked with local
people and stayed with families in the village. To ensure
the trips were fully accessible, they were undertaken
during work time and funded by the Group, with
volunteers encouraged to raise money for the Charitable
Foundation.
This year’s team worked with WasteAid on a Department
for International Development funded community waste
management programme to build a new workshop to
turn waste plastic into floor and roof tiles. In conjunction
with this project we are working alongside MBG,
Disability Africa, United Purpose, and a local non-
governmental organisation called TARUD. These deliver
long-term holistic programmes in Gunjur, including
micro-finance, employability and a disability centre,
which mirror the work we undertake in the UK.
ST. JAMES’S PLACE PLC 29
Our employees are at the heart of everything we do
Leadership and people development
We are committed to making SJP the place
to build a great career, and our focus on
developing our talent is central to that. We
believe that our leaders need to be held to
account. They must possess a sense of
humility, and inspire their people to work
together; to collaborate and innovate,
promoting curiosity and growth. In 2019
we introduced four new programmes,
underpinned by a new leadership capability
framework, that develop our leaders to
embrace these values. Each programme
is aligned to specific attributes that enable
the leader to hone the best version of
themselves. All programmes follow similar
principles, providing a diverse talent pipeline
with the opportunity to develop their
leadership capability and enhance their
internal networks. These talent programmes
complement our growing Early Career
apprenticeship, undergraduate intern and
graduate schemes.
During 2019 we have empowered our
people to take greater ownership and
responsibility over their career development
by partnering with LinkedIn Learning,
which provides thousands of development
resources via an online platform. Mentoring
remains a key feature of our development
programmes with a new platform launched
this year allowing our people to connect
with each other in a more dynamic way.
All of these development interventions
are underpinned by our performance
management system, where our people
have structured career conversations about
their performance and development.
Human rights
We are committed to managing our
business in an ethical manner and recognise
that responsible management is important
to all of our stakeholders – shareholders,
clients, Partners, employees, suppliers and
the communities in which we operate. We
will not tolerate or condone abuse of human
rights (including modern slavery) in any part
of our business, and we are committed to
minimising the risk of slavery or human
trafficking in any part of our supply chain.
All employees receive a copy of our Code
of Ethics and our equal opportunities policy,
which make clear that we oppose all forms
of unfair discrimination or victimisation.
Our bullying and harassment policy sets
out our approach in relation to allegations
of harassment and/or bullying.
Harassment, in general terms, is defined as
unwanted conduct affecting the dignity of
people in the workplace. It may be related to
age, sex, race, disability, religion, nationality
or any personal characteristics of the
individual and may be persistent or an
isolated incident.
Anti-bribery and corruption
St. James’s Place has a zero-tolerance
approach to bribery and corruption. The
Board has responsibility for oversight of the
Group’s anti-bribery and corruption policy
and procedures and annually carries out a
review of their adequacy. Employees and
Partners are provided with training with
regards to money laundering, financial
crime, fraud, bribery and corruption via
online training programmes, the completion
of which is compulsory. The anti-bribery
and corruption policy, which contains
additional information, is available on our
website, www.sjp.co.uk.
Why this is important
Our people are our greatest asset and a
core reason for our continued success,
which is reflected in our identification of
people risk as one of our principal risks (see
page 63). With their continued commitment
and expertise, it is our people who will
shape our culture, deliver our proposition,
achieve operational excellence, and who
will create social value. We are committed
to our high-performance culture and we
do this by supporting our people to build
great careers at SJP by investing in their
development. We believe that a diverse and
inclusive culture is important to the success of
our business as having a diverse community
of people from a wide variety of backgrounds,
and with a range of experiences, skills and
approaches, will help us better understand and
meet the needs of clients and advisers,
making our business stronger and driving
continued growth and innovation.
Inclusion and diversity (I&D)
Achieving true gender equality within the
business is a strategic priority for us and we
are making progress in this area. Female
representation on the Board has increased
to 40% as at 26 February 2020 (25% as at
31 December 2019) and in December 2019
we appointed Elizabeth Kelly to our
Executive Board. We recognise how
important diversity is in driving creativity,
innovation and sound decision making, but
achieving diversity without fostering an
inclusive environment means we cannot
harness these benefits.
Our I&D network is a thriving community
of enthusiastic and energetic employees
committed to driving change. They help
us to raise awareness, educate and inform.
During 2019 the group has grown
significantly both in size and impact. They
have organised events including key note
talks and panel discussions for International
Women’s Day, workshops on ally-ship and
role models during Pride week, and our first
Black, Asian and Minority Ethnic (BAME)
round table event.
The breadth of topics covered reflects the
growing need to surface conversations on
subjects which can have a material impact
on our wellbeing and performance at work.
From webinars on inclusive meeting
behaviours and menopause to our mental
health awareness programme, our goal is
to foster an inclusive environment across
the business.
Governance
In May 2019 we appointed a Head of
Inclusion and Diversity, responsible for the
development and delivery of the Group’s
I&D strategy. Our strategic I&D goals are
aligned to our corporate objectives and
focus on attracting, retaining and
developing talent across the business.
As such, we aim to:
1. Attract a wide range of talented people,
with broad perspectives, diverse
backgrounds and different
characteristics;
2. Create an inclusive environment and
engaged workforce which is led by
a leadership team who demonstrate
inclusive behaviours instinctively; and
3. Strengthen our talent pipeline by
identifying, developing and nurturing
talent, irrespective of race, ethnicity,
gender, gender identity, disability, sexual
orientation, age, religion, social class or
background.
Our I&D steering group includes our CEO
and is chaired by our Managing Director.
The group oversees the I&D strategy and
regularly reports progress to the Board and
Executive Board.
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S T R AT E G I C R E P O R T
Our Social Value Report continued
Our employees are at the heart of everything we do continued
Public commitments
Measuring our progress to become a more
inclusive and diverse business is
fundamental. We have made public
commitments to:
• Increase the number of women on the
Board to at least 33% by 2020;
• Increase the number of black, Asian and
minority ethnicities across our business
to at least 10% by 2023; and
• Increase the number of women in senior
roles in our business to at least 30%
by 2023.
Although we are delighted to report
our progress with increasing female
representation on the Board to 40%, we know
we have much more to do in other areas.
We have worked hard to move towards our
Women in Finance Charter commitment of
at least 30% women in senior roles by 2023.
In 2019 we reported a 3.6% increase on
2018 to 22% which signals good progress
and indicates we are on track. To help us
accelerate progress, mentoring and
sponsorship of our female talent remains a
key area of focus for us. In October 2019 we
joined other businesses taking part in the
30% Club mentoring scheme again. In
conjunction with our internal mentoring
programme, this enables talented women
from across our business gain access to
senior leaders from industry and sector
firms, which provides valuable development
opportunities.
We are focused on creating an inclusive
work environment where everyone has the
opportunity to achieve their highest
potential. Disability, both visible and
invisible, is firmly on our agenda and in July
2019 we became signatories of the Valuable
500, demonstrating our commitment to
driving change in this area. We give full and
fair consideration to all applicants, having
regard to an individuals’ aptitudes and
abilities. When needed, we will consider
modifications to the working environment
so employees with disabilities can take up
opportunities or enhance their role, and we
aim to assist employees who become ill or
disabled, for example, by arranging
appropriate support and training.
As at 31 December 2019 we employed 2,634 people across the world, including 2,365 in the
UK (31 December 2018: 2,484 people across the world, including 2,263 in the UK) and the
breakdown of our workforce by gender was:
Board Directors
Managers and decision-makers 1
Total employees
Female
Male
2019
2
60
1,315
2018
1
42
1,255
2019
7
213
1,319
2018
7
181
1,229
1 During 2019 we have revised the definition of ‘managers and decision-makers’ to align it to the definition of ‘senior
roles’ used for our Women in Finance Charter commitment, and so the comparatives for 31 December 2018 have
been restated. We have made this commitment for our main employing entity in the UK and not for the wider
Group, hence there are differences between progress reported against the commitment and the table above
which covers the Group.
Mentoring our
talent
Over the last year, I had the
pleasure of participating in
the 30% Club cross-company
mentoring scheme. The 30% Club,
founded by St. James’s Place’s
new Non-executive Director,
Dame Helena Morrissey, is a
campaign promoting greater
gender diversity within
businesses.
From the launch event, which
brought together hundreds of
passionate individuals, I was
allocated a really engaged mentor
and felt inspired. Exchanging with
someone from a different
company and industry allowed
me to be very open, and I received
impartial, unbiased advice. Our
discussions also provided new
perspectives and ideas. Alongside
the mentoring, Women Ahead
organised a series of
masterclasses designed to
develop skills for the workplace
and for life, as well as providing
networking opportunities.
My experience was extremely
positive and exceeded my
expectations, helping me to
develop as a professional and
an individual. St. James’s Place
offered support throughout by
giving me the confidence to
adopt new approaches and grow
in my role, and in December 2019
I was promoted to Head of
Alternative Investments. I will
continue to use the development
strategies learnt on the scheme
as I take on this new challenge.
One year on, I am feeling
motivated, truly engaged and
keen to make a difference.
LESLIE UZAN, Head of
Alternative Investments
ST. JAMES’S PLACE PLC 31
Reward and benefits
Reward is a critical element of our
employment proposition for attracting and
retaining talent, and an important tool which
drives the delivery of business objectives.
We provide market competitive rewards and
benefits that are regularly benchmarked and
reviewed. We are a Living Wage employer
for all our employees in the UK and
equivalent initiatives overseas, where
relevant. Our incentive schemes, in which all
our employees participate, recognise and
reward contribution to the growth of the
business. They have stretching targets
which help drive performance, with clear
checks and balances in place to ensure that
business goals are achieved in line with our
values and do not encourage inappropriate
behaviour or risk taking.
We provide meaningful protection and
wellbeing benefits, including generous
pension arrangements, which we regularly
review and improve. In 2019, aligned to our
inclusion and diversity objectives, the
Company enhanced the amount of paid
leave which can be taken for new parents,
for both men and women, to 26 weeks full
pay. We continue to add new benefits to our
flexible benefits scheme, launched last year,
providing our staff with the ability to tailor
their benefits package to suit their needs.
We also believe it is important that our staff
build a sense of ownership and share in the
success of the business. We encourage
employee equity participation through
our SAYE and SIP schemes, which are
so popular that over 80% of employees
participate.
Employee wellbeing
Supporting our people at times of need is
an important part of our culture and an area
where we continue to invest. We are proud
of the range of support services and
benefits available to our employees and
their families, including private medical
cover, permanent health insurance, critical
illness and life cover. In addition, more
specialist support is available through our
Employee Assistance Programme.
During 2019 we have further improved the
support we offer our people by:
• increasing the number of counselling
sessions staff can access;
• launching a second opinion referral
service for medical issues;
• extending the counselling and workplace
health services provided by our company
doctor;
• providing training to managers and staff
on the importance of physical and mental
health and mindfulness; and
• doubling the number of mental health first
aiders across the Group, who share ideas
and best practice on how to support our
people and signpost the support that we
offer.
Underpinning all of this is our belief in a
healthy, supportive working culture, where
everyone is comfortable to discuss
problems they face.
Employee engagement
Our engagement results show that our
people are highly engaged. They give
discretionary effort, not because they feel
they have to but because they want to. We
do not take this for granted as we recognise
it is our people who deliver excellent service
to Partners and clients and create sustained
competitive advantage. That is why in 2019
we have broadened our approach to
engaging with our people.
We established a Workforce Engagement
Committee in spring 2019, which on behalf
of the Board defines the agenda of topics
and issues that we discuss with, and seek
feedback from, our employees on, and
facilitates a more effective two-way
dialogue. We use focused Directors lunch
meetings, focus groups and pulse surveys
to solicit views on a range of topics
including flexible working, reward and
recognition and the employee experience.
We have improved our use of social media
in communicating messages, and now
produce a monthly online magazine, People
Matters, which provides video and written
content on issues that our people need and
want to know about.
We ensure our people are aware of the
financial and economic factors affecting
the Group through communications issued
to all staff announcing quarterly results,
biannual management meetings providing
an overview of business performance and
our Annual Company Meeting. In addition,
People Matters has featured an article on
European Embedded Value (EEV), helping
staff to understand more about the
performance basis which feeds into
the annual bonus calculations.
The right to collective bargaining has
not been exercised by any of the Group’s
employees, however were they to do so
the Group would look to comply with
due process. For further detail refer to the
Relations with Stakeholders section of the
Corporate Governance Report on pages
80 and 81.
91%
New joiners who rated the recruitment
and onboarding experience as
‘excellent’ or ‘good’.
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S T R AT E G I C R E P O R T
Our Social Value Report continued
Investing responsibly
“ We see money as a
force for good. For us,
promoting financial well-
being in a world worth
living is at the heart of
what it means to be a
responsible investor.”
ROBERT GARDNER, Director: Investment
Management
Our approach
Doing the right thing means being a
responsible investor. Current levels of
economic activity are using up
approximately 1.75 planets’ worth of
resources (source: Global Footprint
Network, 2019), a situation that is not
sustainable. Adopting responsible investing
(RI) principles and practices that consider
broader sustainability themes and specific
environmental, social and corporate
governance (ESG) factors within the
investment process can help to speed up
the transition from a depletive economic
model to one that is operating within
ecological limits. At St. James’s Place,
we continue to evolve our investment
proposition to promote good client
outcomes and understand how
sustainability themes and ESG factors
impact client wealth, now and in the future.
Depletive
economic model
Key drivers
Sustainable
economic model
WE ARE CURRENTLY
USING TWO
PLANETS WORTH
OF RESOURCES
BUT THROUGH
TECHNOLOGY,
SCIENCE, SOCIAL
CHANGE AND
REGULATION
WE CAN GROW
SUSTAINABLY
WITHIN LIMITS
Our achievements
Over the past five years we have seen
continuous development in our approach
to responsible investing. This covers our
internal governance and resources, ESG
integration processes, adoption of
minimum RI standards across all of our
investment offerings, our commitment to
industry best practice through initiatives
such as the United Nations Principles for
Responsible Investment (UNPRI), and
reporting on our progress. These deep
roots have provided us with a solid base
for both our 2019 activity and the future:
DEEPER RI INTEGRATION:
Deepened integration of RI principles into
every aspect of our investment approach:
from our ‘Select, Monitor and Change’
processes overseen by the Investment
Committee, to our ‘Plan, Design, Review’
framework that provides the focus for our
client investment proposition. We are pleased
with the progress made to date. According to
our proprietary assessment process, in 2014,
33% of the investment managers were rated
‘good’ or ‘excellent’, with this figure rising to
70% in our 2019 exercise.
EDUCATION AND INDUSTRY
PARTICIPATION:
Greater levels of engagement with
our stakeholders: from clients, the
Partnership and employees, to
shareholders, policy makers and the
wider industry. Through our programme
of education, communication and
industry participation, we have been
actively involved in many industry groups,
conferences and professional networks.
ENHANCED GOVERNANCE:
Enhanced governance structure
underpinning all areas of our investment
approach, with Executive Board-level
sponsorship, that has a broader and
deeper reach throughout our business
and is supported by additional
resources.
SUCCESSFUL ENGAGEMENT:
Building on our commitment to the UNPRI,
we aim to work with investment managers
that are also signatories to the UNPRI. This
has been a key theme of our engagement
programme with investment managers
throughout the year and we are on track for
all of the investment managers we work with
to be UNPRI signatories by the end of 2020.
CLIMATE CHANGE:
In recognition of the urgency with which
we need to address the risks posed by
climate change, we are proud to support
the Taskforce for Climate-related
Financial Disclosures (TCFD) and have
committed to implementing the TCFD
framework across our business.
ST. JAMES’S PLACE PLC
Building relationships with our suppliers
“ Abbey are committed to
working alongside
St. James’s Place to bring
about a more positive
and responsible
environmental change.
We share a common
vision with regard to
our sustainability and
environmental policies
and through our
collaborative endeavours
during 2019 we recycled
9,036kg of furniture
and packaging for
St. James’s Place,
resulting in a saving
of 8.074kg/CO2.”
STEVE LAYER, Director: Abbey
Business Interiors
Our approach
At St. James’s Place, we believe in treating
all of our stakeholders fairly and having a
sustainable, focused and long-term
mindset. Our suppliers are key to our
business, and we ensure that we manage
our supply chain in an ethical and
responsible manner.
We recognise the benefits of building
long-term relationships with our suppliers,
and so many of them have been associated
with the Group for a number of years. This
allows us to cultivate strong, mutually
beneficial relationships.
Many of our suppliers share our desire to
make a positive and lasting difference to
those less fortunate than ourselves, and we
are delighted that many have provided
support for the Charitable Foundation over
the years through both donations and
actively participating in fundraising events.
The environmental impact of our
suppliers
During 2019 we have looked to reduce our
environmental impact through our suppliers
and bring social enterprise procurement
into our supply chain. We have maintained
our purchasing of electricity from renewable
sources and welcomed a new sustainable
fleet provider.
33
Our process
We have developed procurement processes
which ensure we meet regulatory obligations
and create and promote internal awareness
of how our suppliers should be managed.
Our procurement policy requires due diligence
to be conducted on all new suppliers. This
is through a risk-based approach which
considers legal and business requirements.
Ongoing due diligence is required annually
for our critical and key suppliers.
Evidence of our commitment
• Since 2014, we have been a member of
the Real Living Wage Foundation. We
also encourage our suppliers to adopt
the same approach or, where applicable,
an overseas equivalent
(www.livingwage.org.uk).
• We are signatories of the Prompt
Payment Code, which is encouraged
by the Department for Business, Energy
and Industrial Strategy (BEIS) and
demonstrates our commitment to good
payment practices between ourselves
and our suppliers.
Our focus for the future
We will continue to increase the depth
and breadth of knowledge of our suppliers,
enabling a deeper understanding of the
potential risks and ensuring they are
appropriately managed. In 2020, we plan
to further develop our code of conduct and
formalise our procurement process which
will help provide more transparent data on
suppliers. This should in turn provide a
holistic insight into our wider supply chain
performance and risks.
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S T R AT E G I C R E P O R T
Our Social Value Report continued
Managing our environmental impact
“ Climate change is a
global problem, which
requires global solutions,
in which the whole
financial sector has a
central role to play.”
MARK CARNEY, Governor of the Bank
of England, 2019
Our approach
Whilst our business operations have little
effect on the environment, we recognise
that we can still have a central role to play
in promoting sustainability:
• Firstly, through increased responsible
investment, see pages 19 and 32;
• Secondly, through decreasing our direct
emissions (scope 1 and 2), see page 35;
and
• Thirdly, through the rest of our non-
investment supply chain, see page 33.
Oversight of our strategic approach to
sustainability is through our Environmental
Reporting Committee, with ultimate
responsibility resting with our Chief
Executive, Andrew Croft. The Social
Value Committee also regularly reviews
environmental performance.
TCFD
“The urgency to transition to a
low carbon economy is real.
If we cannot reverse this trend,
the impacts will be catastrophic.
We must all play our part to
bring about a smooth transition.”
ROBERT GARDNER, Director:
Investment Management and
Executive Board sponsor of TCFD
We recognise that climate change
poses a risk to our business and to
client outcomes. Therefore, in 2019 we
became a supporter of the Taskforce
for Climate-related Financial Disclosures
(TCFD) and have committed to
implementing the TCFD framework
across our business.
Whilst we have always assessed the
climate risks and opportunities for our
business, the TCFD ensures we continue
to implement an appropriate governance
structure, strategy, risk management
and targets and metrics. It also ensures
that we continue to bring together
various departments, including Risk,
Investment and social value, to make
the necessary changes.
Our impact
During 2019 we have maintained our
approach of purchasing electricity from
renewable sources, but we have also gone
further in offsetting our residual carbon
footprint, so that we are proud to be a
carbon neutral company. In recognition of
our approach we are also pleased to have
maintained our Carbon Disclosure Project
Grade B.
We have also worked with our suppliers to:
• welcome a new sustainable fleet provider
and provide more electric car charging
points;
• remove plastic from marketing collateral;
• raise awareness of and reduce our
printing usage;
• introduce online payslips and recycling for
our stationery supplies;
• replace hand towels with dryers which
use renewable electricity; and
• save 66,576kg of carbon dioxide
equivalent from landfill through furniture
recycling.
In 2019, we donated £27,600 to the
Woodland Trust as a result of clients
moving to electronic correspondence. In
total, we now have 48,000 clients who are
paperless.
Environmental data
We collect and report our environmental
data from October to September. The tables
on the following page summarise our targets
and progress, expressed in terms of both
absolute and normalised carbon dioxide
equivalent (CO2e) emissions for our core
business activities in recent years. Core
business activities are defined as those
within ‘operational control’. Our emissions
are calculated in line with the Greenhouse
Gas Protocol using the 2019 emissions
factors provided by the Department for
Education, Food and Rural Affairs (DEFRA).
The emissions were calculated by our
external sustainability partner, EcoAct.
ST. JAMES’S PLACE PLC 35
1. Targets
Absolute emissions targets
ID
Abs1
Scope
Description
1 and 2 (Market based) Gas, owned vehicles and electricity
% of emissions
in scope
100%
% decrease
from base year
50%
Base year
2016
Base year
emissions
2,809
Target year
2020
2. Progress
Absolute emissions progress
Actual emissions
in year
(tonnes CO2e)
865
ID
Abs1
Scope
1 and 2
(Market
based)
% Variance
from target Comment
-38% In 2016, we set an ambitious target to reduce our Scope 1 and 2 emissions by 50% by 2020
based on our 2016 emissions. In 2019, we purchased 100% renewable electricity for our UK
operations, exceeding our target. We will continue to purchase renewable electricity in the
UK, reflecting best practice and driving demand in the renewable energy market.
During 2019, we also moved into a number of energy efficient properties, most significantly
our Lombard Street property which has a Building Research Establishment Environmental
Assessment Method (BREEAM) rating of ‘excellent’, improving our energy efficiency.
3. 2025 targets
We are committed to doing our part to cap global warming to two degrees Celsius by 2050, and are now aiming to set science-based targets.
On the journey to limiting global warming to 2 degrees by 2050 we have set the following interim targets for 2025:
Scope
1
Description
Gas and owned vehicles
% decrease
from base
year
50% 2018 2025 We are committed to reducing our use of fossil fuels. We will reduce our
year Comment
Base
year
Target
Scope 1 emissions by investigating biomass solutions to replace gas
boilers and increasing the number of electric vehicles within our Company
car fleet.
2 (Market
based)
3
Electricity
100% 2018 2025 We already procure 100% renewable electricity for our UK operations. By
Business travel, waste, hotel
stays, electricity transmission
and distribution
2025, we will procure 100% renewable electricity for our global operations.
50% 2018 2025 We are committed to reducing our carbon impact from business travel and
conferences by working smarter, reducing emissions by 50% by 2025.
4. Gross emissions
The table below illustrates the changes in our absolute emissions over the past three years. During this time, we have taken steps to improve
our data quality and calculation methodology. This has enabled us to gain a more accurate understanding of our environmental impact and
take appropriate mitigating actions.
Scope
1
2 (Market based)
3
3
Total
Activity
Gas and owned vehicles
Electricity
Business travel, waste, hotel stays, electricity transmission and distribution
Property trust and WTT
Gross emissions (tonnes CO2e)
2017
876
130
8,875
15,101
24,982
2018
835
167
8,830
13,019
22,851
2019
725
140
5,752
10,763
17,380
Normalised emissions
Normalised
emissions in prior year
(tonnes CO2e per ‘000 sq ft)
2.04
Scope
1
Normalised
emissions in year
(tonnes CO2e per ‘000 sq ft) Comment
1.51 Our Scope 1 intensity has decreased, driven by a reduction in the amount of fuel used
in our car fleet coupled with an increase in floor space, which decreases emission
intensity as floor space is the denominator in the intensity calculation.
2 (Market based)
0.41
0.29 Our Scope 2 (market based) intensity has decreased due to reduced emissions from
our Asia offices. Our UK operations continue to use 100% renewable electricity.
3
21.59
12.01 Scope 3 intensity has significantly reduced due to a substantially lower conference-
related emissions.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 36
S T R AT E G I C R E P O R T
Our Social Value Report continued
Supporting our communities
“ Our approach to
community engagement
asks: ‘Are we changing
lives? Are we having a
long-term impact?’ For us
it is not about how many
people we reach or how
many people know about
it, but rather considering
the depth of change and
peace of mind we can
create for those we
support.”
ANDREW CROFT, Chief Executive
Engagement with the community
We engage with our community through a
variety of means, including meeting local
government, NGOs and local charities.
As an example, senior management based
in our head office in Cirencester regularly
attend meetings with Cotswold District
Council, Cirencester Town Council and
Cirencester Community Development Trust
to understand the social needs of the local
community and ensure we are providing
adequate support when and where required.
We also engage with local schools through
our financial education programme, and
various community organisations through
our volunteering and grant initiatives.
We were title sponsors of the DofE
Adventure which raised
£115,000
Strategic partnership with The
Duke of Edinburgh’s Award (DofE)
Since making smaller grants in 2016 and
2017, St. James’s Place and DofE have
entered into a £2 million five-year strategic
partnership. DofE works with nearly 69,000
young people from disadvantaged
backgrounds, who are part of the 460,000
young people striving for their awards.
Many of our core values are shared by DofE.
We both look to support young people from
all backgrounds to raise their aspirations
and opportunities, creating better futures by
preparing them for employment and
financial security. We both work through a
multitude of local experts who are located
across the UK, giving incredible reach to
our impact.
Our long-term partnership approach means
we support the DofE with core funding for
their strategic work, which will enable more
disadvantaged young people to develop by
undertaking their award. Once again, we
were title sponsors of the DofE Adventure
which raised £115,000 for the charity. In
2019, 33 St. James’s Place apprentices
undertook their own Gold awards as part of
our apprenticeship programme, supported
by DofE champions network in the business.
ST. JAMES’S PLACE PLC 37
Financial education
We are one of the leading providers for
face-to-face financial education in schools
in the UK. We understand the importance
of financially educating children and it has
remained a core focus of our long-term
approach. The Money and Pensions Service
UK Strategy for Financial Wellbeing has set
a target to reach 2 million more children and
young people a year by 2030, up 42% from
4.8 million in 2019. We aim to be a significant
part of this national strategy. This year we
increased our resources and revised our
materials, so we can offer a mixture of full
day, half day, flexible modular programmes
and one-hour courses which are accredited
by The Money Advice Service. We have also
launched a scheme enabling our Partners
to become accredited and provide financial
education in their local schools, which will
further extend our impact.
In total, this year we reached 9,672 children
face-to-face through 215 employees and
110 advisers in 82 different schools.
We recognise that our people cannot
support every school. We therefore offer
grants to charities including Young
Enterprise, DofE, The Money Charity,
National Numeracy and Career Ready
to work in the schools we do not already
support.
In our 2018 Annual Report, we committed
to reaching 3,200 children through
face-to-face employee-led financial
education: we actually reached 3,309. We
also reached an additional 6,363 students
through adviser-led financial education.
Team challenges and
community engagement
Team challenges within our local
community support a variety of charities
and community organisations. They are
usually activities that are non-skilled and
therefore we do not set specific targets;
instead we look to set up challenges that
meet a genuine need of the community,
from ecology to heritage and preschools
to food banks.
This year will also be the fourth year of our
holistic charity programme where we work
with a wide range of charities in Cirencester
to tackle both economic and cultural
poverty. We have five-year relationships
with these charities to provide unrestricted
funding and business expertise to help
them grow sustainably and plan for the
long term. The unrestricted funding allows
the charities to use the money where it is
needed most, whether this be for projects,
overheads, staff costs or equipment.
Team challenges 2016–2019 plus 2020 target
900
600
300
2016
2017
2018
2019
2020
(target)
Employee Volunteers
Employee days
Financial education 2016–2019
Percentage of employees volunteering for one day
or more a year 2016-2019 plus 2020 target
The St. James’s Place
Charitable Foundation
Giving is a strong part of our culture with
81% of our employees donating to the
Charitable Foundation each month. We are
proud to match, pound for pound, donations
to the Charitable Foundation and, as a
result, in 2019 the Group gave £5.7 million.
The Charitable Foundation has been a key
strategic part of our social value approach
from its launch in 1992. Since then it has
been supporting those in need, making a
positive and lasting difference to the lives
of children and young people who are
disadvantaged economically, socially or
through disability, people affected by cancer
or poor mental health, and the hospice
movement. The Charitable Foundation
specialises in funding and developing small
grass-roots charities. Further information
is provided on pages 68 to 71.
In 2019, the Charitable Foundation
commissioned research on the impact of
their 2017 grants. The research evidenced
the effectiveness of their ambition to reach
out to those most in need and change their
lives. In 2017 the Charitable Foundation
gave grants to 931 different organisations,
two thirds of which have a turnover of
less than £1 million, in all reaching nearly
475,000 direct beneficiaries and over
1.5 million indirect beneficiaries.
Importantly, 41% of direct beneficiaries
reported some substantive improvement
in their lives with another 34% reporting a
transformative improvement. For every 100
people supported, 75 developed a positive
change in behaviour or attitude and another
45 developed new skills; overall, 97 reported
a positive impact on their quality of life.
10,000
s
t
n
e
d
u
t
s
f
o
r
e
b
m
u
N
5,000
300
200
100
l
s
y
a
d
e
e
y
o
p
m
e
f
o
r
e
b
m
u
N
35
25
15
5
t
n
e
c
r
e
P
2016
2017
2018
2019
Number of
students
Employee and
adviser days
2016
2017
2018
2019
2020
(target)
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
38
Chief Financial Officer’s Report
CRAIG GENTLE, Chief Financial Officer
“ 2019 was a challenging
year but nevertheless one
of resilient new business
performance.”
IFRS profit after tax
£146.6m
(2018: £173.5m)
Underlying cash result
£273.1m
(2018: £309.0m)
EEV operating profit
£952.0m
(2018: £1,002.0m)
As already stated in the Chief Executive’s
Report, 2019 was a challenging year but
nevertheless one of resilient new business
performance as the Partnership attracted
gross inflows of £15.1 billion (2018:
£15.7 billion) and net inflows of £9.0 billion
(2018: £10.3 billion). The level of political
uncertainty throughout most of the year
particularly impacted the pace of
discretionary investment flows as some
clients took a more cautious approach
to investing new funds. Discretionary
investment aside, we saw continued net
inflows throughout the year as clients
sought to consolidate investments through
St. James’s Place and utilise the value of
their tax allowances. As we have seen in
similar periods historically, client retention
remained strong as our advisers worked
hard to provide reassurance and sound
counsel in an uncertain environment.
Coupled with the impact of positive
investment market returns, this new
business performance resulted in funds
under management closing at a record
£117.0 billion (31 December 2018:
£95.6 billion), up some 22% over the
year and boding well for the development
of our financial results in the years ahead.
Our financial business model remains
straightforward. We attract and then retain
funds under management (FUM) on which
we receive advice and product charges.
Ongoing product charges are the principal
source of income for the Group, out of
which we meet the overheads of the
business and invest in growing the scale
and capability of the Partnership, our
client propositions, and our core Group
infrastructure. Further information about
our financial business model can be found
on pages 20 and 21.
Our financial results are presented in more
detail on pages 45 to 57 of the Financial
Review, but we provide below a summary
of financial performance on a statutory
IFRS basis, as well as our chosen alternative
performance measures (APMs). We also
summarise key developments from a
balance sheet perspective and provide
shareholders with an overview of capital,
solvency and liquidity.
Financial results
IFRS
IFRS profit after tax was £146.6 million in
2019 (2018: £173.5 million), with the result
lower year-on-year largely due to the
challenging external environment which
resulted in lower gross inflows of
approximately 4% which in turn reduced
income arising from new business.
To address the challenge of policyholder tax
being included in the IFRS results we focus
on IFRS profit before shareholder tax as our
pre-tax measure. On this basis the result
was £187.1 million in 2019 (2018: £211.9
million), reflecting the same underlying
business drivers.
The IFRS results also include the impact of
non-cash accounting adjustments such as
equity-settled share-based payment
expenses, deferred income and deferred
expenses, so we continue to supplement our
statutory reporting with the presentation of
our financial performance using two APMs:
the Cash result and the European Embedded
Value (EEV) result. Taking each in turn:
Cash result
The Cash result, and the Underlying cash
result contained within it, are based on IFRS
but adjusted to exclude certain non-cash
items, so therefore represent useful guides
to the level of cash profit generated by the
business. All items in the Cash result, and
in the commentary below, are presented net
of tax.
During the year, the net income from funds
under management was £424.9 million
(2018: £388.1 million), representing a
margin of 0.63% (2018: 0.65%) on average
‘mature’ FUM, in line with prior guidance. It
is only ‘mature’ FUM that contributes to this
net income figure and this ‘mature’ stock
of FUM at any given time substantially
comprises all unit trust and ISA business,
as well as life and pensions business written
more than six years ago.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 39
The development of ‘mature’ FUM
year-on-year is dependent on four principal
factors:
1. new unit trust and ISA flows;
2. the amount of life and pensions FUM
that moves from ‘gestation’ into ‘mature’
FUM;
3. the retention of FUM; and
4. investment returns on FUM.
Growth in ‘gestation’ FUM has been more
rapid than growth in ‘mature’ FUM in recent
years, mainly due to the strength of new
pensions business following pensions
freedom. While this therefore constrains
growth in net income from funds under
management today, it bodes well for the
future as ‘gestation’ FUM matures and
begins making a positive contribution.
At 31 December 2019, the balance of
‘gestation’ FUM stood at £40.2 billion
(31 December 2018: £33.5 billion). Once this
current stock of gestation FUM has all
matured, it will (assuming no market
movements or withdrawals) contribute in
excess of £350 million to net income from
funds under management and hence to the
Underlying cash result.
St. James’s Place also generates a margin
arising from new business where initial
product charges exceed new business-
related expenses. The 9% reduction in
margin arising from new business in 2019
largely reflects the 4% decline in gross flows
over the period, as well as the timing effect
associated with an element of new business
costs being linked to prior year production
levels. This impact will unwind as new
business volumes grow.
2019 was another year of considerable
investment into the business as we sought
to lay the foundations for long-term growth
in the business. However, it was also a year
where, given the nature of the external
environment around us, we took an even
more disciplined approach to expense
management, deferring or delaying
expenditure where possible and where
long-term growth would not be
compromised.
Establishment expenses in 2019 were
£186.2 million (2018: £170.6 million), up 9%
over the year and some £4 million below the
guidance that we published last year. The
9% increase however reflects growth in the
Partnership and client base during the year.
Our contribution to the FSCS levy also
increased during the year to £22.3 million,
up from £12.8 million in 2018, reflecting
both an increased rate of levy and also a full
12 month charging period compared to 9
months in 2018.
Reflecting its critical role in providing a
source of future organic growth in our
adviser population, we made further
investment into building our Academy in
order to accommodate additional capacity
with greater geographic reach. We have also
further invested in developing our presence
in Asia, as well as in discretionary fund
management via Rowan Dartington both in
the UK and overseas.
The Underlying cash result, which is a key
metric that provides a good indicator of
underlying performance and the impact
of our investment programmes, was
£273.1 million (2018: £309.0 million),
some 12% lower.
Recognised below the Underlying cash
result, our back-office infrastructure activity
has been a critical multi-year project. In 2019
we successfully completed the smooth
migration of all our core UK business to the
new Bluedoor platform. Costs in 2019 were
£38.8 million post-tax (2018: £35.8 million)
reflecting the significant migration activity
we undertook. We would anticipate up to
£10 million of decommissioning expense in
2020 but then, as we have previously stated,
this cost will cease.
The Cash result in 2019 was therefore
£229.4 million (2018: £268.7 million).
EEV
The EEV performance disclosure provides
a useful measure of the longer-term impact
of results and developments during the year.
It ascribes a value on the long-term economic
benefit of attracting additional FUM, takes
account of the ongoing costs of doing so,
reflects long term benefits and costs of
improved or deteriorating retention, and it
takes account of current and projected market
conditions. Although the EEV statement
includes no valuation for the Group’s ability
to gather and maintain additional future
FUM, it does serve as an indication of the
value of the business written thus far.
The EEV operating profit is sensitive to
new business written within the year and
the 4% reduction in gross flows year-on-
year is the main factor behind a reduced
EEV operating profit of £952.0 million (2018:
£1,002.0 million). Whilst new business levels
were slightly lower in 2019, our retention
experience remained very strong at 96%.
A significant positive in the 2019 EEV profit
before tax is the positive investment return
variance of £768.6 million. This positive
return reflects improved market values
across our funds under management, and
follows the £460.9 million charge disclosed in
last year’s statement as markets weakened
sharply in the final quarter of 2018.
Key financial position
developments
The shareholder, or Solvency II Net Assets
Balance Sheet, is one that is derived from
the statutory IFRS Statement of Financial
Position and a reconciliation between the
two can be found on page 52 of the
Financial Review. There are several
areas that are worthy of note.
Movements in business loans
to Partners
Ensuring good client outcomes and
experience is at the heart of what we strive
to do. Providing business loans to Partners
continues to play an important part in
achieving this, with most loans supporting
Partner business succession planning and
execution. This principally involves providing
capital support for growing Partner
businesses to take on those businesses of
retiring or contracting Partners.
Total business loans to Partners reported
on the Statement of Financial Position has
been somewhat distorted by the execution
of successful securitisation during the
course of the past two years. To facilitate
the securitisation, some lending that was
provided directly to Partners from third-
party lenders, and so was outside of the
Group Statement of Financial Position,
was bought onto it. This inflated the size
of the business loan to Partners balance.
Following this a portfolio of business loans
to Partners were ring-fenced from the other
assets of the Group and used as security in
the issue of non-recourse securitisation loan
notes. Since inception of the securitisation,
additional lending to Partners has also been
funded in this way. The following table
demonstrates the split of business loans to
Partners between those which are directly
funded by the Group, and those which have
been securitised and so are funded by the
issue of securitisation loan notes.
31 December
2019
31 December
2018
£’Million
£’Million
476.5
394.5
316.0
295.5
160.5
99.0
Total business
loans to Partners
Split by funding
type:
Business loans to
Partners directly
funded by the
Group
Securitised
business loans to
Partners
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 40
Chief Financial Officer’s Report continued
The impairment experience on the overall
portfolio of business loans to Partners
remains very low and this reflects the
financial strength of the borrowing
businesses together with the Group’s
approach to credit decisions and the
structural strength of the Group’s security
over the loans. Further information is set
out in Note 12 to the Financial Statements.
Movements in borrowings
St. James’s Place continues to pursue a
strategy of diversifying and broadening its
access to debt finance. We have done this
successfully over time, including the
creation and execution of the securitisation
vehicle referred to on the previous page in
the past two years. For accounting purposes
we are obliged to disclose on our Statement
of Financial Position the value of loan notes
relating to the securitisation, which has had
the effect of inflating the reported level of
borrowings. However, these are secured
only on the securitised portfolio of business
loans to Partners, and hence are non-
recourse to the Group’s other assets.
31 December
2019
31 December
2018
£’Million
403.7
£’Million
348.6
287.1
278.6
116.6
70.0
Total borrowings
Split by borrowing
type:
Senior unsecured
corporate
borrowings
Senior tranche
of non-recourse
securitisation
loan notes
After adjusting for this non-recourse debt,
borrowings have increased broadly in line
with the scale of the business over time and
we remain comfortable not only with our
level of borrowings, but also the headroom
we have within our range of facilities.
Movement in operational readiness
prepayment asset
The investment into our back-office
infrastructure project has been a complex,
multi-year programme. In addition to
expensing our internal project costs through
the IFRS Statement of Comprehensive
Income and Cash result as incurred, we
have been capitalising Bluedoor
development costs as a prepayment asset
on the Statement of Financial Position.
The asset, which stood at £299.2 million
at 31 December 2019 (31 December 2018:
£236.4 million) has been amortising
through the IFRS Statement of
Comprehensive Income and the Cash result
since 2017 and will continue to do so over
the remaining life of the contract, which
at 31 December 2019 is nine years at the
earliest. The movement schedule below
demonstrates how the operational
readiness prepayment has built up
over the past two years.
31 December
2019
31 December
2018
£’Million
£’Million
Cost
At 1 January
Additions during
the year
At 31 December
Accumulated
amortisation
At 1 January
Amortisation during
the year
At 31 December
Net book value
268.3
183.0
91.8
360.1
85.3
268.3
(31.9)
(12.4)
(29.0)
(60.9)
299.2
(19.5)
(31.9)
236.4
The amortisation expense is recognised
within third-party administration expenses
in the IFRS result, and within the net annual
management fee and margin arising from
new business lines of the Cash result. It is
offset by the lower tariff charges on
Bluedoor compared to the previous system.
The amortisation charge will remain
constant year-on-year following the final
operational readiness spend planned for
2020, however the tariff saving benefits will
grow as the business grows, benefiting both
the IFRS and Cash results.
Solvency, capital and liquidity
We continue to manage the balance sheet
prudently to ensure the Group’s solvency is
safely maintained. This is important not
only for the safeguarding of our clients’
assets, but also to ensure we can maintain
returns to shareholders.
Given the simplicity of our business model,
our approach to managing solvency
remains to hold assets to match client
unit-linked liabilities plus a management
solvency buffer (MSB). At 31 December
2019 we held surplus assets over the MSB
of £580.6 million (2018: £617.0 million). We
also ensure that our approach meets with
the requirements of the Solvency II regime
where we have an approach, agreed with
the Prudential Regulatory Authority (PRA)
since 2017, for our largest insurance
company, the UK Life company, that targets
capital equal to 110% of the standard
formula requirement. This is a prudent and
sustainable policy given the risk profile of
our business which is largely operational.
At 31 December 2018 the solvency ratio
for our Life businesses was 117%, which
included the positive effect of the equity
dampener depressing the market risk capital
component. Management chose not to
release this volatile additional amount of
free assets, which course of action has been
justified through its unwind over the year.
At 31 December 2019 the equity dampener
was (0.1)% (31 December 2018: (6.3)%),
hence the solvency ratio for our Life
business was 112%. Taking into account
entities in the rest of the Group, the Group
solvency ratio at 31 December 2019 was
132% (2018: 143%), with the 2018 Group
result also reflecting the positive equity
dampener effect noted above. It is worth
noting that continuing growth of the UK life
company within the Group will gradually
dilute the Group solvency ratio. However,
because we manage capital requirements
of regulated entities on a solo basis, there
will be no change in the underlying solvency
risk of the Group.
Given the importance we place on
investing to underpin the future growth
and sustainability of our business, it is
necessary that we manage and balance
Group resources accordingly. Historically
these were boosted by the exceptional
release of excess solvency capital from our
UK Life company as a result of the adoption
of Solvency II during 2016, which also
provided an opportunity to remove market
risk in the business by better matching
assets and liabilities. More recently the
development of our corporate debt facilities,
as well as the securitisation and those
facilities put in place to provide finance from
third parties direct to Partners, signal good
progress in maintaining a sustainable path
for investment into the business whilst
facilitating future Partner lending activity
in support of positive client service and
outcomes.
As noted on the previous page, there has
been steady but modest growth in lending
to Partners in recent years, but by contrast
considerable cash resource has been
deployed in our back-office infrastructure
project. This programme will shortly be
coming to end, and whilst the successful
completion of the Bluedoor migration in
no way marks an end to our investment in
technology given our ambition to continually
enhance the way in which we enhance our
Partner and client propositions, it does
mark the end of a planned but significant
demand on cash resources that were held
at the outset.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 41
Summary financial information
Page
reference
Year ended
31 December
2019
Year ended
31 December
2018
FUM-based metrics
Gross inflows (£’Billion)
Net inflows (£’Billion)
Total FUM (£’Billion)
Total FUM in gestation (£’Billion)
IFRS-based metrics
IFRS profit after tax (£’Million)
IFRS profit before shareholder tax (£’Million)
Underlying profit before shareholder tax (£’Million)
IFRS basic earnings per share (EPS) (Pence)
IFRS diluted EPS (Pence)
IFRS net asset value per share (Pence)
Dividend per share (Pence)
Cash result-based metrics
Operating cash result (£’Million)
Underlying cash result (£’Million)
Cash result (£’Million)
Underlying cash result basic EPS (Pence)
Underlying cash result diluted EPS (Pence)
EEV-based metrics
EEV operating profit before tax (£’Million)
EEV operating profit after tax basic EPS (Pence)
EEV operating profit after tax diluted EPS (Pence)
EEV net asset value per share (Pence)
Solvency-based metrics
Solvency II net assets (£’Million)
Management solvency buffer (£’Million)
Solvency II free assets (£’Million)
Solvency ratio (Percentage)
43
43
43
44
45
45
46
48
48
48
55
58
59
59
59
15.1
9.0
117.0
40.2
146.6
187.1
218.9
27.6
27.5
177.1
49.71
310.7
273.1
229.4
51.4
51.1
952.0
148.8
148.0
1,320.1
1,056.8
476.2
999.0
132%
15.7
10.3
95.6
33.5
173.5
211.9
278.6
33.0
32.4
192.5
48.22
342.8
309.0
268.7
58.7
57.8
1,002.0
158.0
155.4
1,109.0
1,108.0
491.0
1,060.1
143%
The Cash result should not be confused with the IFRS Consolidated Statement of
Cash Flows which is prepared in accordance with IAS 7.
The Group has £1,429.8 million of liquid
assets (31 December 2018: £1,550.9 million)
largely comprising investments in AAA-
rated money market funds and cash
balances, as demonstrated in the table
below. This represents a considerable
stock of liquidity and excludes the additional
headroom that we have in our borrowing
facilities.
31 December
2019
31 December
2018
£’Million
£’Million
5.2
5.4
1,131.8
1,297.0
292.8
1,429.8
248.5
1,550.9
Fixed interest
securities
Investment in
Collective
Investment
Schemes (AAA-
rated money
market funds)
Cash and cash
equivalents
Total liquid assets
Dividend and concluding remarks
As noted on previous pages, 2019 was
not an easy year, with domestic political
uncertainty compounded by global
economic uncertainty. We were not immune
and our Cash result for the year tells a story
of lower discretionary flows providing less
funding for investment in future growth.
However, our business remains in great
shape and, post the UK election, 2020 is
feeling different. Activity levels are currently
higher and we are seeing a pick-up in
investor confidence which is driving higher
activity levels in our business. This more
positive outlook, coupled with the material
flow of cash to come from our stock of
gestation FUM over the medium term,
has given the Board the confidence to
recommend a 5% increase in the final
dividend to 31.22 pence per share (2018:
29.73 pence per share), giving a full year
dividend of 49.71 pence per share (2018:
48.22 pence per share), growth of 3%.
This will provide for a pay-out ratio of 97%
against the Underlying cash result, which
is higher than our stated medium term aim
of an 80% pay-out ratio.
CRAIG GENTLE
Chief Financial Officer
26 February 2020
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 42
Financial Review
This financial review provides analysis of the Group’s financial position and performance.
The Review is split into the following sections:
SECTION 1: FUNDS UNDER
MANAGEMENT (FUM)
1.1 FUM analysis
1.2 Gestation
As set out on pages 20 and below, FUM
is a key driver of ongoing profitability on
all measures, and so information on
growth in FUM is provided in Section 1.
Find out more on pages 43 and 44.
SECTION 2: PERFORMANCE
MEASUREMENT
2.1 International Financial Reporting
Standards (IFRS)
2.2 Cash result
SECTION 3: SOLVENCY
Section 3 addresses Solvency, which is
an important area given the multiple
regulated activities carried out within the
Group.
2.3 European Embedded Value (EEV)
Find out more on pages 58 and 59.
Section 2 analyses the performance of
the business using three different bases:
IFRS, the Cash result, and EEV.
Find out more on pages 45 to 57.
Our financial business model
Our financial business model is straightforward. We generate
revenue by attracting clients through the value of our proposition,
who trust us with their investments and then stay with us. This
grows our funds under management (FUM), on which we receive:
• advice charges for the provision of valuable, face-to-face
advice; and
• product charges for our manufactured investment, pension
and ISA/unit trust products.
Further information on our charges can be found in the Clients
section on page 14. A breakdown of our fee and commission
income, our primary source of revenue under International
Financial Reporting Standards (IFRS), is set out in Note 4
on page 153.
Most of the initial and ongoing advice charges received are
offset by corresponding remuneration for Partners, and so an
increase in these revenue streams will correspond with an
increase in the associated expense and vice versa. This means
that advice charges are not a major driver of the Group’s
profitability.
Neither are initial product charges, which are levied when a
client first invests into one of our products. Under IFRS initial
product charges are spread over the expected life of the
investment through deferred income (DIR – see page 46 for
further detail), and the contribution to the IFRS result from
spreading these historic charges can be seen in Note 4 as
amortisation of DIR. Initial product charges contribute
immediately to our Cash result through margin arising
on new business.
The primary source of the Group’s profit is the income we
receive from annual product management charges on FUM.
As a result, growth in FUM is a strong positive indicator of
future growth in profits. However, most of our investment
and pension products are structured so that annual product
management charges are not taken for the first six years after
the business is written, so the ongoing benefit of these gross
inflows into FUM for a given year will not be seen until six years
later. This means that the Group always has six years’ worth of
FUM in the ‘gestation’ period. FUM subject to annual product
management charges is known ‘mature’ FUM. This is illustrated
in the diagram on page 20. More information about our fees on
FUM can be found in Section 1 of this Financial Review.
Our income is used to meet overheads, the ongoing product
expenses and to invest in the business. Overhead expenditure
is carefully managed with clear targets set for growth in the
core costs of running the Group’s infrastructure, which are
known as ‘establishment expenses’. Other ongoing expenses,
including payments to Partners, increase with business levels
and are aligned with product charges. The Group is investing
to support long-term growth through St. James’s Place Asia,
Rowan Dartington, our back-office infrastructure programme,
and other strategic initiatives.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT
43
Section 1: Funds under management
1.1 FUM analysis
Our financial business model is to attract and retain FUM on which we receive an annual management fee. As a result, the level of income
we receive is ultimately dependent on the value of our FUM, and so its growth is a clear driver of future growth in profits. The key drivers
for FUM are:
• our ability to attract new funds in the form of gross inflows;
• our ability to retain FUM by keeping unplanned withdrawals at a low level; and
• net investment returns.
The following table shows how FUM evolved during 2019 and 2018:
Opening FUM
Gross inflows
Net investment return
Regular income withdrawals and maturities
Surrenders and part surrenders
Closing FUM
Net inflows
Implied surrender rate as a percentage of average FUM
2019
2018
Investment
Pension UT/ISA and DFM
£’Billion
27.62
2.28
2.96
(0.56)
(1.08)
31.22
0.64
3.7%
£’Billion
40.72
8.66
5.99
(1.31)
(1.22)
52.84
6.13
2.6%
£’Billion
27.21
4.16
3.50
(0.02)
(1.92)
32.93
2.22
6.5%
Total
£’Billion
95.55
15.10
12.45
(1.89)
(4.22)
116.99
8.99
4.0%
Total
£’Billion
90.75
15.70
(5.48)
(1.63)
(3.79)
95.55
10.28
4.1%
Rowan Dartington Group and SJP Asia FUM was £3.74 billion at 31 December 2019 (31 December 2018: £2.90 billion), gross inflows were
£0.77 billion for the year (2018: £0.79 billion) and outflows were £0.19 billion (2018: £0.12 billion).
The following table shows the significant in net Inflows over the past six years, which combined with strong retention has resulted in
consistent growth in FUM. FUM has more than doubled over a five-year period:
Year
2019
2018
2017
2016
2015
2014
FUM as at
1 January
£’Billion
95.6
90.7
75.3
58.6
52.0
44.3
Net
inflows
£’Billion
9.0
10.3
9.5
6.8
5.8
5.1
Investment
return
Other
movements1
FUM as at
31 December
£’Billion
12.4
(5.4)
6.2
8.7
0.8
2.6
£’Billion
–
–
(0.3)
1.2
–
–
£’Billion
117.0
95.6
90.7
75.3
58.6
52.0
1 Other movements in 2017 related to the matching strategy disinvestment, and in 2016 related to the acquisition of the Rowan Dartington Group.
The table below provides a geographical and investment type analysis of FUM at 31 December:
North American Equities
Fixed Income Securities
UK Equities
European Equities
Asia and Pacific Equities
Alternative Investments
Cash
Property
Other
Total
31 December 2019
31 December 2018 1
£’Billion
25.1
20.9
20.2
13.8
13.6
9.5
7.5
2.9
3.5
117.0
Percentage
of total
21%
18%
17%
12%
12%
8%
6%
3%
3%
100%
£’Billion
19.9
16.9
17.6
10.0
10.1
7.5
6.7
3.0
3.9
95.6
Percentage
of total
21%
18%
18%
10%
11%
8%
7%
3%
4%
100%
1 The geographical and investment type analysis of FUM for 31 December 2018 has been restated to better reflect the nature of the underlying investment holdings.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 44
Financial Review continued
1.2 Gestation
As explained in our financial business model on page 20, due to our product structure, at any given time there is a significant amount of FUM
that has not yet started to contribute to the Cash result.
When we attract new FUM there is a margin arising on new business that emerges at the point of investment, which is a surplus of income
over and above the initial costs incurred at the outset. Within our Cash result presentation, this is recognised as it arises, but it is deferred
under IFRS.
Once the margin arising on new business has been recognised the pattern of future emergence of cash from annual product management
charges differs by product. Broadly, annual product management charges from unit trust and ISA business begin contributing positively to
the Cash result from day one, whilst investment and pensions business enter a six-year gestation period during which no net income from
FUM is included in the Cash result. Once this business has reached its six-year maturity point, it starts contributing positively to the Cash
result, and will continue to do so in each year that it remains with the Group.
The following table shows an analysis of FUM, after initial charges, split between mature FUM that is contributing net income to the Cash
result and FUM in gestation which is not yet contributing, as at the year-end for the past five years:
Position as at
31 December 2019
31 December 2018
31 December 2017
31 December 2016
31 December 2015
Mature FUM
contributing to
the Cash result
Gestation FUM
that will contribute
to the Cash result
in the future
£’Billion
76.8
62.1
60.1
50.2
39.4
£’Billion
40.2
33.5
30.6
25.1
19.2
The proportion of new business that moves into gestation has increased over the past five years as follows:
Year
2019
2018
2017
2016
2015
Total FUM
£’Billion
117.0
95.6
90.7
75.3
58.6
Proportion of
gross inflows
into gestation
60.1%
59.4%
56.5%
53.8%
53.5%
The increasing proportion of gross inflows moving into gestation FUM is attributable to the strength of pensions inflows in recent years, in
part reflecting the positive impact to our business from pensions freedom. The long-term nature of this type of investment results in a long
post-gestation period of Cash result emergence.
The following table gives an indication, for illustrative purposes, of the way in which the reduction in fees in the gestation period element of
the Cash result could unwind, and so how the gestation balance of £40.2 billion at 31 December 2019 may start to contribute to the Cash
result over the next six years and beyond. For simplicity it assumes that FUM values remain unchanged, that there are no surrenders, and
that business is written at the start of the year. Actual emergence in the Cash result will reflect the varying business mix of the relevant
cohort and business experience:
Year
2020
2021
2022
2023
2024
2025 onwards
Gestation
FUM future
contribution to
the Cash result
£’Million
36.1
81.3
134.5
202.1
282.2
356.3
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 45
Section 2: Performance measurement
In line with statutory reporting requirements we report profits assessed on an IFRS basis. The presence of a significant life insurance
company within the Group means that, although we are a wealth management Group in substance with a simple business model, we apply
IFRS accounting requirements for insurance companies. These requirements lead to Financial Statements which are more complex than
those of a typical wealth manager and so our IFRS results may not provide the clearest presentation for users who are trying to understand
our wealth management business. Key examples of this include the following:
• Our IFRS Statement of Comprehensive Income includes policyholder tax balances which we are required to recognise as part of our
corporation tax arrangements. This means that our Group IFRS profit before tax includes amounts charged to clients to meet policyholder
tax expenses, which are unrelated to the underlying performance of our business; and
• Our policy is to fully match our liabilities to clients, and so policyholder liabilities increase or decrease to match increases or decreases
experienced on the assets held to cover them. This means that shareholders are not exposed to any gains or losses on the £113.5 billion
of policyholder assets and liabilities recognised on our IFRS Statement of Financial Position, which represented over 96% of our IFRS total
assets and liabilities at 31 December 2019.
To address this, we developed APMs with the objective of stripping out the policyholder element to present solely shareholder impacting
balances, as well as removing items such as deferred acquisition costs and deferred income to reflect Solvency II recognition requirements
and to better match the way in which cash emerges from the business. We therefore present our financial performance and position under
three different bases, using a range of APMs to supplement our IFRS reporting. The three different bases, which are consistent with those
presented last year, are:
• International Financial Reporting Standards (IFRS);
• Cash result; and
• European Embedded Value (EEV).
APMs are not defined by the relevant financial reporting framework (which for the Group is IFRS), but we use them to provide greater insight
to the financial performance, financial position and cash flows of the Group and the way it is managed. A complete Glossary of Alternative
Performance Measures is set out on pages 216 to 218, in which we define each APM used in our Financial Review, explain why it is used and,
if applicable, explain how the measure can be reconciled to the IFRS Financial Statements.
2.1 International Financial Reporting Standards (IFRS)
IFRS profit after tax was £146.6 million in 2019 (2018: £173.5 million), with the result lower year-on-year principally due to two factors: first, a
more challenging new business environment resulted in a lower margin arising from new business; second, a planned increase in investment
expense as we continued to put in place the foundations to underpin future growth in the business. Together, these resulted in a degree of
operational deleverage.
To address the challenge of policyholder tax being included in the IFRS results we focus on the following two APMs, based on IFRS, as our
pre-tax metrics:
• Profit before shareholder tax; and
• Underlying profit.
Further information on these IFRS-based measures is set out below, on pages 45 and 46.
Profit before shareholder tax
This is a profit measure based on IFRS which removes the impact of policyholder tax. The policyholder tax expense or credit is matched by
an equivalent deduction or credit from the relevant funds, which is recorded within fee and commission income in the IFRS Statement of
Comprehensive Income. Policyholder tax does not therefore impact the Group’s overall profit after tax. As a result, profit before shareholder
tax, but after policyholder tax, is a useful metric.
The following table demonstrates the way in which profit before shareholder tax is presented in the IFRS Consolidated Statement of
Comprehensive Income on page 138:
IFRS profit/(loss) before tax
Policyholder tax
IFRS profit before shareholder tax
Shareholder tax
IFRS profit after tax
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
708.9
(521.8)
187.1
(40.5)
146.6
£’Million
(84.6)
296.5
211.9
(38.4)
173.5
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Financial Review continued
2.1 International Financial Reporting Standards (IFRS) continued
Profit before shareholder tax has decreased by 12% year-on-year. As with the reduction in profit after tax, this reflects the more challenging
new business environment and an increase in expenses.
Shareholder tax reflects the tax charge attributable to shareholders and is closely related to the performance of the business. However,
it can vary year-on-year due to several factors: further detail is set out in Note 7 Income and deferred taxes.
Underlying profit
This is profit before shareholder tax (as calculated on the previous page) adjusted to remove the impact of accounting for deferred
acquisition costs (DAC), deferred income (DIR) and the purchased value of in-force business (PVIF).
IFRS requires certain up-front expenses incurred and income received to be deferred. The deferred amounts are initially recognised on
the Statement of Financial Position as a DAC asset and DIR liability, which are subsequently amortised to the Statement of Comprehensive
Income over a future period. Substantially all of the Group’s deferred expenses are amortised over a 14-year period, and substantially all
deferred income is amortised over a six-year period.
The impact of accounting for DAC, DIR and PVIF in the IFRS result is that there is a significant accounting timing difference between the
emergence of accounting profits and actual cash flows. For this reason, underlying profit is considered to be a helpful metric. The following
table demonstrates the way in which IFRS profit reconciles to Underlying profit:
IFRS profit before shareholder tax
Remove the impact of movements in DAC/DIR/PVIF
Underlying profit before shareholder tax
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
187.1
31.8
218.9
£’Million
211.9
66.7
278.6
The impact of movements in DAC, DIR and PVIF on IFRS profit before shareholder tax is further analysed as follows. Due to policyholder tax
on DIR, the amortisation of DIR during the year and DIR on new business for the year set out below cannot be agreed to the figures provided
in Note 8, which is presented before both policyholder and shareholder tax:
Amortisation of DAC
DAC on new business for the year
Net impact of DAC
Amortisation of DIR
DIR on new business for the year
Net impact of DIR
Amortisation of PVIF
Movement in year
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
(96.6)
28.1
(68.5)
179.6
(139.7)
39.9
(3.2)
(31.8)
£’Million
(98.2)
33.7
(64.5)
149.9
(148.9)
1.0
(3.2)
(66.7)
Net impact of DAC
The scale of the £68.5 million negative overall impact of DAC on the IFRS result (2018: negative £64.5 million) is largely due to changes
arising from the 2013 Retail Distribution Review (RDR). After this change, the level of expenses that qualified for deferral reduced significantly,
but the large balance accrued previously is still being amortised. As deferred expenses are amortised over a 14-year period there is a
significant transition period, which could last for another five to six years, over which the amortisation of pre-RDR expenses previously
deferred will significantly outweigh new post-RDR expenses deferred despite significant business growth, resulting in a net negative impact
on IFRS profits.
Net impact of DIR
Income deferred during 2019 is 6% lower than income deferred during 2018, driven by the reduction in new business year-on-year.
Conversely, income released from the deferred income liability has increased, primarily as a result of the increase in new business in
prior year compared to 2017. Together, these effects mean that DIR has had a positive £39.9 million impact on the IFRS result in 2019
(2018: positive £1.0 million).
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 47
2.2 Cash result
The Cash result is used by the Board to assess and monitor the level of cash profit (net of tax) generated by the business. It is based on IFRS
with adjustments made to exclude policyholder balances and certain non-cash items, such as DAC, DIR, deferred tax and non-cash-settled
share option costs. Further details, including the full definition of the Cash result, can be found in the Glossary of Alternative Performance
Measures on pages 216 to 218. Although the Cash result should not be confused with the IAS 7 Consolidated Statement of Cash Flows,
it provides a helpful supplementary view of the way in which cash is generated and emerges within the Group.
The Cash result reconciles to Underlying profit, as presented in Section 2.1, as follows:
Underlying profit
Non-cash-settled share-based payments
Impact of deferred tax
Other
Cash result
Year ended 31 December 2019
Year ended 31 December 2018
Before
shareholder tax
£’Million
218.9
28.7
–
22.8
270.4
After tax
£’Million
172.8
28.7
10.4
17.5
229.4
Before
shareholder tax
£’Million
278.6
33.4
–
(24.8)
287.2
After tax
£’Million
227.9
33.4
31.8
(24.4)
268.7
The decrease in non-cash-settled share-based payments reflects the reduction in expense for adviser share schemes.
The most significant impact of deferred tax in 2019 and 2018 relates to the utilisation of capital losses in the Cash result. This has already
been recognised under IFRS, and hence Underlying profit, through the establishment of deferred tax assets. More information can be found
in Note 7 on pages 156 to 158.
Other represents both the change in tax charge discounting and the difference between IFRS 16 lease expense and lease payments made.
The former represents a timing difference between the tax liability due to HMRC and tax deductions charged to clients. The size of the
difference will increase as markets grow and decrease as markets fall. This timing difference is adjusted out of the Cash result, which
therefore does not reflect the negative effect arising in the IFRS result as a consequence of market increases during the year (2018:
positive effect as a consequence of market falls).
The following table shows an analysis of the Cash result using three different measures:
• Operating cash result
This measure represents the regular emergence of cash from day-to-day business operations;
• Underlying cash result
This measure includes the cost of a number of strategic investments which are being incurred and expensed in the year, but which
are expected to create long-term value; and
• Cash result
This measure includes the short-term costs associated with the back-office infrastructure project together with other items of a
one-off nature.
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Financial Review continued
2.2 Cash result continued
Consolidated cash result (presented post-tax)
Operational
Net annual management fee
Reduction in fees in gestation period
Net income from FUM
Margin arising from new business
Establishment expenses
Operational development expenses
Regulatory fees and FSCS levy
Academy
Shareholder interest1
Tax relief from capital losses
Miscellaneous1
Operating cash result
Asia
DFM
Strategic development costs
Underlying cash result
Back-office infrastructure development costs
Variance
Cash result
Year ended 31 December 2019
In-force
New business
Note
£’Million
£’Million
Total
£’Million
Year ended
31 December
2018
Total
£’Million
718.0
(356.3)
361.7
–
(18.6)
–
(3.1)
–
12.9
10.3
(14.3)
348.9
–
–
–
348.9
63.2
–
63.2
127.5
(167.6)
(22.3)
(28.1)
(10.9)
–
–
–
(38.2)
(19.9)
(9.8)
(7.9)
(75.8)
1
1
1
2
3
3
3
3
5
6
7
8
8
3
3
9
781.2
(356.3)
424.9
127.5
(186.2)
(22.3)
(31.2)
(10.9)
12.9
10.3
(14.3)
310.7
(19.9)
(9.8)
(7.9)
273.1
(38.8)
(4.9)
229.4
694.6
(306.5)
388.1
140.8
(170.6)
(20.1)
(20.9)
(8.4)
7.4
29.7
(3.2)
342.8
(16.7)
(10.1)
(7.0)
309.0
(35.8)
(4.5)
268.7
1 Funding-related expenses, including interest on borrowings and securitisation costs, of £6.7 million in the year to 31 December 2018 have been reclassified from
Miscellaneous to Shareholder interest to better reflect the nature of the expense.
Notes to the Cash result
1. Net income from FUM
The net annual management fee is the net manufacturing margin that the Group retains from FUM after payment of the associated costs,
for example, investment advisory fees and Partner remuneration. Each product has standard fees, but they vary between products. Overall
post-tax margin on FUM reflects business mix but also the different tax treatment, particularly Life tax on onshore investment business.
As noted on page 20 however, our investment and pension business product structure means that these products do not generate net Cash
result (after the margin arising from new business) during the first six years, (the gestation period). This is reflected in the reduction in fees
in gestation period line. Further information is provided on page 44.
Net income from FUM reflects Cash result income from FUM that has reached maturity and, consistent with our 2019 half-year reporting,
this line is the focus of our explanatory analysis. As with net annual management fees, the average rate can vary between time periods with
business mix and tax. For 2019, our net income is 0.63% (post-tax) of FUM (2018: 0.65%). In 2020, we expect this margin on FUM to remain
in the range of 0.63% – 0.65%.
Net income from Asia and DFM FUM is not included in this line, instead this is included in the net Cash result presented separately for Asia
and DFM.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 49
2. Margin arising from new business
This is the net positive Cash result impact of new business in the year, reflecting gross inflows and production related expenses. The driver
for this income line is gross inflows and the result is expected to move broadly in line with the pattern of gross inflows attracted, subject to
the timing effect associated with an element of new business costs being linked to prior year production levels.
3. Overhead expenses and development expenses
Expenses are treated in two different ways in the Cash result depending on their type:
i. Overhead expenses, such as establishment expenses, and development expenses which relates to the Group’s core business such
as back-office infrastructure costs, are presented in separate lines on the face of the Cash result.
ii. Expenses which vary with business volumes, such as payments to Partners and third-party administration expenses, and expenses
which relate to investment in specific areas of the business such as DFM are netted from the relevant income lines rather than
presented separately.
The table below provides a breakdown of the Group’s overhead and development expenses as presented in separate lines in the Cash result:
Overhead expenses
Establishment expenses
Regulatory fees and FSCS levy
Academy
Total overhead expenses
Development expenses
Operational development costs
Strategic development costs
Back-office infrastructure costs
Total development expenses
Total expenses presented separately
on the face of the Cash result
Year ended 31 December 2019
Year ended 31 December 2018
Before tax
Tax rate
£’Million
Percentage
After tax
£’Million
Before tax
Tax rate
£’Million
Percentage
After tax
£’Million
19.0%
19.0%
19.0%
19.0%
19.0%
19.0%
229.9
38.5
13.4
281.8
27.5
9.8
47.9
85.2
367.0
186.2
31.2
10.9
228.3
22.3
7.9
38.8
69.0
210.6
25.7
10.4
246.7
24.8
8.8
44.1
77.7
297.3
324.4
19.0%
19.0%
19.0%
19.0%
19.0%
19.0%
170.6
20.9
8.4
199.9
20.1
7.0
35.8
62.9
262.8
Overhead expenses
Overhead expenses represent the cost of running the Group.
Establishment costs have increased by 9% year-on-year as additional expenses are incurred to support the growth in the Partnership.
The costs of operating in a regulated sector include regulatory fees and the Financial Services Compensation Scheme (FSCS) levy.
On a post-tax basis, these are as follows:
FSCS levy
Regulatory fees
FSCS levy and regulatory fees
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
22.3
8.9
31.2
£’Million
12.8
8.1
20.9
Our position as a market-leading provider of advice means we make a very substantial contribution to supporting the FSCS, thereby providing
protection for clients of other businesses in the sector that fail. Over the last few years the levy has been at an elevated level, which was
further exacerbated this year by the supplementary levy announced in December 2019. Whilst we remain hopeful that it will return to a more
normalised level in future, we are expecting an increase of at least 15% in 2020 based on the indicative levy information announced for the
2020/21 funding year.
For the 2019/20 funding year the FSCS levy covers a 12-month period, compared to nine months for the 2018/19 funding year. As a result,
the post-tax levy expense of £22.3 million recognised in the year to 31 December 2019 reflects the levy for a 12-month period, whereas the
£12.8 million post-tax levy expense recognised in the year to 31 December 2018 was in respect of a nine-month period.
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Financial Review continued
2.2 Cash result continued
Academy expenses represent the cost of running our Academy and Next Generation Academy. They have increased in 2019 as a result of
expansion of the programme both geographically and in terms of the number of individuals recruited into the programme.
Development expenses
Operational development costs have increased in 2019 due to further investment, particularly in our investment management approach,
technology infrastructure and cyber security.
Strategic development costs continue to increase as result of investment in the business, particularly from the creation of regional hubs to
better support our Partner practices and from our acquisition projects.
Costs associated with our Bluedoor back-office infrastructure programme have increased in 2019 due to increased levels of activity leading
up to the final successful migration of business, and to complete internal system changes to facilitate the decommissioning of the legacy
system. We expect to spend up to £10 million in 2020 completing the final decommissioning work, after which point this cost will cease.
4. Reconciliation to IFRS expenses
In order to reconcile the overhead and development expenses presented on separate lines in the Cash result to the total IFRS expenses
set out in the Statement of Comprehensive Income on page 138, the expenses which vary with business volumes and those which relate
to investment in specific areas of the business, both of which are included in the Cash result but are netted against the relevant income
lines and so cannot be seen explicitly, and certain IFRS expenses which by definition are not included in the Cash result need to be added in:
Total expenses presented separately on the face of the Cash result before tax
Expenses which vary with business volumes
Other performance related costs
Payments to Partners
Investment expenses
Third-party administration
Other
Expenses relating to investment in specific areas of the business
Asia expenses
DFM expenses
Total expenses included in the Cash result
Expenses which are not included in the Cash result
Amortisation of DAC and PVIF, net of additions
Non-cash-settled share-based payments expenses
Other
Total IFRS Group expenses before tax
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
367.0
£’Million
324.4
120.4
814.7
89.8
110.6
48.2
23.4
26.7
1,600.8
71.7
28.7
6.6
1,707.8
137.2
781.9
106.1
100.4
44.6
21.3
24.5
1,540.4
67.7
33.4
–
1,641.5
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 51
Expenses which vary with business volumes
Other performance related costs, for both Partners and employees, vary with the level of new business and the operating profit
performance of the business. Payments to Partners, investment expenses and third-party administration costs are met through
charges to clients, and so any variation in them from changes in the volumes of new business or the level of the stock markets does
not impact Group profitability.
Each of these items are recognised within the net annual management fee or margin arising from new business lines of the Cash result,
depending on the nature of the expense.
Other expenses include interest expense and bank charges, operating costs of acquired independent financial advisers (IFAs) and donations
to the St. James’s Place Charitable Foundation. They are recognised across various lines in the Cash result, including shareholder interest
and miscellaneous.
Expenses relating to investment in specific areas of the business
Asia expenses and DFM expenses have both increased during the year as investment is required to support their growth. Such investment
will continue going forwards.
Asia and DFM expenses are presented net of the income they generate in the Asia and DFM lines of the Cash result.
Expenses which are not included in the Cash result
DAC amortisation, net of additions, PVIF amortisation and non-cash-settled share-based payment expenses are the primary expenses which
are recognised under IFRS but are excluded from the Cash result.
5. Shareholder interest
This is the income accruing on the investments and cash held for regulatory purposes together with the interest received on the surplus
capital held by the Group. It is presented net of funding-related expenses, including interest paid on borrowings and securitisation costs.
6. Tax relief from capital losses
In recent years, a deferred tax asset has been established in IFRS for historic capital losses which are regarded as being capable of utilisation
over the medium term. The tax asset is ignored for Cash result purposes as it is not fungible, but instead the cash benefit realised when
losses are utilised is shown in the tax relief from capital losses line. Utilisation during the year of £10.3 million tax value (2018: £29.7 million)
was in line with previous guidance that gave the expected rate of utilisation as c.£10 – £12 million per year. Going forwards we expect the rate
of utilisation to slow to c.£8 – £10 million per year due to the extension of the existing loss restriction rules to cover capital losses, which is
expected to have effect from 1 April 2020.
7. Miscellaneous
This category represents the cash flow of the business not covered in any of the other categories. It includes ongoing administration
expenses and associated policy charges, utilisation of the deferred tax asset in respect of prior years’ unrelieved expenses (due to structural
timing differences in the life company tax computation) and movements in the fair value of renewal income assets.
8. Asia and DFM
These lines represent the net income from Asia and DFM FUM, including the Asia and DFM expenses set out in note 4 on the previous
page. Both of these business areas continue to grow: combined, Asia and DFM FUM has increased 29% year-on-year, from £2.90 billion at
31 December 2018 to £3.74 billion at 31 December 2019. Significant investment is required to support this growth hence their contribution
to the Cash result is currently a net expense. However, as set out in our financial business model on page 20, growth in FUM is a strong
positive indicator of future profits.
9. Variance
This reflects a number of small non-recurring items incurred during the year.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 52
Financial Review continued
2.2 Cash result continued
Solvency II Net Assets Balance Sheet
The Cash result is derived from the IFRS Consolidated Statement of Financial Position in a two-stage process:
Stage 1: Solvency II Net Assets Balance Sheet
Firstly, the IFRS Consolidated Statement of Financial Position is adjusted for a number of material balances that reflect policyholder interests
in unit-linked liabilities together with the underlying assets that are held to match them. Secondly, it is adjusted for a number of non-cash
‘accounting’ balances such as DIR, DAC and associated deferred tax. The result of these adjustments is the Solvency II Net Assets Balance
Sheet and the following table shows the way in which it has been calculated for 2019.
31 December 2019
Assets
Goodwill
Deferred acquisition costs
Purchased value of in-force business
Computer software
Property and equipment
Deferred tax assets
Reinsurance assets
Other receivables
Income tax assets
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Deferred tax liabilities
Insurance contract liabilities
Deferred income
Other provisions
Other payables
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Income tax liabilities
Preference shares
Total liabilities
Net assets
IFRS
Balance Sheet
Adjustment 1
Adjustment 2
Solvency II
Net Assets
Balance Sheet
Solvency II
Net Assets
Balance Sheet:
2018
Note
£’Million
£’Million
£’Million
£’Million
£’Million
15.6
490.0
20.8
8.9
166.3
131.1
88.6
2,127.1
–
1,750.9
72,694.2
26,275.6
5,166.4
1,342.9
7,013.6
117,292.0
403.7
493.7
556.6
614.7
40.6
1,782.7
83,558.5
948.8
27,830.0
115.4
0.1
116,344.8
947.2
–
–
–
–
–
–
–
(733.1)
–
(1,750.9)
(72,694.2)
(26,270.4)
(4,034.6)
(1,342.9)
(6,720.8)
(113,546.9)
–
–
(464.2)
–
–
(745.4)
(83,558.5)
(948.8)
(27,830.0)
–
–
(113,546.9)
–
1
2
3
4
4
4
5
2
6
1, 3
7
(15.6)
(490.0)
(20.8)
(8.9)
–
(32.6)
(88.6)
(2.1)
–
–
–
–
–
–
–
(658.6)
–
(57.5)
(92.4)
(614.7)
–
(3.6)
–
–
–
–
–
(768.2)
109.6
–
–
–
–
166.3
98.5
–
1,391.9
–
–
–
5.2
1,131.8
–
292.8
3,086.5
403.7
436.2
–
–
40.6
1,033.7
–
–
–
115.4
0.1
2,029.7
1,056.8
–
–
–
–
28.5
111.6
–
890.1
9.7
–
–
5.4
1,297.0
–
248.5
2,590.8
348.6
154.5
–
–
22.7
956.9
–
–
–
–
0.1
1,482.8
1,108.0
Adjustment 1 strips out the policyholder interest in unit-linked assets and liabilities, to present solely shareholder impacting balances.
For further information refer to Note 11 Investments, investment property and cash and cash equivalents to the IFRS Financial Statements.
Adjustment 2 removes items such as DAC, DIR, PVIF and their associated deferred tax balances from the IFRS Statement of Financial
Position to bring it in line with Solvency II recognition requirements.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT
53
Notes to the Solvency II Net Assets Balance Sheet
1. Property and equipment, and other payables
On 1 January 2019, the Group adopted IFRS 16 Leases. This new accounting standard fundamentally changes the accounting for lessees,
that is an entity which leases an asset from its owner, as it requires the recognition of almost all leases on the Statement of Financial
Position. The right to use the leased item is recognised as an asset, and the obligation to pay lease rentals is recognised as a liability.
As a result, the property and equipment line has increased significantly year-on-year: At 31 December 2019 it includes £126.6 million of
leased assets (31 December 2018: nil). Lease liabilities of £118.6 million are recognised within the other payables line (31 December 2018:
nil). The initial recognition of lease liabilities is a driver behind the increase in other payables on the Solvency II Net Assets Balance Sheet,
which increased from £956.9 million at 31 December 2018 to £1,033.7 million at 31 December 2019.
Further information on the adoption of IFRS 16 can be found in Note 1 Accounting policies to the IFRS Financial Statements. Additionally,
Notes 9, 10 and 13 provide further detail on property and equipment, leases and other payables respectively.
2. Deferred tax assets and liabilities
Analysis of deferred tax assets and liabilities, including how they have moved year-on-year, is set out in Note 7 Income and deferred taxes.
The most significant movement in the year is the increase in deferred tax liability associated with impact of stock markets on investments
and the resulting increase in policyholder tax liability.
3. Other receivables and other payables
Detailed breakdowns of other receivables and other payables can be found in Note 12 Other receivables and Note 13 Other payables of the
IFRS Financial Statements.
Other receivables on the Solvency II Net Assets Balance Sheet have increased from £890.1 million at 31 December 2018 to £1,391.9 million
at 31 December 2019, principally reflecting movement in fund tax deductions. This increase is associated with, and largely offsets, the
increase in deferred tax liability above.
4. Liquidity
Cash generated by the business is held in highly rated government securities, AAA-rated money market funds, and bank accounts. Although
these are all highly liquid, only the latter is classified as cash and cash equivalents on the Solvency II Net Assets Balance Sheet. The total
liquid assets held are:
Fixed interest securities
Investment in Collective Investment Schemes (AAA-rated money market funds)
Cash and cash equivalents
Total liquid assets
31 December
2019
31 December
2018
£’Million
5.2
1,131.8
292.8
1,429.8
£’Million
5.4
1,297.0
248.5
1,550.9
The Group’s primary source of net cash generation is product charges. In line with profit generation, as most of our investment and pension
business enters a gestation period, there is no cash generated (apart from initial charges) for the first six years of an investment. This means
that the amount of cash generated will increase year-on-year as FUM in the gestation period becomes mature and is subject to annual
product management charges. Unit trust and ISA business does not enter the gestation period, and so generates cash immediately from
the point of investment.
Cash is used to invest in the business and to pay the Group dividend. Our dividend policy is set such that appropriate cash is retained in the
business to support the investment needed to meet our future growth aspirations.
Our most significant investment in the business in recent years has been the development of Bluedoor, which has had a substantial impact
on our liquid assets, and borrowings positions. Since the inception of the project in 2014 we have capitalised £360.1 million of development
spend on Bluedoor in our operational readiness prepayment asset. This is in addition to £183.9 million of internal project costs that we have
expensed as incurred. The total cash outflow on the project is £543.7 million.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 54
Financial Review continued
2.2 Cash result continued
5. Borrowings
The Group has two different types of borrowings: senior unsecured corporate borrowings, which are used to manage working capital and
to fund investment in the business; and a senior tranche of non-recourse securitisation loan notes, which is secured on a legally segregated
portfolio of the Group’s business loans to Partners. Holders of the senior tranche of non-recourse securitisation loan notes have no recourse
to the assets held by any other entity within the Group:
Corporate borrowings: bank loans
Corporate borrowings: loan notes
Total senior unsecured corporate borrowings
Senior tranche of non-recourse securitisation loan notes
Total borrowings
31 December
2019
31 December
2018
£’Million
173.3
113.8
287.1
116.6
403.7
£’Million
164.8
113.8
278.6
70.0
348.6
After adjusting for this non-recourse debt, borrowings have increased broadly in line with the scale of the business over time, and we remain
comfortable not only with our level of borrowings but also the headroom we have within our range of facilities. Further information is
provided in Note 16 Borrowings and financial commitments of the IFRS Financial Statements.
6. Other provisions
Further information on other provisions, including how the balance has moved year-on-year, is set out in Note 15 Other provisions.
7. Income tax liabilities
The Group has an income tax liability of £115.4 million at 31 December 2019 compared to an income tax asset of £9.7 million at
31 December 2018. This is due to a current tax charge of £227.9 million and tax paid of £102.8 million during the year. Further detail
on the current tax charge and tax paid is provided in Note 7 Income and deferred taxes.
Stage 2: Movement in Solvency II Net Assets Balance Sheet
After the Solvency II Net Assets Balance Sheet has been determined, the second stage in the derivation of the Cash result identifies a number
of movements in that balance sheet which do not represent cash flows for inclusion within the Cash result. The following table explains how
the overall Cash result reconciles into the total movement:
Opening Solvency II net assets
Dividend paid
Issue of share capital and exercise of options
Consideration paid for own shares
Proceeds from exercise of shares held in trust
Change in deferred tax
Change in tax discounting
Change in goodwill, intangibles and other non-cash movements
Cash result
Closing Solvency II net assets
2.3 European Embedded Value (EEV)
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
1,108.0
(256.0)
8.7
(0.1)
0.2
(10.4)
(10.0)
(13.0)
229.4
1,056.8
£’Million
1,095.1
(242.7)
2.8
(6.0)
–
(31.8)
23.4
(1.5)
268.7
1,108.0
Wealth management differs from most other businesses, in that the expected shareholder income from client investment activity emerges
over a long period in the future. We therefore supplement the IFRS and Cash results by providing additional disclosure on an EEV basis, which
brings into account the net present value of the expected future cash flows. We believe that a measure of the total economic value of the
Group’s operating performance is useful to investors.
As in previous reporting, our EEV continues to be calculated on a basis determined in accordance with the EEV principles originally issued
in May 2004 by the Chief Financial Officers Forum (CFO Forum) and supplemented in both October 2005 and, following the introduction of
Solvency II, in April 2016.
Many of the principles and practices underlying EEV are similar to the requirements of Solvency II. In the prior year, we had made a number of
small changes to our EEV methods and assumptions to align them as closely as possible to Solvency II. These changes were reflected in the
Economic assumption changes line.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT The table below and accompanying notes summarise the profit before tax of the combined business:
Funds management business
Distribution business
Back-office infrastructure development
Other
EEV operating profit
Investment return variance
Economic assumption changes
EEV profit before tax
Tax
EEV profit after tax
55
Note
1
2
3
4
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
1,121.2
(55.6)
(47.9)
(65.7)
952.0
768.6
(27.0)
1,693.6
(286.8)
1,406.8
£’Million
1,151.6
(38.9)
(44.1)
(66.6)
1,002.0
(460.9)
(15.1)
526.0
(89.7)
436.3
A reconciliation between EEV operating profit before tax and IFRS profit before tax is provided in Note 3.
Notes to the EEV result
1. Funds management business EEV operating profit
The funds management business operating profit has decreased to £1,121.2 million (2018: £1,151.6 million) and a full analysis of the result is
shown below:
New business contribution
Profit from existing business
– unwind of the discount rate
– experience variance
– operating assumption change
Investment income
Funds management EEV operating profit
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
793.0
248.5
82.1
(9.9)
7.5
1,121.2
£’Million
852.7
242.3
24.5
25.9
6.2
1,151.6
The new business contribution for the year at £793.0 million (2018: £852.7 million) was 7% lower than the prior year, reflecting both the
decrease in new business volumes and operational deleverage during the year as fixed expenses and overheads have not reduced in line
with volumes.
The unwind of the discount rate for the year increased to £248.5 million (2018: £242.3 million), reflecting the higher opening value of in-force
business. The experience variance during the year was £82.1 million (2018: £24.5 million), reflecting positive retention experience. The
impact of operating assumption changes in the year was a negative £9.9 million, reflecting revisions to the expense basis and the treatment
of partial withdrawals on offshore bond business. The significant benefit of £25.9 million in 2018 reflected a reduction in the allowance for
dual running costs associated with the Bluedoor migrations following improved understanding of the expected migration dates.
2. Distribution business
The distribution loss includes the positive gross margin arising from advice income less payments to advisers offset by the costs of investment
in growing the Partnership, building the distribution capabilities in Asia and a charge of £18.9 million for the FSCS levy (2018: £11.3 million).
3. Investment return variance
The investment return variance reflects the capitalised impact on the future annual management fees resulting from the difference between
the actual and assumed investment returns. Given the size of our FUM, a small difference can result in a large positive or negative variance.
The typical investment return on our funds during the year was positive 15% after charges, compared to the assumed investment return of
positive 2%. This resulted in a positive investment return variance of £768.6 million (2018: negative £460.9 million).
4. Economic assumption changes
The negative variance of £27.0 million arising in the year (2018: negative £15.1 million) reflects the negative effect from a reduction in real
yields over the year.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 56
Financial Review continued
2.3 European Embedded Value (EEV) continued
New business margin
The largest single element of the EEV operating profit (analysed in the previous section) is the new business contribution. The level of new
business contribution generally moves in line with new business levels. To demonstrate this link, and aid understanding of the results, we
provide additional analysis of the new business margin (the ‘margin’). This is calculated as the new business contribution divided by the gross
inflows, and is expressed as a percentage.
The table below presents the margin before tax from our manufactured business:
Investment
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Pension
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Unit Trust and DFM
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Total business
New business contribution (£’Million)
Gross inflows (£’Billion)
Margin (%)
Post-tax margin (%)
Year ended
31 December
2019
Year ended
31 December
2018
123.0
2.28
5.4
434.0
8.66
5.0
236.0
4.16
5.7
793.0
15.10
5.3
4.4
129.0
2.41
5.4
454.2
8.76
5.2
269.5
4.53
6.0
852.7
15.70
5.4
4.5
The overall margin for the year was lower at 5.3% (2018: 5.4%) reflecting a decrease in new business volumes and an increase in
establishment expenses during the year.
Economic assumptions
The principal economic assumptions used within the cash flows at 31 December are set out below:
Risk-free rate
Inflation rate
Risk discount rate (net of tax)
Future investment returns:
– Gilts
– Equities
– Unit-linked funds
Expense inflation
Year ended
31 December
2019
0.9%
3.3%
4.0%
Year ended
31 December
2018
1.4%
3.4%
4.5%
0.9%
3.9%
3.2%
3.7%
1.4%
4.4%
3.7%
3.8%
The risk-free rate is set by reference to the yield on ten-year gilts. Other investment returns are set by reference to the risk-free rate.
The inflation rate is derived from the implicit inflation in the valuation of ten-year index-linked gilts. This rate is increased to reflect higher
increases in earnings-related expenses.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 57
EEV sensitivities
The table below shows the estimated impact on the reported value of new business and EEV to changes in various EEV calculated
assumptions. The sensitivities are specified by the EEV principles and reflect reasonably possible levels of change. In each case, only the
indicated item is varied relative to the restated values.
Value at 31 December 2019
100bp reduction in risk-free rates, with corresponding change
in fixed interest asset values
10% increase in withdrawal rates
10% reduction in market value of equity assets
10% increase in expenses
100bp increase in assumed inflation
Change in new business
contribution
Change in European
Embedded Value
Note
1
2
3
4
5
Pre-tax
£’Million
793.0
(26.7)
(55.0)
–
(22.0)
(29.5)
Post-tax
£’Million
658.8
(22.3)
(45.7)
–
(18.3)
(24.6)
Post-tax
£’Million
7,059.8
(116.5)
(371.8)
(721.4)
(86.1)
(132.8)
Notes to the EEV sensitivities
1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that
the sensitivity assumes a corresponding change in all investment returns but no change in inflation.
2. The 10% increase is applied to the withdrawal rate. For instance, if the withdrawal rate is 8% then a 10% increase would reflect a change
to 8.8%.
3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in
recent years the proportion invested directly in UK and overseas equities has exceeded 70%.
4. For the purposes of this sensitivity only non-fixed elements of the expenses are increased by 10%.
5. This reflects a 100bp increase in the assumed RPI underlying the expense inflation calculation.
100bp reduction in risk discount rate
Change in new business
contribution
Change in European
Embedded Value
Pre-tax
£’Million
96.0
Post-tax
£’Million
79.7
Post-tax
£’Million
543.3
Although not directly relevant under a market-consistent valuation, this sensitivity shows the level of adjustment which would be required to
reflect differing investor views of risk.
Analysis of the EEV result
The table below provides a summarised breakdown of the embedded value position at the reporting dates:
Value of in-force business
Solvency II net assets
Total embedded value
Net asset value per share
31 December
2019
31 December
2018
£’Million
6,003.0
1,056.8
7,059.8
Pence
1,320.1
£’Million
4,763.5
1,108.0
5,871.5
Pence
1,109.0
The EEV result above reflects the specific terms and conditions of our products. Our pension business is split between two portfolios.
Our current product, the Retirement Account, was launched in 2016 and incorporates both pre-retirement and post-retirement phases of
this investment in the same product. Earlier business was written in our separate Retirement Plan and Drawdown Plan products, targeted
at the each of the two phases separately, and therefore has a slightly shorter term and lower new business margin.
Our experience is that much of our Retirement Plan business converts into Drawdown business at retirement, but, in line with the EEV
guidelines, we are required to defer recognition of the additional value from the Drawdown Plan until it is crystallised. If instead we were
to assess the future value of Retirement Plan business (beyond the immediate contract boundary) in a more holistic fashion, in line with
Retirement Account business, this would result in an increase of approximately £385 million to our embedded value (31 December 2018:
approximately £350 million).
In November 2019, the UK Prime Minister pledged to postpone the reduction in the corporation tax rate to 17%. This change has yet to
be substantively enacted and therefore is not reflected in the total embedded value presented above. The impact, were the change to be
substantively enacted, would be a reduction our embedded value of approximately £98 million.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 58
Financial Review continued
Section 3: Solvency
St. James’s Place has a business model and risk appetite that results in underlying assets being held that fully match with our obligations to
clients. Our clients can access their investments ‘on-demand’ and because the encashment value is matched, movements in equity markets,
currency markets, interest rates, mortality, morbidity and longevity have very little impact on our ability to meet liabilities. We also have a
prudent approach to investing shareholder funds and surplus assets in cash, AAA-rated money market funds and highly rated government
securities. The overall effect of the business model and risk appetite is a resilient solvency position capable of enabling liabilities to be met
even through adverse market conditions.
Our Life businesses are subject to the Solvency II capital regime which applied for the first time in 2016. Given the relative simplicity of our
business compared to many, if not most, other organisations that fall within the scope of Solvency II, we have continued to manage the
solvency of the business on the basis of holding assets to match client unit-linked liabilities plus a management solvency buffer (MSB). This
has ensured that, not only can we meet client liabilities at all times (beyond the Solvency II requirement of a ‘1 in 200 years’ event), but we also
have a prudent level of protection against other risks to the business. At the same time, we have ensured that the resulting capital held meets
with the requirements of the Solvency II regime, to which we are ultimately accountable.
For the year ended 31 December 2019 we reviewed the level of our MSB and concluded that it was appropriate to decrease the MSB for the
Life businesses from £355 million to £320 million. The decrease primarily reflects the reduction in risk in our UK Life business as we come
towards the end of the back-office infrastructure programme. All of this business is administered on Bluedoor following the final successful
migrations during the year.
The Group’s overall Solvency II net assets position, MSB and management solvency ratios are as follows:
31 December 2019
Solvency II net assets
MSB
Management solvency ratio
1 After payment of year-end intra-group dividend.
2 Before payment of the Group final dividend.
Life1
£’Million
337.7
320.0
106%
Other
regulated
£’Million
235.8
156.2
151%
Other2
£’Million
483.3
–
–
Total
£’Million
1,056.8
476.2
–
2018
Total
£’Million
1,108.0
491.0
–
Solvency II net assets reflect the assets of the Group in excess of those matching clients’ unit linked liabilities. It includes a £98.5 million
(2018: £111.6 million) deferred tax asset which is not immediately fungible, although we expect it will be utilised over the next ten years.
The actual rate of utilisation will depend on business growth and external factors, particularly investment market conditions.
Solvency II Balance Sheet
Whilst we focus on Solvency II net assets and the MSB to manage solvency, we provide additional information about the Solvency II free
asset position for information. The presentation starts from the same Solvency II net assets, but includes recognition of an asset in respect
of the expected value of in-force cash flows (VIF) and a risk margin (RM) reflecting the potential cost to secure the transfer of the business
to a third party. The Solvency II net assets, VIF and RM comprise the ‘own funds’, which are assessed against our regulatory solvency capital
requirement (SCR), reflecting the capital required to protect against a range of ‘1 in 200’ stresses. The SCR is calculated on the standard
formula approach. No allowance has been made for transitional provisions in the calculation of technical provisions or the SCR.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 59
An analysis of the Solvency II position for our Group, split by regulated and non-regulated entities at the year end is presented in the
table below:
31 December 2019
Solvency II net assets
Value of in-force (VIF)
Risk margin
Own funds (A)
Solvency capital requirement (B)
Solvency II free assets
Solvency ratio (A/B)
1 After payment of year-end intra-group dividend.
2 Before payment of the Group final dividend.
Life1
£’Million
337.7
4,303.5
(1,213.3)
3,427.9
(3,059.4)
368.5
112%
Other
regulated
£’Million
235.8
–
–
235.8
(88.6)
147.2
266%
Other2
Total
£’Million
483.3
–
–
483.3
–
483.3
£’Million
1,056.8
4,303.5
(1,213.3)
4,147.0
(3,148.0)
999.0
132%
2018
Total
£’Million
1,108.0
3,388.8
(989.4)
3,507.4
(2,447.3)
1,060.1
143%
The solvency ratio after payment of the proposed Group final dividend is 126% at the year end (2018: 137%).
In 2018 the solvency ratio reflected the positive effect of the equity dampener depressing the market risk capital component. Management
chose not to release this volatile additional amount of free assets, which course of action has been justified through its unwind over the year.
At 31 December 2019 the equity dampener is (0.1)% (31 December 2018: (6.3)%). We continue to target a solvency ratio of 110% for SJPUK,
our largest insurance subsidiary, as agreed with our regulator the PRA. As the business grows, the weighting of the balance sheet towards
SJPUK will result in a gradual dilution of the group solvency ratio, but this will not reflect any change in risk appetite, nor risk inherent in
the business.
Solvency II sensitivities
The table below shows the estimated impact on the Solvency II free assets, the SCR and the solvency ratio from changes in various
assumptions underlying the Solvency II calculations. In each case, only the indicated item is varied relative to the restated values.
The solvency ratio is not very sensitive to changes in experience or assumptions, and, due to the approach to matching unit-linked
liabilities with appropriate assets, can move counter-intuitively depending on circumstances, as demonstrated by the sensitivity
analysis presented below:
Value at 31 December 2019
100bp reduction in risk free rates, with corresponding change in fixed interest asset
values
10% increase in withdrawal rates
10% reduction in market value of equity assets
10% increase in expenses
100bp increase in assumed inflation
Solvency II
free assets
£’Million
999.0
897.6
1,039.3
902.5
949.5
913.4
Solvency II
capital
requirement
£’Million
3,148.0
3,148.3
2,961.4
2,835.0
3,142.2
3,150.4
Note
1
2
3
4
5
Solvency
ratio
%
132%
129%
135%
132%
130%
129%
Notes to the Solvency II sensitivities
1. This is the key economic basis change sensitivity. The business model is relatively insensitive to change in economic basis. Note that the
sensitivity assumes a corresponding change in all investment returns but no change in inflation.
2. The 10% increase is applied to the lapse rate. For instance, if the lapse rate is 8% then a 10% increase would reflect a change to 8.8%.
3. For the purposes of this sensitivity all unit-linked funds are assumed to be invested in equities. The actual mix of assets varies and in
recent years the proportion invested directly in UK and overseas equities has exceeded 70%.
4. For the purposes of this all expenses are increased by 10%.
5. This reflects a 100bp increase in the assumed RPI underlying the expense inflation calculation.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 60
Risk and Risk Management
Overview and culture
Effective risk management is critical to the
success of the St. James’s Place Group.
We are exposed to a wide variety of inherent
risks due to the business activities and the
industry in which we operate. We choose
carefully the risks we accept and those to
limit or avoid through the design and
operation of our client and Partner
proposition, including the way in which it is
delivered and administered.
In addition, the Group is also exposed to a
number of current and emerging external
factors and trends (including political risks
such as Brexit, macro-economic factors,
cyber crime and climate change) some of
which may impact on our short- and/or
longer-term profitability. Under the leadership,
direction and oversight of our Board, these
risks are carefully understood and managed
to achieve our client and business objectives
(as set out on pages 14 to 23).
We do not, and cannot, seek to eliminate
risk entirely, rather we seek to understand
our risks fully and manage them
appropriately. The emphasis is on applying
effective risk management strategies, so
that all material risks are identified and
managed within the agreed risk appetite.
Risk management is embedded within
our culture and is therefore a core aspect
of decision-making.
Risk management forms a key part of
the business planning process, including
decisions on strategic developments to our
client and Partner propositions, investments
and dividend payments.
Our risk and controls management framework
The internal control environment is built
upon a strong control culture and
organisational delegation of responsibility.
The ‘first line’ business is responsible and
accountable for risk management. This
is then combined with oversight from
the ‘second line’ risk, controls and
compliance functions and assurance
from the ‘third line’ internal audit to
form a ‘three lines of defence’ model.
The risk management and control
framework is the combined processes
by which the Group identifies, assesses,
measures, manages and monitors the
risks that may impact on the successful
delivery of its strategic objectives. Based
upon our risk appetite, the risks identified
are either accepted or appropriate actions
are taken to mitigate them.
The Board, through the Risk Committee,
takes an active role in overseeing the Risk
Management Framework, for which it is
responsible. As part of this the Board
robustly assesses its principal and emerging
risks, which are considered in regular
reporting and summarised annually in the
Own Risk and Solvency Assessment: further
information on this is provided overleaf.
On behalf of the Board, the Audit
Committee takes responsibility for
assessing the effectiveness of the
Group’s risk management and internal
control systems, covering all material
controls, including financial, operational
and compliance controls. It does this via
an annual review of risk and control
self-assessments and a programme of
control effectiveness reviews, the results
of which are reviewed quarterly.
The diagram below depicts our risk
management framework.
Strategy – Key outcomes
RISK CAPITAL
Risk management framework
RISK GOVERNANCE
Regulatory
assessment
Own assessment
r
M o nit o
12
1
11
10
9
Insights
communicated
to inform further
activity
8
7
6
M
a
n
a
g
e
I
d
e
n
t
i
f
y
2
5
3
4
s s ess
A
Board
R
i
s
k
c
u
l
t
u
r
e
Risk Committee
Executive Board
Subsidiary Boards
Group Risk ExCo
Other ExCos
RISK ESCALATION
1. Loss event reporting
2. Emerging risk assessment
3. Stress and scenario testing
4. Risk and controls self assessment
5. Operational risk assessments
6. Reverse stress testing
7. Own Risk and Solvency Assessment
8. Recovery and resolution planning
9. Risk registers
10. Regular risk reporting
11. Key Risk Indicators (KRIs)
12. Risk relationship meetings
ST. JAMES’S PLACE PLCSTRATEGIC REPORT
61
Our risk appetite
The Board carefully sets its appetite for
taking risk against strategic objectives.
These choices are set out in detail in our Risk
Appetite Statement, which is reviewed at
least annually by the risk committees of the
Board (the Risk Committee) and Executive
Board (Group Risk Executive Committee)
and ultimately approved by the Board. The
Risk Appetite Statement also provides clarity
over ownership, enabling us to identify the
key individuals within the Group who have
responsibility for managing these risks.
based on understanding the likelihood and
impact of a risk materialising.
The Risk Appetite Statement includes a risk
appetite scale. This scale has several risk
acceptance levels, ranging from no appetite
for taking risks at all, through to acceptance
of risk. The level of risk we are willing to
accommodate will vary dependant on
individual risk scenarios. The decisions the
Board takes when setting appetite will be
Risk appetite can and will change over time,
sometimes rapidly as economic and
business environment conditions change,
and therefore the statement is an evolving
document. A comprehensive suite of Key
Risk Indicators (KRIs) is reported regularly
to enable the Risk Committee, on behalf of
the Board, to monitor that the Group
remains within its accepted appetite.
Own Risk
and Solvency
Assessment (ORSA)
We are classified as an insurance group
and are subject to Solvency II insurance
regulation. A key part of this regulation
requires a consistent approach to risk
management across the Group,
supported by the production of an
annual ORSA, which considers both
the individual insurance entities
and Group.
The ORSA process follows an annual
cycle, which links the business activity
and strategic objectives with
comprehensive risk assessments, and
ensures the Group is resilient to stresses
in the short term and over a five-year
period. The ORSA cycle is depicted in
the diagram on the right.
The solvency capital requirement for
insurers allows for at least a ‘1 in
200-year’ risk event over a one-year time
horizon. In addition, a broad range of
severe stresses and scenarios are used
to help provide insight into the ability to
maintain the regulatory capital in these
conditions. Our results show that with
appropriate management action it would
be possible to maintain regulatory capital
across the Group under all scenarios
modelled for the business planning
horizon. The outcomes of these activities
assist us when considering the
calculations and allocation of risk capital
to all major risks in the Group, and the
adequacy of capital positions. This
process ensures our continued
confidence that the regulated entities
remain strongly capitalised.
The ORSA uses a five-year projection
period for the medium term. Due to the
gestation period across some of our
pension and investment product range,
we do not earn annual management fees
Update ORSA
related policies
Update
risk profi le
Confi rm
risk appetite
Agree fi nal ORSA,
update policies
Assess
changes to risk
profi le, emerging
risks; agree
scenarios
Annual
business plan
refresh
Present
draft ORSA
Mid-year
results /
dividends
Annual
results /
dividends
Assess
sensitivities
and own
solvency needs
Determine
solvency
capital
requirement /
own solvency
assessment
Monitor risk
exposure
and capital
adequacy
Agree
own needs,
thresholds and
recovery plans
ORSA
summary report
Stress
and scenario
testing
in the first six years and so considering a
five year period gives a prudent view of the
Group’s viability as we consider revenues
generated on existing business only. The
ORSA is particularly useful in assessing
viability as it has a similar purpose and
requires a comprehensive assessment of
risk management and risk capital
requirements of the business. Consideration
is given to factors or events that impact on
our funds under management, investment
growth, retention of clients and ability to
attract new clients, in addition to the effects
of a market downturn. Combinations of
these factors are used to form scenarios
which are tested, providing for more
extreme combinations of events. Therefore,
assumptions are robustly analysed to
predict both the immediate impact of an
event along with the impact over the longer
term (in the wake of the event). In addition to
these more extreme ‘combination’
scenarios, assessments are also
completed based on more current/
topical or emerging risk exposures
affecting the Group or financial services
more generally.
The ORSA aids decision making by
bringing together the following processes:
• strategic planning;
• risk appetite consideration;
• risk identification and management; and
• capital planning and management.
The ORSA continues to evolve and
further strengthen risk management
processes throughout the Group.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 62
Risk and Risk Management continued
Principal risks and uncertainties
The types of principal risks and
uncertainties have not changed significantly
over the past year. The strategic areas on
which these risks impact, and the high-level
controls and processes through which we
aim to mitigate them, are set out in the
tables on the following pages. Reputational
damage and impacts to shareholders and
other stakeholders are a likely consequence
of any of our principal risks materialising.
Over the past year, the continued
uncertainties around Brexit and international
trade have impacted investor sentiment.
Whilst some of the UK political uncertainties
have recently reduced, global economic
factors, such as the impact on trade of the
coronavirus, continue to impact on markets
and investor behaviour. While we have very
little direct exposure to market risk because
of our matching policy (where we hold
assets which match our liability to clients),
we do have indirect exposure because of
the impact these uncertainties have on new
business and funds under management.
Stress and scenario testing has been
performed which demonstrates that the
businesses is resilient to extreme but
plausible scenarios. We continually monitor
the changing environment, to ensure our
analysis and scenario testing remains
current. Although scenarios of political
change (Brexit, general elections and trade
wars) can drive changes in risk, the potential
impacts on our business would manifest
in ways with which we are familiar, notably,
market risk, persistency risk, changes in new
business levels and operational risks. We
cover these risks more specifically in the
table in the following pages.
The following symbols are used to indicate
which primary strategic objectives our
principal risks could impact, recognising
that they could also have a secondary
impact on other strategic objectives.
Key strategic areas
PEOPLE
FINANCIALS
THE PARTNERSHIP
CLIENTS
INVESTMENT
MANAGEMENT
Risk description
Strategy
Key risks
Example controls
Administration
service
We fail to deliver good
quality administration
services to clients
and the Partnership.
Brand and
competition
Challenge from
competitors and the
impact of
reputational damage.
Client
proposition
Our product
proposition fails to
meet the needs,
objectives and
expectations of our
clients. This includes
poor relative
investment
performance and
poor product design.
• Clients and the Partnership
• Management of administrations centres to ensure key
receive poor policy
administration
service standards are met
• Continuous development of technology
• Failure of key administration
system change projects
• Administrative complexity
• Effective planning of large-scale change projects
• Ongoing activity to reduce administrative complexity
• Increased competitive
• Clear demonstration of value delivered to clients
pressure from traditional
and disruptive (non-
traditional) competitors
• Cost and charges pressure
• Negative media coverage
through advice, service and products
• Investment in improving positive brand recognition
• Ongoing development of client and Partner
propositions
• Pro-active engagement with external agencies
including media, industry groups and regulators
• Issues with manufactured
• Regular monitoring of manufactured products’
products
performance
• Monitoring of investment performance and selection
of the most appropriate funds from a risk/net return
perspective
• Continuous development of the range of services
offered to clients
• Engagement with investment managers around
principles of responsible investment
• Investments provide poor
returns relative to their
benchmarks and/or do not
deliver expected client
outcomes
• Range of solutions does not
align with the product and
service requirements of our
current and potential future
clients
• Failure to meet client
expectations of a
sustainable business, not
least in respect of
responsible investing
Conduct
We fail to provide
quality, suitable
advice or service to
clients.
• Partners deliver poor quality
• Licensing programme ensuring appropriate standard
or unsuitable advice
of advice and service from advisers
• Failure to evidence the
• Technical support helplines for advisers
provision of quality service
and advice
• Timely and clear responses to client complaints
• Robust oversight process of the advice provided to
clients delivered by Business Assurance, Compliance
Assurance, Field Risk and Advice Guidance teams
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 63
Risk description
Strategy
Key risks
Example controls
Financial
We fail to effectively
manage the business
finances.
• Failure to meet client
• Policyholder liabilities are fully matched
liabilities
• Excess assets generally invested in high-quality,
• Investment/market risk
high-liquidity cash and cash equivalents
• Credit risk
• Liquidity risk
• Insurance risk
• Expense risk
• Operational failures by
material outsourcers
• Failure of critical service,
significant areas include:
• Lending to the Partnership is secured on their future
income streams
• Reinsurance of insurance risks
• Ongoing monitoring of all risk exposures and
experiences
• Acceptance of market and persistency risk impact on
profit
• Monitoring and management of individual entities
solvency to minimise Group interdependency
• Oversight regime in place to identify prudent steps to
reduce risk of operational failures by material
third-party providers
• Ongoing monitoring
– Investment administration
• Due diligence of key suppliers
– Investment management
– Custody
– Policy administration
– Cloud services
• Failure to attract new
• Focus on providing a market-leading adviser
members of the Partnership
proposition
• Failure to retain advisers/
• Adequately skilled and resourced population of
Partners
supporting field managers
• Failure to increase adviser
• Reliable systems and administration support
• Expanding the Academy capacity and supporting
recruits through the Academy and beyond
• Market-leading support to Partners businesses
productivity
• Available technology falls
short of client and Partner
expectations and fails to
support growth objectives
• The Academy does not
adequately support adviser
growth
• Loss of key personnel
• Measures to maintain a stable population of
• Poor employee morale
• Lack of inclusion and
diversity in our business
• Our culture of supporting
social value is eroded
employees, including competitive total reward
packages
• Monitoring of employee engagement and satisfaction
• Corporate incentives to encourage social value
engagement, including matching of employee
charitable giving to the Charitable Foundation
• Whistle-blowing hotline
• Failure to comply with
changing regulation
• Compliance functions provide expert guidance and
carry out extensive assurance work
• Inadequate internal controls
• Strict controls are maintained in highly regulated areas
• Failure to respond to
regulatory driven changes to
the industry in which we
operate
• Solvency risk
• Maintenance of appropriate solvency capital buffers,
and continuous monitoring of solvency experience
• Fostering of positive regulatory relationships
• Internal or external fraud
• Business continuity planning for SJP and its key
• Core system failure
• Corporate, Partnership, or
third-party information
security and cyber risks
• Disruption in key business
services to our clients
suppliers
• Identification, communication, and response planning
for the event of cyber crime
• Data leakage detection technology and incident
reporting systems
• Internal awareness programmes
• Identification and assessment of critical business
services
Outsourcing
Third party
outsourcers’ activities
impacts our
performance and risk
management.
Partner
proposition
Our proposition
solution fails to meet
the needs, objectives
and expectations of
our current and
potential future
Partners.
People
We are unable to
attract, retain and
organise the right
people to run the
business.
Regulatory
We fail to meet
current, changing or
new regulatory and
legislative
expectations.
Security and
resilience
We fail to adequately
secure our physical
assets, systems and/
or sensitive
information, or to
deliver critical
business services to
our clients.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 64
Risk and Risk Management continued
Emerging risks
Emerging risks are identified through
conversations and workshops with
stakeholders throughout the business,
attending industry events, reviewing
academic papers, watching emerging risk
webinars and other horizon scanning by
Group Risk.
The purpose of monitoring and reporting
emerging risks is to give assurance that we
are prioritising our response to emerging
risks appropriately in our strategy, which is
the primary risk management tool for
longer-term strategic risks. Examples of
emerging risks which have been considered
during the year include:
• risks that may result from changes in the
political environment that could impact
our business, including changes in
regulation and legislation, and also
investment market volatility or disruption;
• risks from digital disruption from
competitors or shifts in consumer trends
away from face-to-face advice;
• failing to capitalise on our significant
investment in administration systems;
• risks relating to an ageing population of
our clients and failure to appeal to future
generations of clients; and
• risks relating to climate change.
Viability statement
How we assess our viability
The business considers five-year financial
forecasts when developing the strategy.
These incorporate our budget for the next
financial year and four further years of
forecasts based on reasonable central
assumptions around development of
business drivers.
At the core of assessing our viability we
seek to understand how different principal
risks could materialise. We consider risks
which might present either in isolation or in
combination and which could result in acute
shocks to the business or long-term
underperformance against forecasted
business drivers. We consider the five-year
time horizon sufficiently long to assess
potential impacts and ensure that the
business could remain viable whilst
enacting any management actions to
restore the business’ prospects.
When considering how the principal risks
previously described might impact the
business, we consider our ability to deal
with particular events and changes to
the following key financial drivers:
• Reduction in client retention;
• Reduction in new business relative
to forecasts;
• Market stresses;
• Increases in expenses; and
• Direct losses through operational
risk events.
We carry out stress and scenario testing
on these key financial drivers, alongside
operational risk assessments. To provide
comfort over viability over the next five
years, the scenarios and assessments look
at events which would be extreme, whilst
still remaining plausible. This work
demonstrates that, although there would
be impacts on profitability, the Group is
resilient and could continue to meet
regulatory capital requirements over five
years should even the more extreme risks
materialise.
As well as robust scenario testing the
Directors have given consideration to
assessments of the current risk
environment, including how risks are
managed through controls relative to the
risk appetite, and emerging risks.
Example scenario
A wide variety of stresses and scenarios are
applied to test all material drivers in a variety
of ways to provide understanding of any
dynamic impacts. As an example of a type
of scenario which is considered, we
assessed the direct financial implications of
dealing with a major cyber-attack. We also
modelled the impact of a large reduction in
new business levels alongside a large mass
lapse. We looked at the immediate impacts
and the impact over five years, where we
further assumed there was no subsequent
growth in new business levels and no
market growth.
ST. JAMES’S PLACE PLCSTRATEGIC REPORT 65
Resilience over different time horizons
The table below provides an indication of which risk are relevant over different timeframes and why the Group is considered to be resilient
over these timeframes.
Over the next year
Over the next five years
Beyond 2024
Risks
Most of the shorter-term risks will remain
relevant, however, over the longer-term
client expectations around digital services
are likely to become more important. The
impact of artificial intelligence and machine
and advice side will become more prevalent.
Risks from climate change are starting to
have an impact on investor sentiment and
drive political change and this is only likely
to increase. Beyond 2024 climate change
is likely to be a far more significant factor
for all our clients.
Resilience
Whilst the importance of technology in
the advice space will grow, we believe that
overall our target market will continue to
value human interaction in discussing
sensitive financial matters. We recognise
however that the advice proposition will
develop, and our advisers will need to be
technology enabled. With increased use
of integrated technology, we will be able to
automate processes and allow our advisers
to focus on the high-value advice and
service aspects.
We have been developing our responsible
investing proposition for some years and
welcome the focus in this area as the
right thing to do and as an opportunity to
maximise client benefit through our active
investment management approach.
Risks
Investor sentiment, market impacts and
changes to regulation after the Brexit related
transition period continue to provide
uncertainty.
Aside from Brexit, risk relating to changes to
advice regulation would likely impact the
business in the next five years, or beyond.
The importance of technology in the client
proposition is only likely to become more
important and risks may materialise from
non-traditional competitors seeking to
disrupt the UK financial advice market.
Risks which have a more gradual effect,
such as talent retention and acquisition, are
also relatively more important over a longer
time horizon.
Resilience
Counteracting the medium-term risks, there
is more time to respond and take actions to
manage the Group’s prospects. As already
referenced stress and scenario testing
takes place which provides comfort over
the Group’s ability to weather storms over
a five-year time horizon and adapt
accordingly. The Group’s strategy is
designed to navigate the threats and keep
our proposition current for existing and
potential clients. As the largest wealth
manager in the UK the Group is well
resourced to effectively respond to
regulatory change and deal with increased
regulatory complexity.
In addition to the assessment of longer-
term viability and resilience set out above,
the Board have assessed the Group’s going
concern status. Further information is
provided in the Directors’ Report on page 126.
Risks
The key risks to business resilience in the
short term are likely to be operational in
nature, such as data loss or system failure.
The share price could reflect risks that
crystallise over the year but have a
delayed or gradual impact on business
performance. Liquidity risks would also be
relevant for this time window. These risks
are also relevant for the longer time periods.
Resilience
The Group generates relatively steady cash
profits on existing funds under
management and new business. This has
allowed the Group to grow dividends and
invest in growing the business. This is
expected to remain the case over the next
year and the Group maintains access to the
finance necessary for its business plan. If
severe risks materialised over the year and
resulted in significant costs, the Group
would have options to deal with the
financial implications. Whilst other options
would be explored first, curtailing
investment or reducing dividends would be
obvious ways to protect the financial
strength of the business.
Operational resilience is also important and
risks which might cause severe business
disruption are carefully managed. The
success of the back-office system
migration is an example of this.
There are not considered to be any material
uncertainties over the ability of the Group
to survive over the one-year time horizon.
Conclusion
In accordance with UK Corporate
Governance Code (Provision 31), the
Directors have assessed the Group’s current
financial position and prospects over the
next five-year period and have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities
as they fall due. The Directors believe that
the risk planning, management processes
and culture, allow for a robust and effective
risk management environment.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 66
Section 172(1) Statement
Section 172 of the Companies Act 2006
requires a director of a company to act in the
way he or she considers, in good faith, would
most likely promote the success of the
company for the benefit of its members as a
whole. In doing this s.172 requires a director
to have regard, amongst other matters, to the:
• likely consequences of any decisions in
the long term;
• interests of the company’s employees;
• need to foster the company’s business
relationships with suppliers, customers
and others;
• impact of the company’s operations on
the community and environment;
In discharging our section 172 duty we have
regard to the factors set out above and also
other factors which we consider relevant to
the decision being made. Those factors, for
example, include the interests and views of
Partners and our relationship with
regulators. We acknowledge that every
decision we make will not necessarily result
in a positive outcome for all of our
stakeholders. By considering the
Company’s purpose and values, and having
a process in place for decision-making, we
do, however, aim to make sure that our
decisions are consistent with its strategic
objectives and the long-term success of the
Company.
• desirability of the company maintaining a
reputation for high standards of business
conduct; and
• need to act fairly as between members of
the company.
For details on how our Board operates and
the way in which we reach decisions and
maintain high standards of business
conduct, including the matters we discussed
and debated during the year, the key
Example
Consideration
stakeholder considerations that were central
to those discussions and the way in which
we have had regard to the need to foster the
Company’s business relationship with
customers, suppliers, employees and other
stakeholders, please see ‘What the Board
did this year’ (page 79) and ‘Relations with
stakeholders’ (pages 80 and 81).
We set out below some examples of how
the Directors have had regard to the matters
set out in s.172(1)(a)-(f) when discharging
their section 172 duty and the effect of that
on certain of the decisions taken by them.
Culture
Strategy
Environment
During 2019 St. James’s Place received criticism in the media in relation to aspects of its culture. A culture of
‘doing the right thing’ has been an important part of the Group’s strategy since its outset and underpins the
continued high levels of client satisfaction and particularly employee engagement. However, the criticism did
highlight that our culture may not be as clear and recognisable to those unfamiliar with us as we would like it to
be and that aspects of it should evolve to reflect the changing nature of the Group and the environment in which
it operates. The Board and management took time to reflect and sought further insight from a number of
stakeholders across the community which reinforced the Board’s view that our culture remained key to our
success but could be better communicated to those less familiar with St. James’s Place. Recognising the
importance of safeguarding the culture, we concluded that it was important to articulate the culture more clearly
through a stated purpose, values and examples of desirable behaviour. The Board has supported management
and approved the ‘culture statement’, which reflects the collective views and beliefs of the community, believing
that it will assist everyone within the St. James’s Place community in recognising and, where appropriate,
addressing behaviour that would not be tolerated.
The Board has spent considerable time in 2019 looking at the strategy for 2020 and beyond. The corporate
strategy will naturally have implications for all of our stakeholders so the Board was keen to ensure that it had
an understanding of their perceptions and expectations of SJP. The strategy process sought to obtain further
insight from Partners, clients and employees to support the in-depth investor perception study carried out in 2018.
A business intelligence partner has also been engaged to help the Board understand its current standing with a
number of other stakeholders. The insight gathered helped shape and inform the Board’s decisions in relation to
the 2020 business plan and budget and its longer-term strategy. It also highlighted areas where more immediate
action was desirable. One such example is the review of the adviser incentive structure and development
programme.
The Board is clear that all organisations have a responsibility to help address the social, environmental and
economic challenges that the world faces. Insight and feedback from a broad range of our stakeholders, including
shareholders, employees, clients and the Partnership, has further emphasised the need for St. James’s Place to
demonstrate its commitment through its actions (see Our Social Value Report on pages 24 to 37 for more
information).
During 2019 the Board spent considerable time reflecting on the evolution of the IMA, particularly the importance
of establishing a leadership position in relation to environmental, social and governance factors. Via the IMA,
St. James’s Place’s clients have more than £100 billion of assets under management and St. James’s Place has
a responsibility to ensure that those assets are managed in a manner that meets the expectations and wishes of
our clients. The Board’s considerations were influenced by developments in the macro environment and the views
shared by our stakeholders and it agreed ways in which it would enhance the prominence of responsible investing
within the IMA with the objective of achieving a leadership position. The Board’s commitment was further
demonstrated in the decision to sign up to the recommendations of the Taskforce for Climate-related Financial
Disclosures.
Details
Page 78
Pages
14 to 23
Pages
34 and 35
Inclusion
and
diversity
In 2019, the Board has continued to focus on how best to encourage greater diversity and inclusion at all levels within
the Group. Feedback received from the workforce helped inform regular discussions around inclusion and diversity at
Board and senior management levels; gender pay and the availability of flexible working arrangements. As a result of
this the Board approved a new Inclusion and Diversity Policy (www.sjp.co.uk/about-us/inclusion-diversity) that clearly
sets out the Group’s vision, designed to encourage the Group and our workforce to do the right things in this area.
Pages
29 and 30
ST. JAMES’S PLACE PLCSTRATEGIC REPORT Approval of the Strategic Report
67
As part of the Annual Report
by the Directors it is a statutory
requirement to produce a
Strategic Report.
The purpose of the report is:
• to inform members of the Company and
help them assess how the Directors have
performed their duty under section 172 of
the Companies Act 2006 (duty to promote
the success of the Company).
The objective of the report is to provide
shareholders with an analysis of the
Company’s past performance, to impart
insight into its business model, strategies,
objectives and principal risks and to provide
context for the Financial Statements in the
Annual Report.
The Directors consider that the report,
comprising pages 2 to 66 of this document,
meets the statutory purpose and objectives
of the Strategic Report.
On behalf of the Board:
ANDREW CROFT
Chief Executive
CRAIG GENTLE
Chief Financial
Officer
26 February 2020
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
68
The St. James’s Place Charitable Foundation
“ The St. James’s Place
Charitable Foundation
has gone from strength
to strength since it was
formed in 1992. 2019 was
another successful year
with more grants being
made than ever before.”
CATHERINE IND, Head of the
St. James’s Place Charitable Foundation
Now as the sixth largest Corporate
Foundation 1 it is raising and distributing
over £12 million a year to charities across
the UK and overseas.
The Charitable Foundation is grateful
for the generous support of the
St. James’s Place Group and the
St. James’s Place community in the UK
and Asia, including: Partners, advisers
and employees, who year-on-year provide
outstanding support in donations,
fundraising and time. Key support
is given through:
• regular monthly giving – over 80%
of the Partners and employees of
St. James’s Place give a monthly
donation which contributes £1.7 million
a year;
• a variety of fundraising activities, from
cake bakes to golf days, marathon
cycles, walks and treks to charity
dinners;
• £1 for £1 matching on all monies raised
by the St. James’s Place Group;
• supporting the day-to-day running costs
and administrative overheads of the
Charitable Foundation; and
• volunteering time and skills to Charitable
Foundation supported charities,
providing wider holistic and
meaningful support.
Years of giving
27
(2018: 26)
Percentage of Partners and
employees who donate each month
Over 80%
(2018: Over 80%)
You can find out more about how
the Charitable Foundation is making
a positive and lasting difference to
people’s lives at
www.sjpfoundation.co.uk
1 Association of Charitable Foundations Giving
Trends Report 2019.
ST. JAMES’S PLACE PLCST. JAMES’S PLACE CHARITABLE FOUNDATION 69
Total amount raised for good causes
since inception
£93.1m
(2018: £81.0 million)
Amount raised in 2019
£12.1m
(2018: £10.0 million)
Number of individual charities
supported in 2019
1,109
(2018: 1,011)
Our focus for 2020
Looking ahead to 2020 our aim is to
continue to:
• extend our grant giving activities,
facilitating positive change in
thousands of lives;
• add value to the charities we fund
by being responsive to their needs
and providing wider organisational
support where we can;
• develop opportunities for the
community of St. James’s Place to
get involved with the charities we
fund; and
• inspire and support the community
of St. James’s Place in their
fundraising efforts, introducing
new activities for them to get
involved in.
Our core themes
The core themes for the grant giving
programmes are:
1.
Children and young people
We support charities who support
children and young people under the
age of 25 who are either
disadvantaged or have special needs.
In 2019 we funded a range of projects
including: therapeutic support to help
young people facing emotional
difficulties in their life, helping young
people into further training, education
or employment, the provision of
specialist equipment for young
people with special needs and
funding youth workers, working
specifically with marginalised young
people.
2.
Cancer support
We support charities which provide
help and support to those living with
or affected by cancer. In 2019 we
funded projects providing both
emotional and practical support,
helping to ease the burden that
cancer will have on many aspects
of a person’s life.
3.
Hospice sector
We work in partnership with Hospice
UK, providing £0.5 million of funding
each year to hospices across the UK.
The funding supports innovative
projects that will develop new ways to
deliver specialist and palliative care
for more people with a range of
debilitating and life-limiting
conditions.
4.
Mental health
We have given out £1.0 million in
2019 to charities supporting people
with mental health issues, helping
people across all ages to make a
positive step forward with their
illness.
Turn over to read about the
Charitable Foundation in action
Making a positive impact
on thousands of lives
2019 was another successful year
for the Charitable Foundation –
distributing £13.9 million to 1,109
charities in the UK and overseas.
The Charitable Foundation grant
programmes continue to focus on
supporting smaller charities, where
monies donated can have a bigger
impact both organisationally and in
enabling the charity to develop and
reach more beneficiaries, providing
transformational support to these
charities and enabling deep and
lasting impact.
Allocation of grant spend 2019
Children – disadvantaged
Children – special needs
Hospice
Cancer support
Mental Health
Armed forces/other
3%
7%
3%
16%
46%
25%
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019 70
The Charitable Foundation in action
The impact we make
Panathlon
In 2019 we have helped make a difference to 1,109 charities,
enabling positive change to thousands of lives. We have continued
to ensure that our grant making is invested in charities who can make
the biggest impact, helping charities to become more robust, more
confident, more empowered and to reach more people in need.
Our vision is to continue to make a positive and lasting difference
to people’s lives and facilitate transformational change in the
organisations we support.
Here are some of the charities we have supported:
“The multi-year funding has enabled Panathlon
to be ambitious in scaling up our ability to
provide competitive sporting opportunities
for children with disabilities in 1,020 schools
across the UK.”
ASHLEY ICETON,
Chief Executive of Panathlon
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OnSide Youth Zones
“Thanks to the Charitable Foundation’s support we’re
bringing a brand-new Youth Zone to Warrington.
Much needed within the town, this centre will give
young people a fantastic place to go outside of
school. Packed full of youth workers and volunteers
the Youth Zone will inspire Warrington’s young people
and help them reach their full potential.”
KATHRYN MORLEY,
Chief Executive of OnSide Youth Zones
ST. JAMES’S PLACE PLCST. JAMES’S PLACE CHARITABLE FOUNDATION
71
Cancer Support –
Penny Brohn
“We are grateful to the St. James’s Place
Charitable Foundation for their support in
funding a targeted package of care for cancer
patients experiencing loneliness. The grant
enabled us to deliver a range of retreats, courses
and weekly community groups that provided
people affected by cancer with a safe place
which normalised their diagnoses and gave them
crucial peer support. With the Charitable
Foundation’s support, over 2,000 people had
reduced feelings of loneliness.”
HARRISON LEONARD,
Trusts Manager
Hospice UK
“Hospice UK aims to transform hospice care. Our partnership
with the St. James’s Place Charitable Foundation helps us to
implement significant change in the palliative care sector by
targeting funding where it is most needed. The Charitable
Foundation has a long history of supporting hospice services;
building on this legacy, this partnership enables hospices to
initiate or develop locally delivered approaches to end of life
care, tailored to the needs of their communities. The
development of a sustainable heart failure palliative care
service at Nightingale House Hospice in Wrexham, and a male
carers support project at St Wilfrid’s Hospice in Eastbourne,
are two examples of projects funded recently that widen
access to hospice care.”
KARL BENN,
Head of Grants
Beat
“The grant from the St. James’s Place Charitable Foundation
has made a transformational difference to Beat, enabling us to
kickstart our localised work through our ‘Beat on the Ground’
programme. Thanks to the Charitable Foundation, we have
been able to train over 400 school professionals in the regions,
helping young people affected by eating disorders get to the
specialised treatment they need, and quickly. We are now
funded to deliver this training in over 50% of UK secondary
schools – and it all began and was made possible thanks to
the generosity of this wonderful Charitable Foundation.”
JENNY WHITWORTH,
Trusts and Statutory Fundraising Officer
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019 72
G O V E R N A N C E
02
Governance
Board of Directors ...................................74
Chair’s Report .......................................... 76
Corporate Governance Report ........... 78
Report of the Audit Committee ......... 89
Report of the Risk Committee ............ 95
Report of the
Nomination Committee ....................... 99
Report of the
Remuneration Committee ................ 102
Directors’ Report .................................. 126
Statement of Directors’
Responsibilities .................................... 129
Corporate governance reform
The Board has continued to monitor corporate
governance developments closely, responding to
the FRC’s consultation on the proposed revisions
to the UK Corporate Governance Code (the Code)
and establishing clear plans for ensuring it complied
with both the letter and the spirit of both the Code
and the new statutory reporting regulations (the
Companies (Miscellaneous Reporting) Regulations
2018) when they came into force.
This year, we have structured our corporate
governance statement (see the navigation bars
at the top of pages 74 to 129) so that it aligns with
the new Code. We have also made clearer the links
between elements of this statement and more
detailed examples in the Strategic Report that
seek to outline our approaches to themes within
the Code, including inclusion and diversity and
workforce engagement.
The Code and the new regulations have sought to
increase the emphasis on both culture and diversity
as key drivers of successful organisations and this
aligns strongly with the Board’s own beliefs. Whilst
the Board has previously provided details of our
engagement with a number of key stakeholders,
including our clients, the Partnership and our
employees, we have taken the opportunity to reflect
on our disclosures, in response to the increased
focus on stakeholder engagement, in the new
reporting requirements.
1 Board leadership and Company purpose
See pages 74 to 81.
2 Role of the Board and its responsibilities
See pages 82 and 83.
3 Board composition, succession and evaluation
See pages 84 to 88 and also the Nomination
Committee Report (pages 99 to 101).
4 Audit, risk and internal control
See the Audit Committee and Risk Committee
Reports on pages 89 to 98.
5 Remuneration
See the Report of the Remuneration
Committee on pages 102 to 125.
S T. J A M E S ’ S P L A C E P L C
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“The Code and the new regulations have
sought to increase the emphasis on both
culture and diversity as key drivers of
successful organisations and this aligns
strongly with the Board’s own beliefs.”
IAIN CORNISH, Chair
A N N U A L R E P O R T A N D A C C O U N T S 2 0 19
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G O V E R N A N C E / 1. B O A R D L E A D E R S H I P A N D C O M P A N Y P U R P O S E
1
2
3
4
5
Board of Directors
1
3
5
7
9
2
4
6
8
10
Summary Board composition
as at 26 February 2020
Gender
Tenure
Committee key
3
4
4
6
Female
Male
3
0–3 years
4–7 years
8+ years
AC
RK
NC
RM
Member of
Audit Committee
Member of
Risk Committee
Member of
Nomination
Committee
Member of
Remuneration
Committee
Denotes Chair
of Committee
1. Iain Cornish
Chair
Date of appointment
Chair October 2018.
RK NC
Non-executive Director October 2011.
Experience
Iain brings experience from both the financial
and regulatory environments. He was a senior
consultant at KPMG, specialising in the banking
and finance sector, and then served as Chief
Executive of the Yorkshire Building Society.
In recent years he has been a non-executive
director of Arrow Global Group plc, chair of
Shawbrook Group plc and an independent
director of the Prudential Regulation Authority.
External appointments
Non-executive director (and chair elect) of
Leeds Building Society and Treasurer of
Macmillan Cancer Support.
2. Andrew Croft
Chief Executive Officer
Date of appointment
Chief Executive Officer January 2018.
Joined St. James’s Place 1993 and appointed
to the Board September 2004.
Experience
Andrew joined the Company in 1993 and
was Chief Financial Officer from 2004 to
2017. Having trained as an Accountant
with Deloitte Haskins and Sells (now part of
PricewaterhouseCoopers LLP) he then worked
in the financial services sector. Since joining
St. James’s Place he has held a number
of roles within the Finance department,
assuming the role of Finance Director in
2002 and being appointed as the Chief
Executive in January 2018. He is a Trustee of
the St. James’s Place Charitable Foundation.
External appointments
Lay member of the Audit and Risk Committee
and Finance and Investment Committee of
the Royal College of Surgeons of England.
3. Craig Gentle
Chief Financial Officer
Date of appointment
Chief Financial Officer January 2018.
Joined St. James’s Place 2016 and appointed
to the Board January 2018.
Experience
Craig joined the Company in 2016 as the
Chief Risk Officer. Prior to this, Craig spent
22 years at PricewaterhouseCoopers LLP,
12 of which were as a Partner. During his time
at PricewaterhouseCoopers LLP, Craig held
a number of roles, including as a senior audit
partner. Craig qualified as a Chartered
Accountant in 1993.
External appointments
Member of the Board, Trustee and Honorary
Treasurer for the Bristol Music Trust.
ST. JAMES’S PLACE PLC 75
9. Baroness
Wheatcroft
Independent Non-executive Director
AC RK NC RM
Date of appointment
Non-Executive Director April 2012.
Experience
Baroness Wheatcroft brings experience
of the media and also the legislature. Her
career has included editorial roles at both
the Sunday Telegraph and The Times, as
well as being Editor-in-Chief at the Wall Street
Journal, Europe. She is a member of the
House of Lords. Her financial services
experience includes previous appointments
as a non-executive director of Barclays Group
plc and Shaftesbury plc.
External appointments
Non-executive director of Fiat Chrysler
Automobiles. Chair of the Financial Times
Appointments and Oversight Committee.
Member of the House of Lords.
AC RK NC RM
10. Roger Yates
Senior Independent Non-executive Director
(SID)
Date of appointment
Senior Independence Non-executive Director
October 2018
Non-executive Director January 2014.
Experience
Roger brings over 30 years of investment
management experience. He started his
career with GT Management Limited in
1981 and has subsequently held positions
at Morgan Grenfell, Invesco and Henderson
Group plc, where he was Chief Executive
Officer. Most recently, he was chair of Electra
Private Equity plc and a non-executive director
of IG Holdings plc and J.P. Morgan Elect plc.
External appointments
Senior independent non-executive director
(SID) of Mitie Group plc and non-executive
director of Jupiter Fund Management PLC.
Full biographical details of each Director
can be found on the corporate website at
www.sjp.co.uk
4. Ian Gascoigne
Managing Director
Date of appointment
Executive Director January 2003.
Joined St. James’s Place 1991.
Experience
Ian is one of the founding members of the
management team and is now the Managing
Director. He has worked in financial services
since 1986 and has considerable experience
in the advice space. He is also a Trustee
of the St. James’s Place Charitable
Foundation and Chair of the Distribution
Executive Committee.
External appointments
Member of the Strategic Advisory Board
of Loughborough University School of
Business and Economics.
5. Emma Griffin
Independent Non-executive Director
Date of appointment
Non-executive Director February 2020.
Experience
Emma has previously been a non-executive
Director of AIMIA Inc and Enterra Holdings.
From 2002 to 2013, Emma was a founding
partner of the stockbroking firm, Oriel
Securities, which was sold to Stifel
Corporation. In her early career Emma
worked at HSBC James Capel and Schroders.
External appointments
Emma is currently a non-executive director
and chair of the Investment Committee of
Industrial Alliance Financial Group, one of
Canada’s largest insurance and wealth
management companies, listed on the TSX,
and a non-executive director of the private
investment company Claridge Inc. She is
also a non-executive director of Solotech Inc.
6. Rosemary Hilary
Independent Non-executive Director
AC RK
Date of appointment
Non-executive Director October 2019.
Experience
Rosemary was Chief Internal Auditor at TSB
Bank from 2013 to 2016 and prior to that, from
1989 to 2013, she held a number of senior
positions at the Financial Conduct Authority
(formerly the Financial Services Authority) and
the Bank of England. Rosemary is a Chartered
Certified Accountant, FCCA. Rosemary was
formerly a member of the Investment
Committee and chair of the Risk and Audit
Committee of the Pension Protection Fund
(2016 to 2019) and Trustee and member of the
Audit, Risk and Finance Committee of Shelter,
the homelessness charity.
External appointments
Since 2016, Rosemary has been a non-
executive director and chair of the Audit
Committee of Willis Ltd; a non-executive
director and chair of the Audit and Risk
Committee of Record plc; and a non-
executive director and chair of the Risk
Committee of Vitality Life and Vitality Health.
7. Simon Jeffreys
Independent Non-executive Director
AC RK NC RM
Date of appointment
Non-executive Director January 2014.
Experience
Simon brings experience of the auditing
world and financial services. He was a senior
audit partner with PricewaterhouseCoopers
LLP from 1986 to 2006 where he also led
their Global Investment Management
practice. Between 2006 and 2014, Simon
was CFO and Chief Administrative Officer at
Fidelity International and then CFO and Chief
Operating Officer at the Wellcome Trust.
External appointments
Chair of AON UK Limited and Henderson
International Income Trust plc and a
non-executive director and chair of the Audit
Committees of Templeton Emerging Markets
Investment Trust plc and SimCorp A/S, a
listed Danish financial services software
company. Simon is also a non-executive
director and chair of the Audit and Risk
Committee of the Crown Prosecution Service.
8. Dame Helena Morrissey
Independent Non-executive Director
Date of appointment
Non-executive Director January 2020.
Experience
Dame Helena was Head of Personal
Investing at Legal v General Investment
Management from 2017 to December 2019.
Prior to that, she was Chief Executive of
Newton Investment Management, the global
investment manager, from 2001 to 2016,
having joined the company in 1994.
External appointments
In 2010 Dame Helena founded the 30% Club,
which began with the aim of achieving more
women on boards and has since broadened
its efforts to tackle gender inequality more
broadly. She is also the chair of the Diversity
Project, and a past chair of the Investment
Association and since 2015 has been a
member of the UK Chancellor’s Financial
Services Trade and Investment Board.
From 2014 to 2017 she was a non-executive
director of the Takeover Panel.
She was appointed Commander of the
Order of the British Empire (CBE) in 2012
and Dame Commander of the Order of the
British Empire (DBE) in 2017.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONGOVERNANCE 76
G O V E R N A N C E / 1. B O A R D L E A D E R S H I P A N D C O M P A N Y P U R P O S E
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Chair’s Report
vulnerable clients. Another is the
development of propositions around
long-term care, again signifying our desire
to make sure we can support clients as
their needs change and develop.
Investment for the future
We continue to invest in the future
growth of the business including the
St. James’s Place Academy, through which
we train new advisers for the Partnership
(see Partnership on page 16), as well as our
Rowan Dartington and Asian operations.
The pace of technological change in our
industry is relentless, and the Board believes
it is important to continue to invest in this
area to meet client and adviser expectations
and to improve our operating excellence.
In October we completed the successful
migration of all our core UK business to the
new Bluedoor platform which will provide
a solid operating system for future growth.
Purpose and culture
The Board spent considerable time in 2019
reflecting on purpose, culture and values.
The founding principles of the business
recognised the importance of wider social
purpose: ‘doing the right thing’ and ‘giving
something back’. Our desired culture is
best exemplified by the St. James’s Place
Charitable Foundation which is a core part
of our business model. More than eight out
of ten of our Partners and employees make
regular donations to the Charitable
Foundation, and many actively participate
in fund raising and other charitable activities.
There are many other ways in which
St. James’s Place makes an active
contribution to society: we directly benefit
the financial well-being of 733,000 clients
and their families; we help 4,271 advisers
thrive in providing high-quality advice
across 2,564 separate Partner businesses;
we are stewards, on behalf of our clients,
of £117.0 billion of assets; we employ 2,634
people; we are the largest provider of
financial advice in the UK and seek to be a
good regulatory citizen; the Company and
the Partnership are an active part of many
local communities; and, we are a significant
tax payer. During the last year, the Board
took account of all of these stakeholders in
its decision making and will continue to do
so in future (see S.172(1) Statement on page
66 for examples).
It was clearly disappointing when some
aspects of our culture were subject to
criticism last year, particularly in relation
to way in which the Partnership is rewarded.
Recognising achievement and bringing
advisers together to provide development
and networking opportunities remains an
IAIN CORNISH, Chair
“ The Board remains
confident in the
fundamental strength of
the business and in its
ability to take advantage
of the long-term
structural opportunities
which exist in its market.”
Introduction
Despite external challenges,
St. James’s Place continued to grow in 2019.
This is testament to the trust put in us by
existing and new clients, the professionalism
of the Partnership and the strength of the
St. James’s Place proposition, which, in turn,
underpins the enduring success
and resilience of the business.
Our role is to plan, grow and protect the
financial future of clients, and we do so by
developing long-term relationships, working
hand in hand with our clients, to advise
them on their long-term financial strategies
(see Clients on page 14). We are operating in
an environment where the value of trusted
face-to-face advice has never been more
important.
The industry
The asset and fund management sector,
including St. James’s Place, came under
significant scrutiny last year, with the failure
of Woodford Investment Management
(WIM). St. James’s Place funds managed
by WIM were held as segregated mandates
and our distinctive Investment Management
Approach (IMA) prevented WIM from
investing any St. James’s Place client funds
in unquoted stocks. We quickly moved
funds away from WIM and preserved full
client access. Whilst this was a tangible
demonstration of the value of our IMA, the
Board has, nevertheless, fully considered
the wider implications of this episode
and identified areas in which we could
strengthen it further.
The industry remains under scrutiny on the
levels of fees, charges and value delivered
to clients. The St. James’s Place proposition
is fundamentally different to that of an
online funds platform, and it is unfortunate
that much of the public commentary
on fees and charges has been overly
simplistic. Independent third-party analysis
demonstrates that, for our target market,
St. James’s Place charges are competitive,
and our wealth account survey demonstrates
that clients support this view. However,
the Board recognises the need to further
improve the transparency and client
understanding of fees and to ensure that
we continue to deliver value for clients.
This will remain a focus.
Clients
For many clients 2019 proved a very
positive one in terms of investment returns,
buoyed by strong, but at times volatile,
investment performance across major
investment markets globally. We are
naturally pleased that all of our investment
portfolios delivered strong growth,
supporting positive client outcomes.
The Board continues to support the
evolution of our proposition so that we
improve our ability to serve client needs.
One example of this in 2019 is the work
we undertook to enhance our approach
to identifying, servicing and supporting
ST. JAMES’S PLACE PLC 77
important part of how we operate, and
indeed it is an essential way of strengthening
culture in what is a geographically widely
dispersed Partnership. Whilst we do not
believe that the criticism we received is
reflective of our community as a whole, we
continue to review all aspects of Partnership
recognition and remuneration to ensure
they remain appropriate in today’s world
and we will continue to further develop our
approach in this area in 2020.
The Board will spend further time in 2020
considering the wider societal purpose and
the culture of the business and how best to
refine the way in which it assesses them.
Succession, diversity and
workforce engagement
In my report last year I highlighted that one
of the main priorities for the Board was
long-term succession planning for the
Non-executive and Executive Directors and
I am pleased to report that good progress
has been made.
I am delighted to welcome Rosemary Hilary,
Dame Helena Morrissey, Emma Griffin and
(from 1 June 2020) Lesley-Ann Nash to the
Group Board, and Dawn Hyams to the
board of St. James’s Place Unit Trust
Group Limited. All of them bring valuable
skills and experience to the business and
add to the diversity of our governance.
Once the Board has managed through
its current transitional succession phase I
would expect the number of Non-executive
Directors on the Board to return to a more
normal figure. Further information can be
found in the Report of the Nomination
Committee on pages 99 to 101.
The Board has also had a particular focus,
in conjunction with external specialist
support, on further strengthening
succession planning and career
development at senior levels amongst
the Executive, and as part of this the Board
was delighted that Elizabeth Kelly was
appointed to the Executive Board.
The Board is committed to ensuring greater
diversity, in all its facets, throughout the
St. James’s Place community. Getting to
where we want to be will take time, but our
significantly increased focus on diversity
over the last two years has begun to
deliver results.
The Board has been active in overseeing
plans and monitoring performance in this
area and will continue to be so.
St. James’s Place is fundamentally a
people business and engagement with
both employees and the Partnership has
The UK Corporate Governance Code (the Code)
The Corporate Governance Report on pages 78 to 88 explains how the Board leads
the Company’s approach to corporate governance and explains how the principles
of the Financial Reporting Council’s UK Corporate Governance Code have been
applied in practice.
As reported in 2018, as a consequence of Sarah Bates’ retirement, for a short period
up until David Lamb’s retirement on 26February 2019, the Non-executive Directors,
excluding the Chair, accounted for less than half the Board. This remained the case
up until 26 February 2019 meaning that the Company did not comply with Provision 11
of the Code until this date. Since 26 February 2019 the Non-executive Directors have
accounted for at least half of the Board, excluding the Chair, with recently announced
appointments resulting in 70% of the Board being made up of Non-executive
Directors. Further details on the appointments made and the Board’s succession
planning can be found in the Nomination Committee Report on pages 99 to 101.
Other than as stated above, the Board considers that the Company has complied
with all of the other provisions of the Code (available at: www.frc.co.uk) during 2019.
Detailed reporting on remuneration, as required by the Code, can be found in the
Directors’ Remuneration Report.
of the IMA, of which responsible investment
is a key pillar, and we will continue to
oversee progress against it.
Dividend and concluding remarks
St. James’s Place delivered a solid
performance in 2019 in an environment
characterised by uncertainty. While we
acknowledge that there are lessons to be
learned from some of the events which took
place in 2019, the Board remains confident
in the fundamental strength of the business
and in its ability to take advantage of the
long term structural opportunities which
exist in its market, to the benefit of all of
its stakeholders.
Reflecting our confidence in the business
and its future prospects, the Board is pleased
to propose a final dividend of 31.22 pence
per share, making a total of 49.71 pence
per share for the year. This is a 3% increase
on 2018.
Finally, I would like to offer the sincere
appreciation of the Board to the entire
SJP community for their efforts.
IAIN CORNISH
Chair
26 February 2020
If you would like to discuss any aspect of my report
or the Corporate Governance Report please feel free
to email me on: chair@sjp.co.uk
always been an essential part of the way
in which the business is run. In addition
to its normal course of engagement with
the business, the Board has formalised
an employee engagement programme,
led by Baroness Wheatcroft, but with the
participation of all of the Directors (see
page 81). The programme has built on
the pre-existing mechanisms for colleague
engagement and consists of focus groups,
surveys and Director lunches. Last year the
programme covered topics including reward
and recognition, business strategy, diversity
and inclusion, Board and management
interaction, and culture and ethics. The Board
received regular reports on the feedback
received and the actions taken as a result.
Responsible investing and
climate change
The impact of climate change is clearly a
significant concern for society in general
and consequently a growing focus from
clients, regulators and politicians. The Board
recognises that environmental, social and
governance factors are vital components
of a sustainable investment strategy, and
that as a major investor, St. James’s Place
has a key responsibility in this area. It
also believes that the Company has an
opportunity to take a leadership position
in responsible investing (see page 19).
Last year we achieved an A+ rating in the
United Nations Principles for Responsible
Investment annual assessment and the
Board agreed that the Company should
become a supporter of the Task Force on
Climate Related Finance Disclosure. The
Board spent time last year considering the
multi-year plan for the continued evolution
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Purpose and culture
The Board is collectively
responsible for establishing the
purpose, values and strategy of the
Company and satisfying itself that
these and its culture are aligned.
The Board recognises the vital importance
of a sound culture to the continued success
of the Group, and culture has been a core
and explicit element of the Group’s strategy
since its outset. Our core values underpin
our culture and emphasise the behaviours
that will enable SJP to continue to succeed
in what we do.
The Board also recognises its own essential
role in setting an appropriate tone from the
top. Notwithstanding the continued high
level of client satisfaction, aspects of the
Group’s culture have been the focus of
criticism in some parts of the media during
the year, and whilst the Board does not
believe this is representative of the culture
as a whole, it has caused the Board to
consider carefully how it defines and
communicates its desired culture and the
standards of behaviour which it expects
to be upheld in every part of the business.
As part of this, changes are being made
to a number of elements of the Group’s
operations, particularly in relation to how
the Partnership is incentivised. See the
Section 172(1) Statement on page 66
for further information.
Leadership
A successful company
is led by an effective and
entrepreneurial Board.
Our purpose
Our purpose is to give peace
of mind in an uncertain world.
Our values
1
EVERYONE CAN MAKE
A DIFFERENCE
2
DOING THE RIGHT THING
3
PLAYING FOR THE TEAM
Our strategic objectives
CLIENTS
Deliver positive outcomes to clients.
INVESTMENT MANAGEMENT
Increase funds under management.
FINANCIALS
Achieve sustainable growth in IFRS
profit before shareholder tax, the
Underlying cash result and EEV
operating profit before tax.
PEOPLE
Attract, retain and develop talent.
THE PARTNERSHIP
Grow and develop the Partnership.
See page 12
When assessing the basis on which the
Company generates and preserves value
over the long-term, the Board focuses on:
• Providing entrepreneurial leadership
and direction to the Group in setting
out its strategic aims, visions and values
and overseeing delivery against these,
including approving major transactions
and initiatives;
• Monitoring financial performance and
reporting and approving/recommending
payments of dividends;
• Setting the Company’s risk appetite,
assessing the principal risks facing
the Company and ensuring that
adequate controls are in place to
manage risk effectively;
• Ensuring that appropriate and effective
succession planning arrangements and
remuneration policies are in place;
• Implementing and ensuring the effective
operation of corporate governance
procedures; and
• Ensuring that good client outcomes are
delivered through the combination of
the Group’s distinctive investment
management approach and the provision
of high-quality ongoing advice.
The governance framework explained
in more detail on pages 82 to 85 is designed
to ensure that the Board, led by the Chair,
is able to monitor the sustainability of the
business model, performance against
strategy and opportunities and threats as
they arise. When reviewing performance
against strategy, the Board looks to ensure
it continues to align with the Group’s
culture and delivers long-term success
to St. James’s Place and its stakeholders.
The strategy and performance against the
strategy are discussed throughout the Chief
Executive’s Report, the Chair’s Report and
the Strategic Report, and a summary of
significant topics considered by the Board
during 2019 are set out on page 79.
ST. JAMES’S PLACE PLC 79
What the Board did in the year
The Non-executive Directors supported by the Executive and, where appropriate, external input, participated in a number of training,
development and focus sessions during the year, further details of which can be found under Directors’ Development section on page 87.
Strategic
Investment Management Approach – The Group’s distinctive IMA is central to the delivery of good client outcomes and hence the long-term
success of the Group. The Board spent considerable time during the y ear considering how the IMA needs to evolve as the scale of funds under
management continues to grow, enabling it to:
• be increasingly tailored to clients’ financial goals, building their investment portfolios using a ‘Plan, Design, Review’ approach;
• address the impact of market developments including the decision to transfer mandates away from Woodford Investment Management; and
• establish a leadership position in relation to environmental, social and governance factors.
Administration – During 2019, the Group successfully completed the migration of the remaining business on legacy systems onto the Bluedoor
platform. The Directors closely monitored the remaining stages of the migration, reflected on the progress to date and considered how further
enhancements to Bluedoor would support service excellence for clients over the medium to long-term.
Operational excellence – Operational excellence remains a key theme for the Board. The successful migration of our business to the Bluedoor
platform provides a strong basis for further enhancing the efficiency and quality of the service which we can provide to Partners and clients.
The Board also spent time considering the impact of technology on the business model and the investment that will be required to enhance
client, Partner and employee journeys. We are fully aware of the potential impact of digital disruption on market structures and stakeholder
expectations and this remains a key strand of the Board’s strategic deliberations.
See page
18 and 19
Partnership and Academy – Maintaining the highest standards of advice and service to clients is integral to SJP’s business model and the
sustainability of the business. The advice gap in the UK remains significant and SJP is committed to growing the Partnership, both in terms of
number and capability. During the year, the Board has received updates on the growth of the Partnership and has spent time focusing on the
ongoing development of advisers. The Board has also maintained its focus on the infrastructure in place to support and monitor the
Partnership, so as to ensure clients continue to receive high levels of service.
16 and 17
Financial
Partner lending – Supporting Partners to develop their businesses and facilitating the sale and purchase of businesses within the Partnership
through the provision of finance has always been a core part of the Group’s business model. This ensures continuity of advice provision, which
is directly in the interests of clients and the long-term sustainability of the Group. The Board spent time during the year considering the funding
strategy, and in particular the development of the Group’s securitisation franchise. This programme, which is underpinned by the high quality of
Partner lending, is central to future funding strategy.
Financial funding and capital strategy – The Board spent time during the year considering the likely pattern of future cash flows, opportunities
for further balance sheet efficiencies and the Group’s cost base with the objective of ensuring that its financial strategy remains robust and
sustainable under a range of different scenarios.
Risk, governance, regulatory
Regulation – There has been no let up in the pace of regulatory change during 2019 and the Board and its Committees, supported
by management, have spent considerable time assessing the implications of recent developments and ensuring that changes arising from
recently enacted legislation and regulations have been effectively embedded in the organisation. During 2019, the Board has overseen the
implementation of the Senior Managers and Certification Regime.
Corporate governance – The revised Code and the Companies (Miscellaneous Reporting) Regulations 2018 both came into force during
2019 and the Board has ensured that the principles and provisions of the Code and new legislative requirements have been factored into
its governance arrangements. An example was the enhancement of existing workforce engagement mechanisms which was overseen
by Baroness Wheatcroft, the designated Non-executive Director for workforce engagement (see below). Further information can be
found throughout this Corporate Governance Statement.
78 to 88
Brexit – The Board has overseen the continued preparations for different Brexit scenarios. The Board has concluded the direct impacts on the
Group of Brexit are relatively minimal and actions to adequately mitigate these are in place. The indirect impacts through financial markets and
generally increased uncertainty are less clear, although the Board has noted that one consequence has been a deferral of investment decisions
on the part of some clients.
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People and culture
Inclusion and diversity – The Board recognises that attracting, retaining and developing the best people from all walks of life and from all
backgrounds provide the foundations for creativity, innovation and business growth. During 2019 our Head of Inclusion and Diversity has
presented to the Board and Nomination Committee on progress against our aim to build a community with equal opportunities where everyone
has clarity of purpose and feels valued.
Culture and values – Culture, values and social value has continued to be central to the Board’s deliberations during 2019. As part of its
strategic planning process in 2018 the Board had overseen a Chief Executive-led review of culture, values and perceptions of the Group
amongst its stakeholders. Whilst recognising the many positive cultural aspects which are core to the success of the Group, this review
underlined the need to address aspects that need to evolve, make further progress in defining and communicating our culture and values, to
improve the way the Group is viewed externally, and to be clearer about its wider societal purpose and responsibilities. The Board has spent
significant time considering culture and its associated elements, the need for which was brought into sharp focus by the criticism received in
some parts of the media during 2019.
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Succession planning – As the Chair of the Nomination Committee reported last year, work had begun to establish a medium-term pipeline of
succession for all of the Non-executive roles on the Board and in 2019 the Board has been able to announce the appointment of new
Non-executive Directors. Further information on succession planning can be found in the Report of the Nomination Committee.
99 to 101
Workforce engagement – As mentioned in more detail overleaf, a Workforce Engagement Officer was appointed during the year, supported by
a Workforce Engagement Committee and the Board received updates on the embedding of the enhanced workforce engagement mechanisms
and key themes emerging.
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Relations with stakeholders
We have set out below a summary
of the key interests of our
stakeholders and have identified
where more detail can be found
on our engagement with them.
Detailed synopses of a number of these
stakeholders have formed an integral part
of our Strategic Report in recent years and,
rather than duplicate information, we have
maintained the detail in the relevant
sections of the Strategic Report, and
included cross-references in the summary.
Not all information is reported directly to the
Board and not all engagement takes place
directly with the Board. Where engagement
is not with the Board, the output informs
business-level decisions made by
management, an overview of which is fed
back to the Board through regular reporting
and focus on strategic topics. Our Section
172(1) Statement, on page 66 provides
further information on our relationships
with our stakeholders.
Key interests of our stakeholders
Shareholders
Sustainable growth in our
business ensures we are able
to deliver the long-term capital
and income growth that our
shareholders are seeking.
Workforce
People have been at the core of
our business model since our
formation and this has been
reflected in the high level of
engagement with our workforce.
Relations with shareholders
Workforce engagement
See page 81
See page 81
Financials strategic objective
See page 20
Clients
Putting clients at the heart of
everything we do is core to our
culture and enables us to work
with Partners and other
stakeholders to run a genuinely
client-focused business. We
focus on building long-term
relationships anchored in trust
and mutual respect, where
advice is tailored to our clients’
individual circumstances.
Partnership
Our products and services are
promoted exclusively through
the St. James’s Place
Partnership. The Company’s
role is to ensure that Partners
are provided with ongoing
support and professional
development opportunities
that enable them to continue to
deliver a high level of expertise
and professionalism to clients.
Clients strategic objective
Partnership strategic objective
See page 14
See page 16
Fund managers
We carefully select
external managers to
manage our range of
funds, which enables us
to provide our clients
with unique access to
fund management
expertise that is often
only available to large
institutional investors or
overseas retail investors.
Investment Management
strategic objective
See page 18
Third-party
administrators
Administration of our
life insurance and
investment products
is delivered through
providers of specialist
investor and policyholder
service providers. These
providers have day-to-day
engagement with our
clients and so it is vital
that their values and aims
are aligned with our own.
Building relationships
with suppliers
See page 33
Other suppliers
We have built long-term
relationships, based on
mutual trust, with many
of our suppliers.
Cultivating very strong
and mutually beneficial
relationships has
ensured our values and
aims are aligned.
Building relationships
with suppliers
See page 33
Community/
environment
Social value is at the
core of our culture and
we recognise that we
have a responsibility to
help address social,
environmental and
economic challenges
the world faces. Our aim
is to act in a way that
considers the long-term
impacts of our actions
on the communities
closest to us and the
environment at large.
Our Social Value Report
See page 24
Regulators
As the Group provides
financial services to its
customers, companies
within the Group are
required to adhere to the
rules and expectations
of a number of
regulators. Maintaining
good relationships with
our regulators, built
upon honesty and
transparency is of
paramount importance
to us.
Risk and Risk
Management
See page 81
ST. JAMES’S PLACE PLC
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Relations with shareholders
We continue to maintain close relationships with institutional shareholders through direct dialogue and frequent meetings, and we also meet
regularly with the Group’s brokers who facilitate meetings with investors and their representatives. Regular dialogue is an important way of
staying abreast of the views of investors and periodic meetings with investors will provide an insight into the considerations that drive their
views on us an organisation. Examples of how we engage are set out on page 80.
How we engage with shareholders
Opportunity for engagement
Institutional shareholder roadshows
Investor studies
During 2019 we held shareholder roadshows around the Company’s full-year and half-year results,
investor conferences, capital markets days (addressing a wide range of strategic and operational
topics), individual investor meetings and conference calls with shareholders. These provided the
Directors with opportunities to gain insight into institutional shareholder views and expectations
and address specific queries they may have.
In 2018 the Board commissioned an investor study which provided an opportunity to assess in
more detail its investor base, investor behaviour, drivers of share price performance and investors’
perception of a number of key aspects of our business model. During 2019 the Board has
continued to build upon the findings of this study by continuing to monitor investor sentiment.
Individual shareholder meetings
The Group’s largest institutional investors continue to meet regularly with the Executive Directors
and the Chair, providing an opportunity for them to raise specific queries. The Chair, SID and other
Non-executive Directors are available for consultation with shareholders on request.
Direct correspondence
with major shareholders
Annual General Meeting
As suggested in the Code, the Chair, Senior Independent Director and Committee chairs seek
engagement with major shareholders on significant matters as they arise. Circumstances that
warrant engagement with major shareholders include proposed changes to the Remuneration
Policy and proposals to extend the tenure of the Chair beyond nine years.
All Directors are available to meet with shareholders after the Company’s Annual General Meeting
which will be held on 7 May 2020, further details of which are set out in the Notice of Annual
General Meeting.
Engagement with regulators
We aim to maintain an open, proactive
and constructive relationship with all of the
Group’s regulators. Engagement is achieved
through a broad range of activities, from
regular face-to-face meetings and calls, to
involvement in targeted assessments and
contribution to thematic reviews. Members
of the Board and senior management meet
with regulators regularly and seek feedback
which is shared with the Board. From time
to time regulators attend Board meetings
and, in October 2019, representatives of
the FCA attended a meeting of the
Group Board.
Workforce engagement
Effective and timely engagement with
our workforce is an integral part of
SJP’s culture and we have this year
appointed a Workforce Engagement
Officer, supported by a Workforce
Engagement Committee, as a primary
engagement mechanism between
employees and the Board. The
Committee comprises a diverse range
of stakeholders from different parts of
our business, and reports through to
Baroness Wheatcroft, our designated
Non-executive Director responsible for
Workforce Engagement. We have
identified eight primary topics for
engagement with employees, including
amongst others career development,
SJP’s culture and ethics, inclusion and
diversity and Board and management
interactions. We remain open to
receiving employee views on any topic
of importance to them and have done
so during the year.
These engagements are undertaken
across a variety of channels, such as
surveys, focus groups and directors’
lunches, and has involved enhancing
existing engagement mechanisms and
developing new mechanisms. This has
enabled us to broaden the reach of our
engagement activities to all parts of the
SJP Group.
Periodic reporting is delivered to the
Board, the Executive and respective
management committees with
delegated responsibility for actioning
the specific feedback. Periodic updates
are provided to employees on the
activity and developments from the
Workforce Engagement Committee.
Further information on workforce
engagement during the year can be
found on page 23.
Whistleblowing arrangements are in
place to enable the workforce to raise
concerns in confidence and the Chair
of the Audit Committee has been
appointed as whistleblower champion.
The Audit Committee monitors the
operation of the whistleblowing
arrangements throughout the year,
escalating matters to the Board when
appropriate. The Board reviews the
operation and effectiveness of these
arrangements annually.
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The role of the Board and its responsibilities
Company’s website. Our shareholders have
granted the Directors authority to make
charitable donations, and further details
on the donations made can be found on
page 127.
Powers of Directors
The powers of the Directors are set out
in the Company’s Articles of Association
(the ‘Articles’), prescribed by Special
Resolutions of the Company and codified
in UK company law. The Articles contain,
for example, specific provisions and
restrictions concerning the Company’s
power to borrow money. They also provide
Directors with authority to allot unissued
shares, up to pre-determined levels set
and approved by shareholders in general
meetings. The Articles can be amended by
a special resolution of the members of the
Company, and a copy can be found on the
At the 2019 AGM, shareholders granted
authority to the Directors for the purchase
by the Company of its own shares, with
such authority expiring at the end of the
2020 AGM, or 30 June 2020, whichever is
the earlier. The Company did not purchase
any of its own shares during 2020 and the
Directors will propose the renewal of this
authority at the 2020 AGM.
Further to the powers granted above,
the Board maintains a full schedule of
matters reserved to it together with a
Group Management Responsibilities
Map which sets out the senior manager
functions, prescribed responsibilities and
control functions within each subsidiary
of the Group (as applicable). The Group
Management Responsibilities Map includes,
inter alia, terms of reference for the various
Board Committees, a schedule of the
Company’s policies and detailed job
descriptions for each of the Directors.
Division of responsibility
The job descriptions of each Director, including the Chair and Chief Executive, and the division of responsibilities between them are
clearly defined and agreed by the Board. The responsibilities of each of the Directors and the role of Secretary are summarised below.
The Board
Leadership
Independent oversight
CHAIR
Responsible for the leadership of the
Board and its continuing effectiveness,
ensuring that the Board is satisfied
that the Group’s purpose, values and
strategy align with its culture and that
communication between the Executive
and Non-executive Directors, as well
as with shareholders generally, is
effective.
CHIEF FINANCIAL OFFICER
Responsible for providing leadership
and direction for, and oversight of,
the financial, accounting, tax, capital,
liquidity and unit pricing activities of
the Group, and to maintain effective
investor relations.
CHIEF EXECUTIVE OFFICER
Responsible for the development
and communication of the Group’s
strategy, developing and achieving
the business objectives, leading and
motivating an effective senior
management team, and ensuring an
appropriate culture is adopted in the
day-to-day management of the Group.
MANAGING DIRECTOR
Responsible for leading the growth
and development of the Partnership,
ensuring that all members of the
Partnership receive appropriate
supervision, oversight, development
and support, and provide high-quality,
suitable advice to clients.
SENIOR INDEPENDENT
NON-EXECUTIVE DIRECTOR
Responsible for providing a sounding
board for the Chair and to serve as an
intermediary for the other Directors,
when necessary, to lead the appraisal
of the performance of the Chair and to
be available to shareholders as a point
of contact if they have concerns which
contact through normal channels has
failed to resolve or for which such
contact is inappropriate.
INDEPENDENT NON-EXECUTIVE
DIRECTORS
Responsible for contributing to the
entrepreneurial leadership of the Group,
within a framework of prudent and
effective controls. Non-executive
Directors provide independence,
impartiality, experience, specialist
knowledge and other diverse personal
skills and capabilities.
COMPANY SECRETARIAT
Responsible for guiding the Board in meeting the requirements of relevant legislation and regulation
and ensuring that Board procedures are both followed and regularly reviewed.
Directors have access to the advice of the Company Secretary at all times, as well as independent
professional advice, where needed, in order to assist them in carrying out their duties.
ST. JAMES’S PLACE PLC 83
Planning and preparing
The Chair is responsible for setting the
Board agenda together with the Chief
Executive and the Company Secretary. The
Group’s strategy and business plan provide
the basis for the forward Board agenda for
the year and this is refined as key topics and
strategic priorities emerge. The Board’s
forward agenda is co-ordinated with those
of its Committees to ensure that topics are
given sufficient coverage in the most
appropriate forums.
The Chairs of the various Committees
report on their activity at Board meetings
and liaise with the Chair to ensure
items escalated from the Committees get
sufficient time and focus in Board meeting
agendas. The Board and other key Director
forums are explained in more detail below.
The work undertaken by the Board
Committees is covered in more detail
in the individual committee reports.
See page 85
Scheduled Board meetings
Scheduled Board meetings follow an agreed format with the final agenda being set by the Chair,
Chief Executive and Company Secretary by reference to the forward agenda and having considered
key developments since the previous meeting. This approach ensures coverage of the Board’s key
responsibilities are balanced against the need to focus on strategic priorities and address topical matters.
The papers for each meeting, which include an Executive Report covering key developments
in the business and performance indicators, are sent to the Board a week ahead of the meeting.
This ensures that the information is timely and that the Directors able to prepare for the meetings.
Ad-hoc Board meetings
From time to time, the Board is required to hold meetings outside of its planned schedule, to consider
topics that require immediate attention or to approve Board appointments or transactions.
Board working dinners
Throughout the year, Board working dinners are held on the nights before Board meetings to allow the
Directors greater time to consider topics that warrant a more discursive approach. Additional internal
and external participants are invited to the dinners to present on these topics.
Strategy meetings
NED meetings
Focused strategy meetings are held to enable the Board and management to reflect, debate, refine and
agree on the Group’s strategy.
The independent Non-executive Directors meet privately with the Chair during the year, to consider matters
arising from Board meetings and also meet without the Chair.
Development sessions
Directors are provided with development sessions on specific topics during the year. Further details can
be found on page 87.
Other meetings
The Board also appoints ad-hoc committees from time to time to manage procedural matters relating
to decisions it has made.
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“ The Board and its
committees have a
combination of skills,
experience and
knowledge. Our
succession plans
aim to promote gender,
social, ethnic and
cognitive diversity.”
Board composition, succession and evaluation
Composition
The Board currently comprises three
Executive Directors, seven independent
Non-executive Directors and the Chair. The
Directors in office throughout the financial
year and up to the date of the report are
set out in the table on page 85, and
biographical details, including their
membership of Board Committees, are
set out on pages 74 to 75. As part of the
establishment of long-term succession plans,
the Board is likely to have more independent
Non-executive Directors on the Board
over the next couple of years than would
normally be the case, in order to manage
orderly induction, handover and transition.
Independence
The Board determined that the Chair was
independent on appointment and believes
that all of the Non-executive Directors
continue to demonstrate their independence.
When determining independence, the Board
considers each individual against the criteria
set out in the Code and also considers how
they conduct themselves in Board
meetings, including how they exercise
judgement and independent thinking.
As previously reported, the Board remains
satisfied that Simon Jeffreys’ role as
chair of Aon UK Ltd has no bearing on
his independence or that of the Executive
Compensation Practice of Aon plc or Aon
Consulting (advisers to the Remuneration
and Investment Committees). When
considering their relationships to the Aon
Group, the Board took into account the fact
that, whilst Aon UK Ltd, Aon Consulting and
the Executive Compensation Practice of Aon
plc operate in different divisions of a large
group, their reporting and ownership lines to
the Aon Group board are entirely segregated.
Iain Cornish’s tenure as Chair of the Board
has been short and has coincided with the
introduction of a provision (19) to the Code
requiring that the chair not remain in post
beyond nine years from the date of their first
appointment. However, the provision also
states that “to facilitate effective succession
planning and the development of a diverse
board, this period can be extended for a
limited time, particularly in those cases
where the chair was an existing non-
executive director on appointment”.
During 2019, the Nomination Committee,
led by the Senior Independent Director
and excluding the Chair met to consider
the Chair’s succession and reflected
upon the rationale for Iain’s appointment,
a key aspect of which was to lead the
establishment and delivery of succession
plans for the Board as well as increasing the
Board’s diversity. The Committee concluded
that, in order for Iain to oversee the initial
phase of these plans and induct the new
members of the Board into the organisation
in a manner that does not disrupt the
Board’s operation and focus, it was
appropriate to extend the appointment of
Iain as Chair beyond the ninth anniversary
of his appointment as a Director with a view
to his successor as Chair taking up their
post no later than the end of October 2022.
Before agreeing this position, the Senior
Independent Director contacted major
shareholders to seek their views and they
expressed their support for this approach.
Further information can be found in
the Nomination Committee Report
on page 100
ST. JAMES’S PLACE PLC 85
Board and Committee structure and attendance
There are four wholly Non-executive
Committees of the Board. The Chair of the
Board is a member of, and chairs, the Risk
and Nomination Committees. All of the
other members of these Committees are
independent Non-executive Directors. Further
information on these Committees can be found
in their separate reports on pages 89 to 125.
Our Non-executive Board Committees
AUDIT
COMMITTEE
RISK
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
Report on
page 89
Report on
page 95
Report on
page 99
Report on
page 102
Director
Board
Audit
Risk
Nomination
Remuneration
IC
Iain Cornish (Chair)
AC
Andrew Croft (CEO)
IG
Ian Gascoigne
CG
Craig Gentle
A
T
T
E
N
D
A
N
C
E
I
N
2
0
1
9
EG
RH
HM
Emma Griffin (appointed
6 February 2020)
Rosemary Hilary (appointed
17 October 2019)
Dame Helena Morrissey
(appointed 1 January 2020)
SJ
Simon Jeffreys
BW
Baroness Wheatcroft
RY
Roger Yates (SID)
Past Directors
7/7
7/7
7/7
7/7
–
1/2
–
7/7
7/7
7/7
4/4
–
–
–
–
0/1
–
6/6 (Chair)
4/6
6/6
DL
David Lamb (stepped
down on 26 February 2019)
1/1
–
5/5 (Chair)
6/6 (Chair)
–
–
–
–
1/1
–
5/5
5/5
5/5
–
–
–
–
–
–
–
6/6
5/6
6/6
–
–
–
–
–
–
–
–
6/6
5/6
6/6 (Chair)
–
This table provides details of scheduled meetings held in the 2019 financial year and the attendance at each meeting of the members of each Board. Rosemary Hilary
was unable to attend a Board meeting and Audit Committee meeting held within a month of her appointment due to pre-existing commitments.
Baroness Wheatcroft was unable to attend meetings of the Board, Remuneration Committee and Audit Committee meeting which clashed with existing commitments.
The dates for the Audit Committee meetings had been set prior to Baroness Wheatcroft joining the committee.
Executive Committees reporting to the Board
In addition to the wholly Non-executive
Committees, the Board has also
delegated specific responsibilities to
three further Committees, the members
of which are Executive Directors. The
terms of reference of the Committees
are regularly reviewed and are included
in the Management Responsibilities Map.
EXECUTIVE BOARD
Comprises the Executive Directors of
the Board and other members of senior
management. It is via the Executive Board
that operational matters are delegated
to management. The Executive Board is
responsible for communicating and
implementing the Group’s business plan
objectives, ensuring that the necessary
resources are in place in order to achieve
those objectives, and managing the
day-to-day operational activities of
the Group.
DISCLOSURE COMMITTEE
Comprises the Chief Executive
and Chief Financial Officer and
is responsible for identifying
and determining matters to
be disclosed to the market.
SHARE SCHEME COMMITTEE
Comprises the Executive Directors
and its purpose is to assist the Board
in fulfilling its responsibilities for
operating and administering
Executive, Employee, Partner and
Restricted share plans.
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Directors’ appointments
The Board has a responsibility to ensure that appropriate succession plans are in place for the Board, the Executive Board and senior
management. Details of progress made in the year can be found in the Report of the Nomination Committee. A summary of key
aspects of Directors’ appointments are set out below:
Appointment,
replacement and
re-election of Directors
The Articles permit Directors to appoint additional Directors and to fill casual vacancies and any Directors
appointed must stand for election at the first Annual General Meeting (AGM) following their appointment.
All other Directors will stand for re-election at each AGM. Directors can be removed from office by an ordinary
resolution of shareholders or in certain other circumstances as set out in the Articles.
Before a Director is proposed for re-election by shareholders, the Chair considers whether his or her
performance continues to be effective and whether they demonstrate commitment to the role. After careful
consideration, the Chair is pleased to support the re-election of all Directors at the forthcoming AGM. Each
Director brings significant skills to the Board as a result of their varied careers and we believe that this diversity
is essential to contributing to the appropriate mix of skills and experience needed by the Board and its
Committees in order to protect the interests of the Company’s shareholders. As in previous years, the Board
is recommending to shareholders that all the Directors retiring at the forthcoming Annual General Meeting
be re-elected and further information can be found in the notice of meeting for the forthcoming AGM.
Duration of appointments Non-executive Directors, other than the Chair, are appointed for a specified term and the Executive Directors
have service contracts (copies of the terms and conditions of appointment of all Directors are available for
inspection at the registered office address and will be available for inspection at the Company’s AGM).
Terms of appointment
Time commitments
Conflicts of interest
Directors’ and officers’
indemnity and insurance
The Executive Directors all have service contracts with the Company that provide for termination on 12 months’
notice from either the Company or the Director (except in certain exceptional recruitment situations where
a longer notice period from the Company may be set, provided it reduces to a maximum of 12 months within
a specified time limit). Service contracts do not contain a fixed end date. The Company does not have
agreements with any Director or employee that would provide compensation for loss of office or employment
resulting from a takeover, except that provisions in the Company’s share schemes may, in certain
circumstances, cause share awards granted to employees under such schemes to vest on a takeover.
Non-executive Directors are expected to commit sufficient time to enable them to undertake their
responsibilities and, as explained in the Report of the Nomination Committee, their capacity to fulfil their
responsibilities is reviewed on an ongoing basis so that the Board can be satisfied that each Non-executive
Director commits sufficient time to the business of the Company.
Iain Cornish was appointed as Chair in October 2018 and devotes a significant proportion of his time to
the role. In conjunction with the SID, he regularly assesses his commitments and continues to manage
his portfolio of other activities to ensure that he has sufficient time to meet the requirements of the position.
He currently holds a non-executive role with Leeds Building Society. He has a full attendance record at the
Company’s Board meetings in 2019 and has also attended the vast majority of Board Committee meetings
in addition to spending a substantial amount of time engaging with the business outside formal Board and
Committee meetings. The Board is satisfied that he commits sufficient time to the business of the Company.
The Board has in place procedures for the management of conflicts of interest. In the event a Director
was to become aware that they had an actual or potential conflict of interest, they must disclose this to the
Board immediately. The Board then considers the potential conflict of interest based on its particular facts, and
decides whether to authorise the existence of the potential conflict and/or impose conditions on such authority
if it believes this to be in the best interests of the Company. Internal controls also exist whereby regular checks
are conducted to ensure that the Directors have disclosed material interests appropriately.
Except as stated in the Directors’ Remuneration Report, no Director has, or has had during the year under
review, any material interest in any contract or arrangement with the Company or any of its subsidiaries.
The Company has taken out insurance covering Directors and officers against liabilities they may incur in their
capacity as Directors or officers of the Company and its subsidiaries. The Company has granted indemnities to
all of its Directors in their capacities as Directors of the Company and, where applicable, subsidiary companies
on terms consistent with the applicable statutory provisions. Qualifying third-party indemnity provisions for the
purposes of section 234 of the Companies Act 2006 were accordingly in force during the course of the financial
year ended 31 December 2019, and remain in force at the date of this Report.
ST. JAMES’S PLACE PLC 87
Directors’ development
Inductions for
new Directors
Continuing
professional
development
An appropriate induction programme is designed to enable all new Directors to meet senior management, understand the
business and future strategy, visit various office locations and speak directly to advisers and staff around the country as
well as being introduced to other key stakeholders. Induction plans are tailored to meet the specific requirements of
incoming Directors. To support his transition when taking on the role of Chair, a programme of activities was also
established for Iain Cornish.
The Chair and Company Secretary ensure continuing professional development for all Directors, based on their individual
requirements and this is achieved through a wide range of approaches:
Approach
Examples in 2019
Specific development
sessions and training
Specific development sessions and events have been provided to the Directors during
the year and these have included further training on the implications of SM&CR and an
‘expo’ where they met employees from a number of departments that provide support
directly to the Partnership. Specific NED development sessions are also held regularly
during the year to augment Directors’ knowledge of the business, the market place and
the regulatory environment. These sessions have covered topics such as new financial
reporting standards and the wealth management sector in Singapore, Hong Kong
and Shanghai.
Visits to head office, other
locations and service
providers to meet with
employees and members
of the Partnership
The Directors are provided with a wide range of opportunities to visit offices.
This included attendance at the Solihull Location Conference where they had the
opportunity to meet Partners and Academy graduates. During the year Directors also
visited regional offices in the UK, Rowan Dartington’s head office in Bristol and the
Group’s offices in Dublin, Singapore, Hong Kong and Shanghai. The Chair and Chair
of the Audit Committee also visited key service providers based in Dublin and India
respectively.
Attending executive
committees and
management forums
During the year the Non-executive Directors have attended a number of the meetings
of the executive committees that report into the Executive Board to gain further insight.
These have included the Group Risk Executive Committee, Investment Executive
Committee and Finance Executive Committee.
Attending seminars or
other events which assist
Directors in carrying out
their duties
Directors receive invitations from time to time to attend seminars and conferences that
provide opportunities to network and enhance their knowledge and experience. In 2019
this has included events run by the FRC and a number of advisory firms.
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2019 Board effectiveness review
Reflecting on the 2018 review
In 2018, the Board appointed Boardroom Review Limited to carry out an externally facilitated review of the effectiveness of the Board,
its Committees and the Directors. This review was led by Dr. Tracy Long and identified a number of areas for the Board to focus upon.
As reported last year, the Board set itself actions which were summarised as follows:
Area
Update on progress in 2019
Improving the Board’s
preparation for the future
Improving the composition
and development of the Board
Improving the Board’s input
into leadership transition
Board agendas in 2019 have focused on the balance of topics, increasing the time available
and depth of focus on strategic topics. Improvements in the quality of reporting and
attendance by a broader range of presenters, including external parties, also contributed
to the progress made.
Succession planning has been a key focus of the Nomination Committee and the Board
and we successfully recruited two additional Non-executive Directors during 2019. Further
information can be found in the Report of the Nomination Committee on pages 99 to 101.
Further details on the enhancements made to support the development of the Board can
be found on page 87.
The establishment of the Workforce Engagement Steering Group and the appointment
of Baroness Wheatcroft as the Non-executive Director for workforce engagement have
supported the Board in increasing its visibility of the workforce. Culture and values have
also been key strategic topics on the Board agenda.
Management succession – We are
fortunate to have a strong management
team with a deep knowledge and
experience of SJP and its market place.
However, the Board recognises that it has
a key role to play in the establishment of
a diverse pipeline for succession that
understands and represents not only SJP,
but also its stakeholders and wider society.
By order of the Board:
IAIN CORNISH
Chair
26 February 2020
The 2019 review
The Code does not require us to carry out
an externally facilitated review in 2019,
having appointed Boardroom Review to
deliver our 2018 Board evaluation. However,
the Board was keen to maintain the
momentum built up from last year’s review
and so, in addition to regularly monitoring
progress against the findings of the 2018
review (see above) has sought to align the
2019 review with the outcomes of that
review. In practice this has meant that
the Board has avoided the quantitative
scoring approach often adopted for
self-assessments and has concentrated
on obtaining focused qualitative insight
from the Board and other attendees
centred around the high-level themes
identified last year.
Directors and other meeting attendees
were invited to provide their views,
principally based around these key themes,
and these were collated by the Company
Secretariat, discussed with the Chair and
summarised to enable the Board to focus
on the pertinent points raised. Alongside the
Board Effectiveness Review, the Chair also
carried out individual appraisals with each
Director, the outcome of which formed the
basis of the assessment by the Board that
supports the recommendations (as set out
in the Notice of AGM) to reappoint Directors
at the forthcoming Annual General Meeting.
Actions agreed by the Board
The 2019 review identified several themes
and the Board intends to focus on these as
areas for development in 2020. Specific
actions will drive progress in addressing
each of the themes summarised below.
Deepening the collective understanding
of the business of today and shaping the
business of tomorrow – Further increasing
our focus on the demands and experiences
of clients in an evolving market place will
not only ensure the Board continues to
focus on the key risks and opportunities,
but will also contribute towards the
integration of the new NEDs onto the Board.
Board operations and dynamics – The
effectiveness of the unitary Board is not
driven by the experience and ability of the
individual directors alone. Building on the
action taken in recent years, we aim to
further enhance how we work by supporting
the development needs of individual
directors (including induction planning for
new NEDs), strengthening the performance
of the collective Board and reinforcing the
relationship with management.
Reflections on lessons learned – In
recent years the workloads of boards have
undoubtedly increased significantly and
the Board is keen to ensure it sets aside
sufficient time to reflect on decisions
made and taken account of lessons
that have been learned.
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Report of the Audit Committee
KEY OBJECTIVE OF THE COMMITTEE
The Committee’s primary purpose is to
oversee financial reporting, internal and
external audits and the Group’s systems
of internal control, and to provide guidance
and advice on these areas to the Board and,
where applicable, other boards and
committees in the Group.
COMMITTEE MEMBERSHIP
REGULAR ATTENDEES AT MEETINGS
Chair of the Board; Chief Financial Officer;
Director – Internal Audit; Executive Director
– Finance (Chief Actuary); Chief Risk Officer;
and Senior Statutory Auditor.
Member
Joined
SJ Simon Jeffreys (Chair)
1 January 2014
RH Rosemary Hilary
BW Baroness Wheatcroft
RY Roger Yates
17 October 2019
8 October 2018
1 July 2014
The Committee’s terms of reference set out the Committee’s role and authority as Audit
Committee for the Company and certain subsidiaries. They can be found on the corporate
website at www.sjp.co.uk.
In 2019, the revised UK Corporate Governance
Code (the Code), together with new company
law reporting requirements, came into
force. These introduced the need for new
disclosures including the new section 172(1)
statement. The Code, together with the new
legislative requirements, have elevated the
importance of reporting on our relationships
with our key stakeholders, in particular our
workforce, and this theme runs through our
Strategic Report and Corporate Governance
Statement. For the purposes of my update
to you, it is important to note that the
Committee reviewed and challenged these
non-financial disclosures to ensure their
probity ahead of publication.
The Committee is entrusted with reviewing
and monitoring the performance and
independence of the Group’s external
auditors, PwC. This year the Committee
oversaw the successful handover of the
Group’s Senior Statutory Auditor role from
Jeremy Jensen to Andy Moore. Following
the mandatory rotation of the
St. James’s Place International plc (SJPI)
audit, the Committee also monitored the
transition to a new auditor in Ireland and
Asia, Grant Thornton. The Committee tasked
PwC with agreeing how they would work
with Grant Thornton and they subsequently
outlined their proposals to the Committee,
who were satisfied with the proposed level
of interaction between the two firms.
Attending meetings of SJPI’s own audit
committee, at which Grant Thornton
presented their audit plan and results,
also provided me with further context.
We also assessed and monitored
the Group’s systems of internal control
and had oversight of the financial crime
and whistleblowing arrangements.
During the year we continued to assess
the potential impacts of the UK’s exit from
the European Union (Brexit) on the Group.
Naturally, Brexit was also discussed both
at the Risk Committee, and at the Board.
This Committee’s attention centred
primarily on the effects of Brexit on the
UK’s economy and, consequently on our
own financial performance. As we move
into 2020, the Committee will maintain
this focus.
Looking ahead to next year, the
Committee will continue to focus on its
core responsibilities, providing oversight
and monitoring of the Financial Statements,
our auditors, and our systems of internal
control, all to ensure the integrity and
robustness of the Group’s operations and
reporting. With the publication of various
reports on the future of audit in the UK,
2020 will undoubtedly be a transitional year
for the audit profession as well as for audit
committees generally. This Committee will
continue to review its own practices to
ensure we are prepared to implement any
relevant changes introduced during 2020.
SIMON JEFFREYS
On behalf of the Audit Committee
26 February 2020
SIMON JEFFREYS
Chair of the Audit Committee
Dear Shareholder,
As Chair of the Committee, I am pleased to
provide an update of the work of the Audit
Committee in 2019.
The Committee’s focus is first and
foremost on the integrity of the Group’s
Financial Statements. We spent a good
proportion of our time scrutinising the
Group’s interim and full year financial
reports. Details of the significant issues
we considered can be found on pages
90 to 92. In a new initiative, and as part
of its commitment to ensuring the Group
continues to report to its stakeholders
in a clear and effective way, Committee
members met more frequently with
management during the year end process.
This enabled us to review the
most important disclosures in reports
to shareholders and presentations
to management.
The financial reporting landscape continues
to evolve at pace and, as reported last year,
2019 has seen the introduction of IFRS 16
(Leases), further information on which we
have set out in Note 1. The implementation
of IFRS 17 (Insurance Contracts) has been
delayed to 2022. We anticipate the change
will be relatively minor for SJP but we continue
to monitor management’s preparations.
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Operation and performance
of the Committee
The Committee has six scheduled meetings
each year at which it considers key topics,
as set out in its forward agenda, and
receives regular updates on developments
in corporate reporting, external auditor
independence, progress against the internal
audit plan, capital management, any
financial control breaches, fraud and
whistleblowing activity, and updates to
key policies. Attendance by Committee
members at these meetings is shown on
page 85. Private sessions are regularly held
with the Director – Internal Audit and the
external auditor, providing an opportunity
for concerns to be raised in the absence of
management. Simon Jeffreys discussed
the meeting agendas separately with PwC
and the Director – Internal Audit in advance
of each meeting. Conversations between
the Chair of the Committee and PwC, and
with internal audit, were also held during
the year as and when these were
considered useful.
To aid the Committee in its understanding
of our relationships with key service
providers the Committee Chair undertook
site visits to meet with two key third party
suppliers in India, and the CEO / Managing
Director for Bluedoor. These meetings
allowed him to gain insight into their control
and innovation culture. Similarly, but closer
to home, meetings were arranged with
management throughout the year on key
matters. One example was a meeting
with the executive management team
responsible for cyber controls, following
an external review. This provided an
opportunity to discuss both the findings
and proposed actions.
During the year, two development sessions
were arranged to enhance further the
Committee’s understanding of key topics.
In 2019 the topics included the financials of
the SJP Distribution business, corporate tax
issues, changes in accounting standards
(IFRS 16 and 17), and the Solvency II
technical provisions calculation. The
Committee also received an update from
the Internal Audit co-source partner, Deloitte
on their views of the internal audit function,
risk appetite, and investment and product
Governance. In relation to the specific
needs of particular members, the Chair
liaised with Rosemary Hilary prior to her
joining the Committee regarding topics that
would support her induction and ensured
these were addressed.
The Committee evaluated its own
performance and effectiveness during
the year carrying out an annual review of its
terms of reference and agreeing changes
that clarified its role in relation to SJPUK.
The Committee’s effectiveness was also
reviewed by the Board as part of its overall
assessment of its effectiveness (see page
88). The Board and the Committee remain
satisfied that the Committee operated
effectively and has the experience and
qualifications necessary to successfully
perform its role, noting in particular that the
Chair of the Committee is a qualified
accountant and former auditor, and other
members also have recent and relevant
experience and expertise in the financial
services sector. The important
recommendation from these reviews
was the setting up of additional meetings
to focus on the key strategic messages
to be included in the financial reports.
The Audit Committee was responsible for
carrying out the function required under
the FCA’s Disclosure and Transparency
Rule DTR7.1.3R (Audit Committees) and
complied with The Statutory Audit Services
for Large Companies Market Investigation
(Mandatory Use of Competitive Tender
Processes and Audit Committee
Responsibilities) Order 2014 throughout
the year ended 31 December 2019.
Matters considered
during the year
The Committee focused on a number of
matters which can be grouped under four
broad headings: Corporate Reporting,
External Audit, Internal Audit, and Internal
Controls. The following sections illustrate
the Committee’s activities during the year.
Corporate reporting
Corporate reporting activities form a large
part of our activities. During the period
the Committee responded to a request
for information from the FRC’s Corporate
Reporting Review function. We responded
fully to their queries and have been able
to make some improvements and
clarifications to the presentation in our
Annual Report and Accounts for 2019 as
a result. The FRC was then able to close
their review promptly.
The FRC would ask us to note the scope
and limitations of their review as follows:
• It is based on the Group’s Annual Report
and Accounts for 2018 and does not
benefit from detailed understanding
of our business or the underlying
transactions entered into;
• It provides no assurance that our Annual
Report and Accounts are correct in all
material respects, and no verification
of the information provided has been
performed; and
• The FRC accepts no liability for reliance
on them by the Group or any third party.
Some highlights from the Committee’s work
this year are included in the table on pages
91 and 92.
ST. JAMES’S PLACE PLC 91
What was the conclusion and impact?
Early engagement and regular updates allowed the
Committee to focus its work efficiently on the most
material items during the year. As a result, the
Committee was able to be confident in the key
judgements and assumptions underpinning the
2019 half and full-year ends.
Discussion at the working group helped shape the
messages to be included in the Annual Report and
Accounts.
The Committee was satisfied that the audits provided
sufficient assurance on the accuracy of the asset
valuations underpinning the reporting, and the
robustness of the control environment.
In relation to the DAF, the Committee was satisfied
with the valuation process, the valuations and the
disclosures in the Annual Report and Accounts. More
details on the DAF assets can be found in the notes
to the IFRS Financial Statements on page 182. The
Committee requested that the recommendations of
Internal Audit regarding strengthening of controls be
implemented and will monitor progress.
During the year, all the key accounting judgements and
actuarial assumptions were examined and challenged,
including the quantitative and qualitative materiality
thresholds. The Committee considered the application
of these materiality thresholds in the preparation of
Financial Statements and agreed the final judgements
and assumptions to be adopted.
The Committee concluded that the operational
readiness prepayment would continue to provide future
cost reduction benefits, even in stressed conditions.
More details on the prepayment can be found in the
notes to the IFRS Financial Statements on page 164.
The development session, held outside the normal cycle
of Committee meetings, provided an opportunity for the
Committee to review reporting against IFRS 16 and to
evaluate the potential impact of IFRS 17.
Following detailed deliberations and wording changes,
the Committee recommended approval of the periodic
financial reports, to the Board.
Following due consideration, the Committee
recommended approval of the SJPUK Annual Report
and Accounts to the SJPUK Board.
Key corporate reporting topics
Theme
What did we do?
Year-end planning
• In early 2019, the Committee agreed a plan for the
year, including new issues arising in half year and year
end reporting. Updates and progress against plan
were reviewed at subsequent meetings.
• To assist with considering strategic messages in the
Annual Report and Accounts the Committee arranged
specific meetings for a working group to carry out
detailed reviews of our key messages.
Asset valuations
• Over 90% of the Group’s assets are invested through
SJP Unit Trusts (UTs). The Committee reviewed
the reports of the independent auditors of the UTs.
• The Committee received reporting twice in the
year from management on the performance of the
investment management control environment and
on oversight of the key outsource providers –
State Street and NatWest.
• The assets of the Diversified Assets Unit Trust (DAF)
are consolidated into the Group’s Financial Statements.
The DAF include some Level 3 Private Credit and
Private Equity stocks. The Committee sought
assurance from management and both the external
and internal auditors about the valuations processes,
especially the application of judgement.
• As part of reviewing the half-year and year-end reports
the Committee required management to identify and
explain all the key judgements and assumptions, and
in particular any significant changes this year.
• Operational readiness prepayment of £299.2 million –
The value of this significant asset continues to be a key
judgement. The Committee challenged management
over their future benefit projections, including sensitivity
testing of valuation assumptions, for example the level
of new business and the recoverable amounts from
using Bluedoor.
• To enhance the knowledge, and skills of its members,
the Committee arranged for a development session
covering key changes arising from the new Financial
Reporting Standards (IFRS 16 and 17).
Accounting
judgements
and actuarial
assumptions
Final results and
Annual Report
• The Committee reviewed and provided input into
the periodic financial reporting, including the Interim
Report, the Final Results announcement and the
Group Annual Report and Accounts for 2019, including
the viability statement and going concern statement.
SJPUK
• The Committee considered the specific requirements
of reporting for SJPUK.
• It also reviewed and provided input into the SJPUK
Annual Report and Accounts for 2019.
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Key corporate reporting topics continued
Theme
Regulatory
reporting
What did we do?
What was the conclusion and impact?
In addition to statutory reporting, The Committee also
reviewed the following regulatory reporting
requirements:
• Solvency II – Group Solvency and Financial Condition
Report (SFCR), Group Regular Supervisory Reporting
(RSR) and SJPUK RSR;
The Committee approved the publication of the 2019
Year End Solvency and Financial Condition Report
(SFCR) and the submission of the 2019 Regular
Supervisory Reporting (RSR) to the regulator.
The Committee reviewed and was satisfied with the
CASS external audit reports.
• CASS – Audit reports on SJPIA, SJPUTG, RD, and
an exception report on SJPWM; and
• To support members with this responsibility, the
Committee arranged a development session on
the Solvency II technical provision calculations.
• The Committee received updates during the year
on the performance and adequacy of the controls
during the year.
Financial controls
The Committee was able to discuss areas of potential
weakness and potential implications with management
during the year, and then track actions to closure.
As a result, the Committee was able to get reassurance
about the robustness of the financial control
environment, and to require certain enhancements
to controls as recommended by internal audit.
The Committee will continue to monitor progress.
‘Fair, balanced and
understandable’ opinion
The Board is required to provide its
opinion on whether it considers the
Company’s Annual Report and Accounts
taken as a whole are fair, balanced and
understandable, and provide the information
necessary for shareholders to assess the
Company’s position and performance,
business model and strategy.
To support the Board in providing its
opinion, the Audit Committee carried out
a formal review, taking account of investor
feedback, commentary from the FRC’s
annual review of corporate reporting, and
management’s own assessment. The
Committee assessed the quality of
financial reporting through discussion
with the external auditors and receiving
presentations and discussing key matters
with senior financial management.
This process included considering each
of the elements (fair, balanced, and
understandable) on an individual basis to
ensure our reporting was comprehensive
in a clear and consistent way, and in
compliance with accounting standards
and regulatory and legal requirements.
The external auditor also considered
and confirmed agreement with the fair
balanced and understandable statement
as part of the audit process.
Following its review, the Committee advised
the Board that the Company’s Annual
Report and Accounts for the year ended
31 December 2019 were fair, balanced
and understandable.
External audit
Auditor activity and effectiveness
PwC were first appointed in 2009 and were
reappointed as the Group’s external auditor
following a tender process in 2016. The
Committee will be required to change our
audit firm no later than the 2027 audit. As
reported in the 2018 Annual Report and
Accounts, the planned transition to Andy
Moore as the Group’s Senior Statutory
Auditor took place in July. The Committee
oversaw this change, monitored Mr.
Moore’s performance, and concluded based
on the following points that he and PwC
were effective. As in previous years, the
external auditor attended all meetings and
met privately with the Committee regularly.
The Chair of the Committee also regularly
met with Mr. Moore to receive updates on
progress and discuss any private matters.
To launch the external auditors programme
of work the Committee received and agreed
their plan for the audit of the 2019 year-end.
The external auditor then provided regular
updates on their work culminating in their
overall final report and findings from the
year-end audit and the review of the
half-year results. The reports were
discussed with the auditors, and the
Committee concurred with management’s
response to the recommendations
identified. The Committee asked PwC to
pay particular attention to the valuation and
recoverability of the operational readiness
prepayment and was satisfied with the
results of PwC’s work and findings.
During the year, an internal evaluation was
carried out to assess the independence,
objectivity, and effectiveness of the external
auditor and the effectiveness of the audit
process. Management assessed PwC’s
effectiveness in three ways: feedback from
management involved in the audit; feedback
from the Audit Committee; and assessing
audit quality and delivery against the
audit plan.
The Committee found that PwC had a
strong senior team and demonstrated
sound knowledge of SJP. PwC exhibited
professional independence, revisited
issues decided in previous years, and were
appropriate in challenging management for
evidence. Areas of robust challenge from
PwC during the year-end audit included:
the definition of underperforming and
non-performing loans under IFRS 9; and
the inclusion of Brexit narratives in the audit
opinion. As part of the evaluation, it was
noted that no substantial changes to the
audit approach were required, however
some adjustments would be made to the
year-end timetable to ensure the audit
ran as efficiently as possible.
The Committee considered the results of
the Financial Reporting Council’s (FRC)
quality review of PwC and of those audits
led by our Senior Statutory Auditor, and the
results of quality control reviews carried
out by PwC. In July, the FRC published the
results of its audit inspections and matters
reported were discussed with the Senior
Statutory Auditor.
ST. JAMES’S PLACE PLC 93
The Committee discussed the outcome of
the review with PwC and noted that PwC
had announced an action plan to strengthen
its focus on audit quality. The plan included
additional investment in people, training and
technology, structural changes to PwC’s
business, and a reinforced focus on culture
and quality control. The Committee were
reassured by PwC’s response, and further
updates on progress, and concluded that
they did not result in any impairment of the
quality of our audit.
The Committee endorsed management’s
view that the PwC audit team were
consistently very professional and the
relationship between the auditors and the
business was positive and constructive.
Following this evaluation, the Committee
recommended that the Board seek the
reappointment of PwC as external auditor
at the next annual general meeting.
Finally, the Committee was authorised by
shareholders at the last Annual General
Meeting to fix the remuneration of the
external auditors. As such, the Committee
considered and approved the 2019 audit
fees. More information on the audit fees
can be found in Note 5 of the IFRS
Financial Statements.
Auditor independence and
non-audit services
During 2019, the Committee has monitored
closely the developments arising from the
Competition and Markets Authority’s audit
market study, the Brydon Review on the
quality and effectiveness of audit, the
Kingman review of the FRC and also
considered the revised ethical standards
issued by the FRC.
The Committee carried out its annual review
of the Policy on Auditor Independence
during the year. There were a number of
enhancements made to the policy following
the appointment of Grant Thornton Ireland
as the external auditor for SJPI.
The Committee continued to ensure
that the policy only permitted the Group’s
auditors to carry out limited non-audit work,
where there is no risk of compromising
independence, and the external auditor is
the only supplier who could reasonably
carry out the engagement. The Committee
considered proposals for non-audit services
as they arose and received updates at each
meeting on fees incurred with PwC for all
services, along with details of ‘clearly trivial’
non-audit services which the Committee
has authorised management to approve.
The Committee discussed and approved
the non-audit work carried out by PwC
during the year. Full details of PwC’s
remuneration for 2019 are set out in
Note 5 of the IFRS Financial Statements.
In their Audit Report to the Committee, PwC
confirmed that they remain independent of
the Group and, having carried out its own
assessment, the Committee concluded that
PwC remained independent and objective.
The Policy on Auditor Independence, which
extends to the restrictions relating to
non-audit services imposed by EU audit
legislation, is available on the Group’s website.
Internal audit
The Internal Audit Plan for 2019, approved
by the Board Audit Committee in November
2018, was determined using a two-part
planning process. The first was a bottom-
up risk assessment of the Group’s Audit
Universe, fully refreshed and redesigned
during 2018, which methodically assessed
the risks faced by each component of the
business. The second part was a top-down
assessment of the key risks to the Group.
The resulting Internal Audit Plan reflected
both of these assessments, providing a
blend of bottom-up core assurance activity
with specific risk-target audits.
This plan was reviewed and monitored by
the Audit Committee throughout the year.
All updates and changes were specifically
considered and approved. The Committee
reviewed and approved the Internal Audit
Charter, which can be found on our website
at: www.sjp.co.uk/about-us/corporate-
governance. The Committee also
considered the proposed 2020 internal
audit plan and recommended additional
areas of coverage before approving.
The 2019 Audit Plan addressed three key themes. The themes, and example audits undertaken are:
Theme
Description
Client and Partner
Operational
excellence
The Group’s processes for ensuring appropriate client
outcomes, overseeing the continued growth and
expansion of the Partnership and its compliance
with the Group’s advice standards, and evaluated
the effectiveness of the field management team
in maintaining the required controls.
The robustness and effectiveness of the Group’s core
operational processes, the impact of continued growth
and increased complexity and the impact of major
change initiatives.
Regulation
and reputation
The regulatory landscape, including significant recent
and future changes, the importance of compliance
across the Group’s increasingly complex operations,
and the key function of second line monitoring.
Example audits undertaken
• Advice Suitability Rate Drivers
• Online Wealth Account
• Private Clients
• Business Risk Team
• Partner Technical Support
• Oversight of Capita
• Oversight of SS&C
• Platform Migration Readiness Assessments
• IT Testing
• Operational Resilience
• Implementation of Asset Management Market Study
• AML Controls
• Fraud and Bribery Controls
• Tax Reporting
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Report of the Audit Committee continued
The delivery of the Audit Plan is the
responsibility of the Director – Internal
Audit, who is accountable to the Audit
Committee and has regular one-to-one
meetings with the Chair of the Audit
Committee and the Chair of the Board.
Each internal audit report is sent promptly
to Committee members and Internal Audit
Progress Reports were discussed at each
meeting to update them on progress
against plan and any remedial actions
allocated to management.
Internal Audit reports biannually to the
Committee on internal controls and has
confirmed that overall internal controls are
effective and no significant failings were
identified, while noting certain controls
which require improvement. Management
has plans in place to enhance controls
further where necessary and internal
audit and the Committee will monitor the
progress of the completion of those plans.
Following a competitive tender process
completed in late 2018, Deloitte LLP
continue to provide co-sourcing services
for specialist expertise and additional
resources to maintain and enhance the
level of assurance provided to the
Audit Committee.
The effectiveness of the Internal Audit
function was externally assessed this
year by EY against the global standards
set down by the International Institute
of Internal Auditors, the 2017 Code for
Effective Internal Audit in Financial Services
and current best practice in our industry.
The report concluded that the Internal Audit
function remains effective and ‘Generally
Conformed’ to the global standards across
all aspects of performance, it highlighted
the function’s significant progress, and
suggested opportunities for enhancements.
The Committee Chair met with EY to
discuss in depth the recommendations.
Plans to address these opportunities are
being reviewed by the Committee. The
Committee concluded that Internal Audit is
effective and meets the needs of the Group.
Internal controls
Systems of internal control
The Board has overall responsibility for
ensuring that management maintains
comprehensive systems of internal control
for managing risk and for assessing their
effectiveness. The Board Risk Committee
plays a key role in the oversight of the Risk
Management Framework, more information
on which can be found in the Risk and Risk
Management Report. The Audit Committee
takes responsibility for assessing the
effectiveness of internal control systems,
including those relating to the financial
reporting process for the accounts prepared
for the Group and individual subsidiaries.
The internal control systems are designed
to identify, evaluate and manage the risk of
failure to achieve business objectives within
appetite, rather than eliminate the risk
altogether. This provides reasonable but
not absolute assurance against material
misstatement or loss. St. James’s Place
is committed to operating within strong
systems of internal control that enable
business to be executed and risk taken
without exposing itself to unacceptable
potential losses or reputational damage.
Specifically in relation to the financial
reporting processes, the main features
of the internal control systems include:
extensive documentation, operation and
assessment of controls in key risk areas;
monthly review and approval of all financial
accounting data including data generated
by our outsource providers; and formal
review of Financial Statements by senior
management, for both individual companies
and the consolidated Group.
During the year, the Committee received
and provided its views on the quarterly
updates on the results from the programme
of control effectiveness reviews. The
Committee is provided with updates on
the operation of financial reporting controls
throughout the year and each control is
subject to an annual cycle of review and
reapproval which culminates at the year
end. In addition, the Committee received,
and discussed the assessments of internal
controls from Internal Audit, and the Internal
Controls Team to support its annual review
of the internal control system. This annual
review enables the Committee to attest,
on behalf of the Board, that it has been
able to properly review the effectiveness
of the Group’s system of internal control
in accordance with the 2014 FRC Guidance
on risk management, internal control and
related financial and business reporting.
The work enabled the Committee to
conclude that overall, the internal
controls were effective. However
Internal Audit and the Internal Controls
self-assessment identified areas where
controls improvements should be made.
For example, ensuring availability and
prioritisation of resource to handle the
increased regulatory burden (notably
following the implementation of SM&CR),
GDPR and recent Money Laundering
Directives, and a refined client outcomes
strategy. The Committee tracked progress
on these items throughout the year to
ensure actions were being addressed.
Whistleblowing
The Chair of the Committee is a key
contact in the whistleblowing policy and
is the whistleblowers’ champion under
the Senior Insurance Managers’ Regime.
The Committee reviewed whistleblowing
arrangements during the year and received
regular updates on activity. Each case was
considered when first reported and tracked
through at each meeting until satisfactorily
concluded. The Committee agreed that
the whistleblowing arrangements were
appropriate and consistently in force
across the entire Group. The Committee
also reviewed, challenged, and approved
the Annual Whistleblowing Report and
the Whistleblowing Policy, presented
to the Board.
Bribery and fraud review
The Committee monitors and receives
regular reports on the Group’s policies,
systems and controls for bribery and fraud
from the Money Laundering Reporting
Officer. It was determined that, overall,
SJP’s controls are effective due to the
restrictive business model, the policies and
procedures in place, and the evidence of
controls operational effectiveness; although
a number of controls enhancements are
currently being introduced. The Committee
also reviewed in detail the new target
operating model of the Financial
Crime Team.
ST. JAMES’S PLACE PLC Report of the Risk Committee
95
KEY OBJECTIVE OF THE COMMITTEE
The Committee’s primary role is to provide
guidance and advice to the Board (and where
appropriate other boards and committees
in the Group) in relation to the Group’s risk
appetite, attitude to risk and to provide
oversight of its risk management framework.
REGULAR ATTENDEES AT MEETINGS
The Chief Executive, Chief Financial Officer,
Managing Director (Distribution), Chief Risk
Officer, and the Head of Internal Audit.
Subject matter experts and other members
of senior management are invited to attend
and present on specific topics throughout
the year.
COMMITTEE MEMBERSHIP
Member
IC
Iain Cornish (Chair)
RH Rosemary Hilary
SJ Simon Jeffreys
Joined
1 October 2011
17 October 2019
1 January 2014
BW Baroness Wheatcroft
2 April 2012
RY Roger Yates
1 January 2014
The Committee’s terms of reference set out the Committee’s role and authority and can be
found on the corporate website at www.sjp.co.uk.
IAIN CORNISH
On behalf of the Risk Committee
Dear Shareholder,
I am pleased to present my annual report
on the work of the Risk Committee during
the year. The primary role of the Committee
is to oversee the effective risk management
of the business on behalf of the Board. The
following pages set out the Committee’s
activities, and provides an update on key
risk management themes considered by
the Committee during the year.
The Group’s Risk function is under the
executive leadership of Mark Sutton, the
Group’s Chief Risk Officer (CRO). Whilst the
CRO reports to the CEO and attends the
Executive Board in an advisory capacity,
he has direct access to me at all times. We
interact on a regular basis and I am involved
in setting his objectives and reviewing his
performance. Mark’s remuneration is
determined by the Remuneration
Committee, with me in attendance.
Through the regular CRO Report and
specific reporting from the Risk and
Compliance function, the Committee is
provided with comprehensive reporting
on key risk developments and activity
across the Group. A breakdown of the
key items considered by the Committee
is included in this report.
In addition to the regular risk reporting, the
Committee requested and received focused
reports from senior executives on a broad
range of strategic and current issues to
support the Committee’s assessment of the
Group’s principal risks. Attendance by senior
management during the consideration of
these reports provides the Committee with
the opportunity to explore the management
of the associated risks, challenge the
executives responsible, and assess
the risk culture within the Group.
Looking ahead to 2020, in addition to
the focus on its core responsibilities
the Committee will continue to monitor
emerging risks. Some specific areas already
identified for discussion in 2020 include:
liquidity risk management for the insurance
entities, the Group’s recovery and resolution
planning, and operational resilience.
Finally, in my update last year, I noted that
I would continue to chair the Committee
until a new independent Non-executive
Director was appointed. Succession
planning is well advanced in this area
and we anticipate appointing a new Chair
of the Committee in the coming months.
IAIN CORNISH
On behalf of the Risk Committee
26 February 2020
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Operation and performance
of the Committee
The Committee comprises the Chair of
the Group Board and four independent
Non-executive Directors. The Committee
Chair meets regularly with the Chief Risk
Officer, Chief Executive, and Chief Financial
Officer, individually and together, to discuss
key risk topics. The Chair, in conjunction
with the other Committee members, and
the CRO, establishes a rolling forward
agenda, ensuring the key responsibilities
of the Committee are carried out across
the year and that significant and emerging
risks are considered at appropriate times.
The Committee also focused on its own
performance and effectiveness during
the year. As part of this, the Committee
carried out an annual review of its terms
of reference and agreed that it continued to
discharge its responsibilities appropriately.
The Committee’s effectiveness was also
reviewed by the Board as part of its overall
assessment of its effectiveness (see page
88). The Board remained satisfied that the
Committee as a whole has the experience
and qualifications necessary to successfully
perform its role.
Oversight of risk
The Committee spends a significant
proportion of its time receiving updates
from the CRO and senior members of the
Risk and Compliance function, who have
direct access to the Chair of the Risk
Committee should the need arise. The
Committee also regularly considers
progress on the risk and compliance
monitoring plan, and assesses the
adequacy of resources committed
to its delivery.
The Committee also approves the annual
compliance monitoring plan and monitors
the operation, performance, and resourcing
levels of the Risk and Compliance function.
As part of this it reviews the compliance
monitoring dashboard, receives updates on
business assurance reviews, and approves
the annual compliance monitoring plan.
Regular agenda items also include reports
produced by the second line (Compliance
Assurance) and the first line (Business
Assurance) functions on thematic reviews
carried out into specific areas of the Group’s
business. The committee also receives an
annual report from the Group’s Money
Laundering Reporting Officer on the
anti-money laundering, anti-bribery and
anti-fraud activities taking place within the
Group, with additional updates as required.
The Committee also reviewed the summary
output from the Internal Capital Adequacy
Assessment Process carried out for
St. James’s Place Investment Administration
Limited (SJPIA) and recommended it to the
SJPIA board for approval. In addition, the
Committee has responsibility on behalf of
the Group and a number of its legal entities
for a number of key risk policies and these
were reviewed throughout the year.
The assessment of risk within the Group
is an important part of the work of the
Committee. For this reason, senior
executives with first line ownership of
principal risks regularly report directly to
the Committee. In addition to the regular
reporting outlined above, the Committee
received and reviewed reports from
management on risks in their business
areas. Overleaf is a list of the key matters
considered by the Committee during
the year.
Oversight of the risk management
framework is key to the delivery of the
responsibilities of the Committee. During
2019 the Group’s principal risks remained
largely unchanged. The Committee also
reviews and challenges the implementation
of risk mitigation in the business. Where
risks crystallise, the Committee reviews the
circumstances and root causes, and then
assesses the response of management.
More details on the principal risks, the risk
management framework, risk appetite,
and how we monitor and manage risk in the
business can be found on pages 60 to 65.
As most of the activity within the Group
is regulated, the Committee also receives
regular updates on regulatory developments
and the Group’s ongoing interactions with
regulators. The Group’s interactions are
principally with the Prudential Regulation
Authority, the Financial Conduct Authority,
the Information Commissioner’s Office,
the Central Bank of Ireland, the Monetary
Authority of Singapore, the Hong Kong
Securities and Futures Commission,
and the Office of the Commissioner of
Insurance in Hong Kong. Engagement
with other firms and advisers in the
financial services marketplace are also
reported to the Committee, and
collectively these updates assist the
Committee in monitoring the Group’s
ongoing compliance with regulation.
Activities during the year
On an ongoing basis the Committee
receives regular reports on a number
of areas including:
• updates on material risks that have
been prominent in the period since
the previous meeting;
• interactions with regulators and any
actions required;
• an assessment of the impact and
implementation of new regulations; and
• emerging risks and any significant
changes in the risk environment.
ST. JAMES’S PLACE PLC 97
Key topics considered
What did we do?
What was the conclusion and impact?
Theme
ORSA
An important area of focus for the Committee is the
Own Risk and Solvency Assessment (ORSA). More
details of the ORSA document and associated
processes can be found on page 61. This year, the
Committee undertook the following ORSA-related
activities:
• Reviewed the proposed 2019 ORSA strategy,
stress and scenario testing, and operational risk
assessments for the 2019 ORSA cycle;
• Assessed the results of stress and scenario testing
carried out as part of the ORSA process; and
• Considered the draft ORSA Summary Report,
including underlying operational risk assessments
and stress tests carried out alongside financial
projections.
Risk Appetite
Statements (RAS)
This year, the RAS were significantly amended to align
with the Group’s ten high level risk areas, which formed
the foundation of the Group’s updated risk taxonomy,
and aligned to the Group’s strategic objectives.
Emerging risks
The monitoring and reporting on emerging risks were
enhanced in 2019.
The Committee reviewed and challenged the proposed
2019 ORSA approach, including the planned stress and
scenario testing and operational risk assessments. This
resulted for example in adjustments to the proposed
scenarios regarding Brexit and potential UK political
change. The Committee debated the use of the
standard formula and agreed that it remained an
appropriate approach for the Group in calculating
its solvency capital requirement.
The Committee met outside of the normal meeting
cycle to review the draft ORSA results and report,
providing additional opportunity for the Committee
to challenge and question. For example, this included
discussion on the impact of operational losses from
a theoretical cyber security breach scenario.
The Committee then considered the final draft of the
2019 ORSA document, before agreeing to recommend
it to the relevant legal entity boards for approval. It also
approved the ORSA Policy.
The Committee reviewed and commented on the RAS
in detail, and its final form, recommended its approval to
the Group Board.
The Committee agreed an enhanced approach to the
consideration and reporting of emerging risks, and this
will continue to be an important focus of the Committee
in 2020.
You can read more about our approach to emerging risks
in the Risk and Risk Management section on page 64.
Regulatory focus
As noted earlier, the Committee receives regular
updates on interactions with the regulators. In addition to
the regular updates, the Committee considered industry
wide and firm specific feedback from the FCA and PRA.
The Committee considered all material interactions with
the Group’s principal regulators, including the Group’s
proposed actions where these are necessary. It
monitors progress against these actions to conclusion.
Conduct –
vulnerable clients
Outsourcing
Operational
resilience
The Committee received an update on the key
measures and oversight in place across the business to
support vulnerable clients, and how this framework was
evolving in the context of the guidance paper from the
FCA (GC19/3) published in late 2019.
Outsourcing is a significant area of focus for the Group.
The Committee reviewed the current material
outsourcing processes in the Group, and a list of
material relationships. This was supplemented by
regular updates on key outsource relationships, such
as the Group’s administration partners.
The Committee reviewed the Group’s approach to
business continuity and operational resilience and
requested an update on enhancements required to
respond to consultation papers issued by the PRA
and FCA in late 2019.
The Committee discussed the actions being taken
in the business to enhance its approach to identifying
and supporting vulnerable clients. This remains an area
of important focus for the Committee through 2020.
The Committee recognises the importance of
maintaining appropriate controls over outsourced
activities. The Committee probed into controls over data
security at third party suppliers, as well as the adequacy
of contingency and exit planning.
The Committee is well sighted and is actively overseeing
the activities ongoing to enhance operational resilience
in the Group. This area will remain in focus throughout
2020 and beyond.
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Report of the Risk Committee continued
Key topics considered continued
What did we do?
What was the conclusion and impact?
Theme
Cyber and
information
security
The Committee was provided with a view on SJP’s
information and cyber security risks, and activities
contributing to the cyber maturity programme.
Business risk
updates
The Committee received regular updates from various
business areas on the risks, operations and governance
related to the following:
• The Investment Management division, which is
responsible for delivery of our Investment
Management Approach.
• Administration and Client Servicing, with particular
focus on the risks associated with migration to
Bluedoor, which was completed in 2019.
• Finance, tax and treasury, understanding the risks
and responses in the head office functions.
• An update from the Group’s businesses in Asia
and Ireland, and its discretionary fund manager,
Rowan Dartington.
• Workforce / employees, assessing key people risks
and the business’s responses.
• The Partnership, including deep dives on topics such
as recruitment, supervision, developments in Training
and Competency assessments and ongoing client
servicing.
Where issues had arisen during the year, the Committee
requested updates from management on the
implications, including the financial impact, root cause
analysis and the extent of potential client detriment.
Crystallised risks
The Committee discussed the results of the testing and
assurance activities over cyber security. It will continue
to receive, review and challenge management
information on cyber security on a frequent basis
and conduct ‘deep dives’ as appropriate.
These topics were discussed and challenged by
the Committee directly with the senior first line
management responsible, and requested follow
up actions and further updates when appropriate.
The Committee discussed the management responses
to issues that had arisen, providing challenge where
appropriate, to ensure that implications were well
understood, and appropriate actions had been taken.
None of the issues identified were systemic in nature
and the Committee was satisfied that any
client detriment that may have been suffered
was satisfactorily addressed.
ST. JAMES’S PLACE PLC Report of the Nomination Committee
99
KEY OBJECTIVE OF THE COMMITTEE
The Committee has overall responsibility
for planning Board and senior management
succession, leading the process for new
appointments and ensuring that these
appointments bring the required skills,
experience and diversity to the Board. As part
of this, the Committee reviews the governance
framework, including the structure, size and
composition of the Board and its Committees
to ensure they are made up of the right people
with the necessary skills and experience to
direct the Company in the successful
execution of its strategy.
REGULAR ATTENDEES AT MEETINGS
The Chief Executive and representatives of
external consultants.
COMMITTEE MEMBERSHIP
Member
Joined
IC
Iain Cornish (Chair) 1 October 2011
SJ Simon Jeffreys
4 December 2018
BW
Baroness
Wheatcroft
1 January 2014
RY Roger Yates
8 October 2018
The Committee’s terms of reference set
out the Committee’s role and authority and
can be found on the corporate website at
www.sjp.co.uk.
Finally, the Committee has been overseeing
the progress against the 2018 Board
effectiveness action plan (which we
reported on in last year’s Report). The
majority of the actions (which we reported
on last year) are now complete, with the
remaining actions well in hand. The
Committee has also overseen an internally
driven Board effectiveness review, which
included reflecting on the lessons of the
Group’s experiences in 2019. A high
proportion of the actions have been
completed with the remaining ones being
completed as and when appropriate.
IAIN CORNISH
On behalf of the Nomination Committee
26 February 2020
Priorities for 2020
• Ensuring adequate induction and
effective governance in light of
a number of new Non-executive
Directors joining the Board;
• Ensuring adequate arrangements
for Chair succession;
• Continued focus on senior
executive development and
succession; and
• Continued focus on diversity in
all its aspects within the Group.
They concluded that it was appropriate to
extend my tenure to no later than October
2022 to enable me to oversee the initial
phase of these succession plans, subject
to the agreement of shareholders. More
information can be found in the Corporate
Governance Statement on page 84.
The Committee receives regular updates
from the Chief Executive with regard to the
composition of the Executive Board and
executive succession planning and I am
pleased to confirm that Elizabeth Kelly
joined the Executive Board in January
2020. She is currently the Company
Secretary and Director of the CEO Office
and has a wealth of experience in senior
executive roles within financial services
organisations. In addition to her current
responsibilities (which also include
inclusion and diversity) she will also
have responsibility for Corporate Social
Responsibility, Conferences/Events and
overseeing the relationship with our
Charitable Foundation.
Responsibility for overseeing SJP’s
inclusion and diversity programme rests
with the Committee and during 2019 we
were pleased to see good progress being
made during the year, not only in relation to
gender diversity on the Board and Executive
Board, but also in relation to our wider
inclusion and diversity agenda across
the SJP community. There remains a
significant amount of work to do in this
area but I believe its prominence and focus
within our strategy and operations coupled
with the ownership of this agenda by the
CEO and his executive team has set the
foundations for SJP to be a leader in
the future. More detailed coverage of
inclusion and diversity can be found
on pages 29, 30 and 101.
IAIN CORNISH
On behalf of the Nomination Committee
Dear Shareholder,
The Committee’s main priorities for
2019 included the appointment of new
Non-executive Directors and a forward-
looking review of Board composition and
medium-term succession planning for
the Non-executive Directors and senior
management, with a particular focus
on increasing diversity. To achieve its
objectives, the Committee established a
structured Board and senior management
succession planning programme working
closely with specialist external consultants.
In carrying out this work the Committee has
been particularly conscious that over the
next three years a number of the existing
Non-executive Directors will be retiring from
the Board, and through this programme the
Committee has established a clear view of
the mix of skills, experience and diversity
that will be required to continue to deliver
effective oversight in the future.
I am pleased to report that significant
progress was made in relation to all of
the Committee’s objectives, in particular
through the appointment of four new
Non-executive Directors to the Board;
Rosemary Hilary, Dame Helena Morrissey,
Emma Griffin and Lesley-Ann Nash (who
will join the Board on 1 June 2020). Each
of the new Directors brings significant
and diverse experience and expertise to the
Board (see biographies on pages 74 to 75
for more information).
Shortly after my selection as Chair-elect,
the revised Code imposed a new nine-year
tenure rule for chairs, albeit on a ‘comply
or explain’ basis. My colleagues on the
Committee, led by the Senior Independent
Director and without my involvement,
considered the implications on the
succession planning for the wider Board.
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Report of the Nomination Committee continued
Activities during the year
Topic
Board succession
Management succession
Inclusion and diversity
Group governance
Board effectiveness
Summary of activity
Drawing up a robust succession plan for the Board and, as part of this
identifying and nominating to the Board four new Non-executive Directors.
Establishing a standardised programme for senior management
succession with the support of specialist external consultants.
Significant focus on the recruitment of the Non-executive Directors, as
mentioned above and establishing appropriate foundations within the
organisation to ensure diversity within the pipeline for succession at all
levels. A key aspect of this was the approval and adoption of the Inclusion
and diversity strategy and policy in addition to receiving reports of progress
against this strategy and the diversity targets, as reported on page 101.
Find out more
See below
See below
See below
Following agreement of the principles and model for Group governance,
regular reports were received as to progress against the programme of
agreed actions. The Committee was also responsible for endorsing
non-executive appointments to subsidiary boards.
See below
Overseeing the progress of the action plans arising out of the 2018 Board
effectiveness review. Preparing for and planning the approach to the 2019
internal Board effectiveness review and proposing this to the Board.
See page 84
Operation and performance
of the Committee
The Committee comprises the Chair
of the Board and three independent
Non-executive Directors and membership
has remained unchanged during the year.
The Committee’s effectiveness has been
reviewed by the Board as part of its overall
assessment of its effectiveness (see page
84) and it remains satisfied that, as a whole,
the Committee has the experience and
qualifications necessary to perform its role.
Board and Executive succession
Last year the Committee highlighted that
four of the Non-executive members of the
Board will reach nine years’ tenure over the
next few years (a threshold set by the Code
as a limit beyond which independence is
difficult to maintain, albeit on a ‘comply
or explain’ basis). The Committee has
established robust and detailed plans
to manage the transition of Board
membership over the next few years
and 2019 has seen the implementation
of the first phase of these plans.
The immediate focus has been to identify
and nominate to the Board, at least four new
Non-executive Directors to ensure effective
succession planning for the future. Inclusion
and diversity has been a key aspect of the
planning and, following a tender process,
the Committee selected Russell Reynolds
Associates to support in the development
of the plans and identify potential candidates.
Russell Reynolds are a sponsor of the 30%
Club and are accredited for the FTSE 350
category of the Enhanced Voluntary Code
of Conduct for Executive Search Firms.
Russell Reynolds led the search for each of
the Non-executive roles and, in respect of
each role, provided a long list of high calibre
candidates, at least 50% of whom were
women. A formal interview process
was undertaken before other members
of the Board were invited to meet the
recommended candidates for each of the
roles. In October and November the Board
was able to announce the appointments
of Rosemary Hilary and Dame Helena
Morrissey and the appointments of
Emma Griffin and Lesley-Ann Nash
were announced in February 2020.
In order to ensure continuity and maintain
stability, we plan to induct the new
members of the Board into the organisation
in a manner that does not disrupt the
Board’s operation and focus. This will mean
that the existing Non-executive Directors
are likely to continue on the Board alongside
their successors for short periods. Although
this may result in an increase in the number
of Non-executive Directors on the Board
over the next few years, we expect the
Board composition to revert back to an
appropriate size and make up after
this period.
We have also seen changes to the Executive
Board during the year with Jonathan
McMahon stepping down and Elizabeth
Kelly joining from 2020. Succession
planning at the Executive and senior
management levels has progressed well
during the year and the CEO has provided
updates to the Committee with regard to
the approach and plans in this respect.
A key element of these plans will be
ensuring that management has the
necessary skills and experience to deliver
the strategy of SJP into the 2020s.
ST. JAMES’S PLACE PLC 101
The Board undertook an externally
facilitated effectiveness review last year and
agreed actions, progress against which has
been monitored by the Committee during
the year. The Committee was responsible
for the planning and preparation of the 2019
review and proposed an internally managed
approach to the Board. Further details of the
2019 review and progress made against the
actions arising from the 2018 review are set
out on page 88. Specific actions for the
Committee from the 2018 review were
factored into the Board and Executive
Succession planning.
Group governance
Significant progress has also been made
to evolve our governance framework, the
principal aim of which is to ensure we have
in place appropriate, proportionate and
sustainable governance which underpins
our business model both now and for
the future. A scalable model is being
implemented across the Group, preserving
the fundamental aspects of our vertically
integrated model, which has been a key
component of our success. This model is
based upon a number of high-level
principles which take into account best
practice and requirements introduced by
the Senior Managers and Certification
Regime and the Asset Management
Market Study.
One aspect of the new framework is the
Committee’s role in the appointment of
non-executive directors to subsidiaries
across the Group. The Committee receives
reports from the CEO as to proposed
appointments and is required to endorse
any such candidate before the appointment
is made. During the year the Committee
endorsed non-executive appointments to
St. James’s Place UK plc and
St. James’s Place Unit Trust Group Limited,
welcoming Dawn Hyams to the Group.
The Committee will continue to closely
monitor the implementation of the
governance model.
Inclusion and diversity
Positive progress has been made with
regard to gender diversity both on the Board
and on the Executive Board with the
aforementioned succession planning
providing opportunities to address both
gender balance and diversity in the broadest
sense. The Board is now 40% female and
we have one woman on the Executive
Board. However, there is still more progress
that needs to be made both at the executive
level and throughout the SJP community
not just in relation to gender diversity but
also social, ethnic and cognitive diversity.
In order that we can continue to make the
progress that we need to, earlier this year
a new Head of Inclusion and Diversity
was appointed (see page 29). We have
established a number of targets and
commitments to ensure that we promote
inclusivity and diversity and report on
progress against these targets and the
Group’s key areas of focus on pages 29 and
30. In March 2020, we will also publish our
latest gender pay gap report which shows a
modest improvement in our median gender
pay gap. We recognise that significant effort
is required to close the gap but are confident
that the momentum being generated will
help to accelerate our progress.
The Committee receives a report at each
meeting from the CEO and the Inclusion
and Diversity Steering Group, via the Head
of Inclusion and Diversity, to enable it to
closely monitor our performance against
our Inclusion and Diversity Strategy and
against the targets which have been
factored into Executive team bonus
performance criteria and Board KPIs.
The Inclusion and Diversity Steering Group
is supported by an advisory board and an
Inclusion and Diversity network made up
of a broad community of employees who
share best practice and feedback their
thoughts and views on different aspects
of inclusion and diversity.
Board effectiveness
The Committee has reviewed detailed
analysis as to the significant other
commitments of the Non-executive
Directors and how much time they were
spending on the Company’s business and
affairs. The Committee and the Board are
satisfied that the Non-executive Directors
are able to, and do, commit sufficient time
and attention to the Company’s business.
In addition, the Committee reviewed
and approved an assessment of the
independence of each of the Non-executive
Directors, concluding that each of the
Non-executive Directors demonstrated
that they remained independent in character
and judgement. Further information on
these conclusions can be found in the
Notice for the Company’s 2020 Annual
General Meeting.
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Report of the Remuneration Committee
ROGER YATES
On behalf of the
Remuneration Committee
Contents
Section 1:
Chair’s annual statement
Section 2: Remuneration at
a glance and annual report
on remuneration
Section 3: 2020 Directors’
Remuneration Policy
KEY OBJECTIVE OF THE COMMITTEE
The Committee’s primary purpose is to ensure
that remuneration arrangements support the
strategic aims of the business and as well as
the recruitment, motivation and retention of
senior executives whilst also complying with
regulatory requirements.
COMMITTEE MEMBERSHIP
REGULAR ATTENDEES AT MEETINGS
Chair; Chief Executive; Chief Financial
Officer; Director – People and Chief Risk
Officer
Member
RY Roger Yates (Chair)
SJ Simon Jeffreys
Joined
1 January 2014
1 January 2014
BW Baroness Wheatcroft
3 May 2012
The Committee’s terms of reference set out the Committee’s role and authority. They can be
found on the corporate website at www.sjp.co.uk.
Section 1: Chair’s annual statement (unaudited)
Dear Shareholder,
On behalf of the Remuneration Committee
(the Committee) and the Board, I am
pleased to present the Directors’
Remuneration Report for 2019 (the Report).
New Directors’ Remuneration
Policy (the ‘Policy’) for shareholder
approval at 2020 AGM
At the AGM held on 4 May 2017,
shareholders approved the current Policy
with 99.6% of votes cast in favour. Some
amendments are proposed to the Policy,
which will be submitted for the triennial
binding vote at the 2020 AGM. The
remainder of the Remuneration Report will
be submitted for the usual advisory vote at
the AGM. The amended Policy will apply to
awards in respect of the 2020 performance
year onwards for all Executive Directors.
The proposed amendments will further
simplify the remuneration arrangements for
Executive Directors and ensure the Policy
continues to be in line with best practice
and shareholder expectations. The key
proposed amendments to the Policy are:
• Increase in shareholding requirement
from 200% of salary to 300% for the
Chief Executive;
• Confirming and clarifying the
Committee’s powers of discretion to
override formulaic incentive outcomes
where necessary;
• Introduction of the post-cessation
shareholding requirement for two years
after leaving service; and
• Confirming the Committee’s flexibility
to make Performance Share Plan (PSP)
awards up to the existing maximum limit
in the Policy, but using this on a prudent
and restrained basis.
For information, the Committee has also
simplified the EPS performance metric in
the PSP for awards from 2020 onwards.
Previously, the EPS was measured using
two different methods; it will now be
measured on one method only, as
described in section 2.3.3. The Committee
will continue to set challenging targets
under this metric.
Pension
The Committee has already taken steps
to start to align pension allowances for
Executive Directors with the wider employee
population. We have a tiered pension
allowance, based on service, for our general
employee population. New joiners start on
10% of base salary and this increases with
service to 12.5% after 5 years, and 15% after
10 years. We have adopted this structure for
any new Executive Director appointments
from the 2018 AGM.
Our existing Executive Directors currently
receive pension contributions of 20%
of base salary, which is 5% above the
maximum for the wider workforce. The
Committee acknowledges the increasing
pressure from investors to see complete
alignment between the rate of pension
contributions paid to all Executive Directors
and the workforce but also recognises the
challenge in balancing investor expectations
with the contractual rights of employees.
ST. JAMES’S PLACE PLC 103
the 2020 ISS Voting Guidelines and the
2020 Glass Lewis Guidelines have also
been taken into account in the review of
the Policy during the year.
Corporate governance
developments and
regulatory change
The Committee closely monitors
developments in remuneration regulations
from European and UK authorities, and has
taken these into account in its latest review
of the Policy. Of significant interest to the
Committee during the year were the new
reporting requirements introduced by the
Companies (Miscellaneous Reporting)
Regulations 2018 and the revised UK
Corporate Governance Code (the Code).
As part of the review of the Policy, the
Committee assessed the Policy and
remuneration practices against the six
factors set out in Provision 40 of the Code:
clarity; simplicity; risk; predictability;
proportionality; and alignment to culture.
The Committee remains satisfied that
each factor has been taken into account,
for example, the proposed changes to the
performance measures for the PSP have
been revised to simplify and ensure
consistency with the approach taken to
determining longer-term value growth in
the Annual Report. A further example is
the proposal to increase the Committee’s
discretion to reduce formulaic incentive
outcomes, addressing the potential risk
posed by formulaic outcomes.
Conclusion
The remuneration outcomes for 2019
reflect the performance achieved by the
business. The proposed amendments
to the Policy will continue to ensure close
alignment of our Executive Directors with
the best interest of our shareholders and
other stakeholders, and continue to
support the future growth and success
of the Company.
I would like to thank shareholders for their
continued support and would encourage
you to vote in favour of the resolutions
relating to our new Directors’ Remuneration
Policy and the Directors’ Remuneration
Report for 2019, at the 2020 AGM.
ROGER YATES
On behalf of the Remuneration Committee
26 February 2020
Although the gap between the contributions
received by our Executives and the
workforce is modest compared to many
companies, we have decided that we will
align the pension contribution rates by
1 January 2023.
Variable remuneration
outcomes of 2019
This Report includes disclosure of
performance targets and the outcome for
the annual bonus for 2019. The Committee
determined that 37.5% of the maximum
annual bonus should be payable for 2019,
reflecting the financial results for 2019 and
good progress against strategic objectives
set by the Committee at the start of the
year, which are fully explained in the Report.
Fifty percent of the bonus is deferred into
shares for three years.
The three years ending 2019 have been
another period of strong performance
relative to the market and PSP outcomes
reflect this. Based on the three-year
performance to the end of 2019, 62.9% of
the Executive Directors’ Performance Share
Plan awards granted in 2017 will vest in
March 2020, as a result of relative Total
Shareholder Return (TSR) being slightly
above the median of the range set by the
Committee and Earnings Per Share (EPS)
growth being towards the upper end of the
range set by the Committee.
Remuneration for 2020
The Committee considered the overall
remuneration arrangements for the
Executive Directors in 2020 in accordance
with the Policy and has awarded an increase
of 3% in the base salaries of the Executive
Directors for 2020, which is in line with the
overall increase of base salaries for the
workforce. Despite this increase, the base
salaries remain below market median for
a company of our size both in Financial
Services and General Industry.
The maximum annual bonus opportunity
and maximum performance share awards
for 2020 will remain at the same levels
as 2019. No discretion to override variable
pay outcomes has been exercised during
the year.
Following a review of the fee levels for
our Non-executive Directors, the fee of
the Board Chair for 2020 will increase
to £221,707 (3% increase). The base
fees of the Non-executive Directors,
which include Committee membership
responsibilities as there are no additional
Committee membership fees, will increase
to £84,650 (26.4% increase), the Committee
Chair fees will increase to £23,075 (3%
increase) and the Senior Independent
Director fees will increase to £6,212
(3% increase). Despite the increases in
the base fees of the Non-executive
Directors, their fees and the Board Chair’s
fee remains below the median level for
financial services companies of our size.
Recognising the increased workload,
regulatory responsibilities and the size
of the Group, the Committee intends to
increase the Board Chair’s fee over the next
few years to the extent necessary to bring
this fee in line with the relevant benchmarks.
Changes to the Board
As I confirmed in my statement last year,
David Lamb stepped down from the Board
of Directors on 26 February 2019. This
year’s Directors’ Remuneration Report sets
out the remuneration David received during
the short period he was in office during the
year but further details on his package in
retirement were included on page 123 of
last year’s Annual Report and Accounts.
Rosemary Hilary, Dame Helena Morrissey
and Emma Griffin joined the Board of
Directors as Non-executive Directors on
17 October 2019, 1 January 2020 and
5 February 2020, respectively. Further
details on their appointments are set out
on page 77. Lesley-Ann Nash will also join
the Board on 1 June 2020. As Dame Helena
Morrissey and Emma Griffin did not serve
as Directors during 2019, they did not
receive any remuneration and have not
been included in Section 2 of this Report.
Engagement with shareholders
and best practice
The Committee is regularly updated on
the latest views of major shareholders
and investor representative bodies and
best practice. Any views expressed by
shareholders at general meetings of
the Company or otherwise have been
considered by the Committee as part of
the Policy review during the year. The
Committee understands the important
and increasing focus on clear and
transparent disclosure of remuneration
outcomes demonstrating the alignment
of remuneration and performance, and the
Committee believes it provides complete
disclosure in this Report. The Committee
has consulted with major shareholders
and proxy voting agencies on the
proposed amendments to the Directors’
Remuneration Policy and met with a
number of shareholders to discuss their
views. The views expressed by shareholders
were discussed by the Committee and
taken into account when finalising the
Policy which is being proposed to
shareholders. The 2020 Investment
Association Principles of Remuneration,
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Section 2: Remuneration at a glance and annual report on remuneration
Summary of Executive Directors’ remuneration for the year (audited)
How were our Executive Directors rewarded?
Single Figure remuneration for performance period ending 31 December 2019, compared with 2018
Fixed remuneration Variable remuneration
ANDREW CROFT
Chief Executive
£
8
4
6
2
8
9
,
£
7
0
7
1
0
5
,
,
£
1
1
9
4
3
1
7
,
£
6
8
7
2
5
5
,
CRAIG GENTLE
Chief Financial
Officer
£
4
0
2
5
7
7
,
£
5
1
7
2
0
8
,
£
7
9
5
0
1
7
,
£
5
0
2
4
6
0
,
IAN GASCOIGNE
Managing Director
£
7
6
0
3
5
6
,
£
5
9
5
5
3
8
,
,
£
1
0
5
6
3
7
9
,
£
5
7
7
7
0
2
,
Base salary
Benefits
Pension
Annual bonus
(cash)2
Annual bonus
(deferred)2
Total
PSP vested1
2019
548,990
48,317
109,798
2018
533,000
47,655
106,600
2019
396,962
40,854
79,392
2018
385,392
39,990
77,078
2019
396,962
119,184
79,392
2018
385,392
115,232
77,078
155,156
249,054
112,190
180,085
112,190
180,085
155,157
249,054
1,017,418 1,185,363
696,209
535,976
112,190
741,588
178,197
180,085
862,630
434,847
112,190
819,918
535,976
180,085
937,872
696,209
1 The value of the PSP vested corresponds to the long-term incentives in the Total Remuneration table on page 105.
2 The Annual bonus awards are in respect of performance during the years ending 2018 and 2019 respectively.
3 The totals in the chart and table above excludes ‘Other’ remuneration as set in the Single Figure table, which relates to all-employee share plans.
Linking remuneration to achievement of key business goals (audited)
Annual bonus for 2019
(max 150%
of base salary)
PSP (2017 award)
(max 200% of
base salary1)
EEV operating profit
Strategic and operational KPIs
Total bonus opportunity
Relative TSR
EPS growth (including the unwind
of the discount rate) in excess of RPI
EPS growth (excluding the unwind of
the discount rate) in excess of RPI
Total PSP opportunity
Weighting
(maximum potential
percentage points per item)
50%
50%
100%
33%
Outturn (actual
points earned)
–
37.5
37.5
12.5
Percentage of base
salary earned 1
0%
56.2%
56.2%
25%
33%
33%
100%
22.1
28.3
62.9
44.3%
56.5%
125.8%
1 Base salary for PSP is the base salary at the time of grant. The value of the PSP vesting is also dependent on the amount of share price movement between grant
and vesting.
This Directors’ Remuneration Report, excluding the Directors’ Remuneration Policy, will be put to an advisory shareholder vote at the
2020 AGM. This part of the Report explains the work of the Remuneration Committee, sets out how we implemented our Policy during
2019 and how we intend to implement our new Policy in 2020. The information on pages 102 to 118 has been audited where indicated.
ST. JAMES’S PLACE PLC
105
2.1. How the Remuneration Policy was applied in 2019
2.1.1 Remuneration payable in respect of performance in 2019 (audited)
Summary of total remuneration
The remuneration received by Executive Directors and Non-executive Directors in respect of the years ended 31 December 2019 and 2018 is
set out below.
Executive Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb
Non-executive Director
Iain Cornish
Rosemary Hilary
Simon Jeffreys
Baroness Wheatcroft
Roger Yates
Base salary
Benefits
Annual bonus
£
310,313
498,108
224,380
360,170
224,380
360,170
–
360,170
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
£
548,990
533,000
396,962
385,392
396,962
385,392
64,546
385,392
Fees
£
215,250
118,589
13,858
–
89,353
86,750
66,950
65,000
95,384
88,104
£
48,317
47,655
119,184
115,232
40,854
39,990
8,826
41,556
Benefits
£
21,545
14,607
–
–
1,963
2,284
1,873
1,735
–
–
Long-term
incentives
£
535,976
696,209
535,976
696,209
178,197
434,847
–
696,209
Pension
£
109,798
106,600
79,392
77,078
79,392
77,078
12,909
77,078
Other
£
175
5,202
175
3,810
175
–
–
3,636
Total
£
1,553,569
1,886,774
1,356,069
1,637,891
919,960
1,297,477
86,281
1,564,041
Total
£
236,795
133,196
13,858
–
91,316
89,034
68,823
66,735
95,384
88,104
Benefits
Benefits for the Executive Directors comprise a company car or cash equivalent, fuel, private health care, life and critical illness cover, permanent health insurance, health screening
and travel costs where deemed taxable. For Ian Gascoigne, they also include a housing allowance to facilitate working across multiple locations. The amounts shown are generally
the taxable amounts.
Benefits for Non-executive Directors are for the reimbursement of taxable travel expenses grossed up for the tax payable thereon.
Pension allowance
Pension contributions, being 20% of base salary, were capped by legislation and so a non-pensionable allowance was paid to the Executive Directors in full for Andrew Croft,
David Lamb (for the two months in which he served as a Director), and Ian Gascoigne, and for the balance for Craig Gentle, who had a £10,000 contribution to the money
purchase group pension scheme. Consistent with the pensions contributions provided to the wider workforce, all Executive Directors appointed after the 2018 AGM receive a
pension allowance of 10% of salary on joining, increasing to 12.5% after five years and 15% after 10 years of service.
Annual bonus
As explained on page 121, half of the annual bonus is paid in cash, with the other half in the form of a conditional award of Company’s shares, which are subject to forfeiture for
three years under the terms of the Deferred Bonus Scheme.
Long-term incentives
The value of the long-term incentives is the value of shares for the award where the performance period ends in the year together with the value of the dividends that would have been
received during the three-year performance period. The gross value of those dividends is £58,493 for Andrew Croft and Ian Gascoigne and £19,447 for Craig Gentle. The long-term
incentive figures for 2019 have been calculated using the average of the Company’s share price in the three-month period to 31 December 2019, being £10.63, as the actual vesting
date of the PSP award is on 27 March 2020. The figures for 2018 have been updated from the three-month average figures used in last year’s report (being £710,619 for Andrew Croft,
Ian Gascoigne and David Lamb and £462,282 for Craig Gentle) to take into account the Company’s share price on the date of vesting on 25 March 2019, being £9.92 and 26 September
2019, being £9.49. The LTIP figure for 2019 in the table above includes the following: £2,763 for Andrew Croft, £2,763 for Ian Gascoigne and £919 for Craig Gentle, which are
attributable to the movement in the share price between the grant date and the end of the performance period. This amounts to 0.52% of the vesting amount shown in the table. The
LTIP figure for 2018 in the table above includes the following: £51,964 for Andrew Croft, £51,964 for Ian Gascoigne, £51,964 for David Lamb, and £16,415 for Craig Gentle, which are
attributable to the movement in the share price between the grant date and the end of the performance period. This amounts to 7.46% of the vesting amount shown in the table for
Andrew Croft, Ian Gascoigne and David Lamb and 3.77% of the vesting amount shown in the table for Craig Gentle. These awards are subject to a two-year post-vesting holding period.
Other
These amounts relate to the value of the Matching shares (one for every ten Partnership shares) under the Share Incentive Plan for Andrew Croft, Ian Gascoigne and Craig
Gentle, whereby 17 shares were purchased on 25 March 2019 at £10.26 and 16 shares were purchased on 29 March 2018 at £10.87.
David Lamb
The 2019 figures for David Lamb in the table above are in relation to his period served as an Executive Director during the year, which ended on 26 February 2019. The value of
David Lamb’s PSP awards vesting during 2019 are not included in the table above as he was not a Director at the date that they vested. David Lamb was a non-executive director
of The Henderson Smaller Companies Investment Trust plc during the year and was paid and retained a fee of £3,670 in connection with that role in the period ended 26
February 2019 (2018 full year: £23,000). As this is not remuneration from St. James’s Place, this is not included in the remuneration above.
Waived remuneration
Iain Cornish has waived his fee for chairing the Risk Committee (2019: £22,403).
Roger Yates has waived his fee for chairing the board of St. James’s Place Unit Trust Group Limited (£20,000 per annum) with effect from 30 September 2019 (2019: £5,000).
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2
3
4
5
Section 2: Annual report on remuneration continued
2.1.2 Summary of total annual bonus for 2019 performance (audited)
The performance conditions and weightings which applied to the annual bonus and the resulting payout were as follows:
Measure
Financial
(EEV operating profit)
Strategic
Total payout
Executive Director
Andrew Croft
Ian Gascoigne
Craig Gentle
David Lamb
Weighting
(percentage
of salary)
75%
Weighting
(percentage
of maximum)
50%
Threshold
(EEV operating
profit)
(20% payable)
£1,010m
Maximum value
(100% payable)
£1,100m
Actual
£952m
75%
50%
Assessment by the Committee of the
performance of the Executive Directors
Payout
(percentage
of salary)
0%
56.25%
56.25%
Payout
(percentage
of maximum
total bonus)
0%
37.5%
37.5%
Payout (cash) Payout (deferred)
Total payout
£
155,156
112,190
112,190
–
£
155,157
112,190
112,190
–
£
310,313
224,380
224,380
–
1 The Committee has the discretion to scale back the annual bonus payable in respect of the strategic measures if it considers it inappropriate in the context of the overall
financial results of the Group. The Committee reviewed the Group’s performance and agreed that no scale-back was appropriate.
2 The Committee retains the discretion to amend each element of the bonus, up or down, within the overall cap of 150% of salary, to take into account other relevant factors
such as the Group’s performance compared to competitor organisations or, for instance, an exceptional positive or negative event which impacts the Group. The Committee
reviewed the Group’s performance as well as competitors and the external market at the end of the performance period and agreed that no adjustment was required.
3 Half of the bonus is paid in cash, with the remainder being invested in the Company’s shares and deferred for three years, under the Group’s deferred bonus plan.
Annual bonus strategic targets performance assessment (unaudited)
As described in other parts of the Annual Report and Accounts, the Company delivered good performance in 2019 for each of the
stakeholders identified on page 80 of the Corporate Governance Statement. The Committee considered these groups when setting the
strategic targets for 2019, together with other objectives set out in the 2019 business plan. In serving our clients well, developing our
employees and the Partnership for the future and striving to improve the effectiveness of our organisation, the Company will be well placed
to meet our long-term business objectives, and create additional value for our shareholders. The Company also focuses on the importance
of safe and sustainable growth through prudent management of risk and the highest standards of regulatory compliance.
The Committee assessed how well the Executive team had performed in relation to the objectives set at the start of the year. The Committee
did not place fixed weightings on the factors assessed, but made a judgement based on the Committee’s view of the relative importance and
impact of those factors over the course of the year. For some factors, the Committee put in place quantitative metrics, and for others
qualitative judgements were made, depending on the nature of the strategic objective.
When determining the bonus outcomes for 2019, the Committee considered the objectives set and reflected upon key events that arose
during the year, including certain criticisms aimed at the business (see pages 77 and 79) and the decision to transfer mandates from
Woodford Investment Management (see pages 6 and 76).
ST. JAMES’S PLACE PLC 107
The following objectives, together with other measures which we have not disclosed as they remain commercially sensitive, were considered
and the Committee recognised that a high proportion of the strategic objectives had been achieved and that nearly all of the major business
plan objectives had been satisfactorily completed.
5
1
4
2
3
1. Reputation
and proposition
2. Operational
excellence
3. Social value
4. Culture
5. Risk management
Reputation and proposition
• Client feedback – The Committee draws
upon results from the Group’s 2019
annual Wealth Account Survey as the
primary means of assessing client
feedback, together with feedback from
clients withdrawing funds and other client
research initiatives. Clients’ likelihood to
recommend SJP is an important indicator
and 93% of clients responding to the
survey said they were likely to, 55% of
which having already done so.
• Investment performance – Against
the backdrop of markets, which saw
a reversal of the poor fortunes seen in
2018, performance in 2019 was good
at a client, portfolio and fund level, both in
absolute and relative terms. Median client
performance (+11.3%) outperformed the
Asset Risk Consultants (ARC) Private
Client Balanced Index (+10.1%) by 1.2%.
A majority of portfolios also outperformed
ARC Private Client indices over 1, 3 and 5
year periods. When determining the
outcome on this objective, the Committee
also took into account strong progress
with our responsible investing initiatives
and the maintenance of strong disciplines
around fund manager fee levels.
Management has acted promptly to
address concerns regarding the
performance of mandates managed by
Woodford Investment Management, as
demonstrated by the outperformance
achieved by the new fund managers.
• Academy – Performance was measured
against planned intakes across the
Group’s four academy sites. At the end
of 2019, 458 Academy recruits were in
training, exceeding the threshold set by
the Committee for an outstanding rating
(380). During 2019 170 new advisers
joined SJP, in line with the level set for
outstanding performance (170).
• Partnership growth – The objective for
2019 was to grow the Partnership and
Adviser numbers by 6-7%, whilst retaining
the quality of new recruits. In 2019 a net
increase of 8% of advisers was achieved,
which met the upper threshold of 8% set
by the Committee.
• Client retention – The Committee has
maintained a consistent scale for
measuring client retention (ranging
between 93% (good) and 96%
(outstanding)) which takes account
of large stock market movements and
persistency experience. Client retention in
2019 was 97.0%, above that achieved in
2018 (96.0%) and 2017 (95.7%).
• Asia – Further progress in developing our
Asian operations was achieved with funds
under management growing to £943m
against a target of £732m. However,
gross inflows of £252m were below the
target of £336m, with market conditions
in Hong Kong being impacted by
anti-government protests.
• Chartered programme – We continue to
encourage and support advisers to
further their qualifications and aimed
to have 22% of Partners with Chartered
status in 2019. At the end of the year
the Partnership included 915 Chartered
Advisers, representing 22.8% of UK
Partners and advisers.
• Complaints – During 2019 our advice-
related complaints experience remained
very low relative to our actual scale and
our interaction with Regulators, including
the Financial Ombudsman Service,
which indicated that we have the right
philosophy and in the main clients feel
that their issues are being dealt with fairly.
• Awards – Building upon the success
achieved in 2018, the quality of advice and
service provided to clients has been
recognised in the awards we have won,
including: Wealth Management Company
of the Year – City of London Wealth
Management Awards; Best Wealth
Management Planning Team – Wealth
Adviser Awards; Best High Net Worth
Team – Wealth Adviser Awards; Best
Wealth Manager Growth Portfolio –
Wealth adviser Awards; and Best Wealth
Manager – Shares Awards.
Operational excellence
• Administration systems – As reported in
the Strategic Report, the migration
to Bluedoor was completed for the UK
business during 2019, with progress being
made in the functionality of the Bluedoor
platform supporting straight through
processing of transactions.
As is to be expected from any major
system migration, service levels and
functionality were impacted at times, but
the impact was not material and issues
that arose have been addressed.
• Management expenses – The Committee
set management a target to manage the
expense base in line with the annual
budget. The objective set was met and
detailed analysis can be found in the
Financial Review in the Strategic Report.
Social value
• Charitable Foundation – Supporting the
St. James’s Place Charitable Foundation
to continue to make a difference remains
an integral part of our strategy and the
2019 target was to raise £10m, including
corporate matching. In 2019 we
successfully raised £12.1m (including
matching).
• Social value KPIs – In 2019, a range
of social value KPIs were introduced into
the business. These KPIs extended to
increasing the reach of our employee
financial education programme,
enhancing our employability and
mentoring programme, increasing
Cirencester team challenges and
volunteering activity, targeting a number
of Local Charity Partnerships across SJP
locations, increasing the usage of
employee volunteering allowance,
and delivery of three trips to The Gambia
to support charitable initiatives. During
the year we have consistently
outperformed the KPIs.
• External corporate responsibility
benchmarking – To enable us to measure
the quality of our corporate responsibility
efforts we have employed external
standards, audits and benchmarks.
During 2019, a critical friend audit
undertaken by Business in the
Community confirmed that we are on
track to achieve the CommunityMark
by the target date of the end of 2020.
Our FTSE4Good score of 4.3 (out of 5)
has continued to improve and we remain
ahead of the UK average of 3.0 and
financial services average of 2.6.
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2
3
4
5
Section 2: Annual report on remuneration continued
Annual bonus strategic targets performance assessment (unaudited) continued
Culture
• Culture – The Group’s distinctive
culture has always been an important part
of our success and, as we report
throughout the Annual Report and
Accounts, a great deal of focus has been
placed on ensuring we define, embed,
maintain and reinforce the culture across
the organisation during 2019. However,
we also recognise that aspects of our
culture were subject to criticism last year
but management’s response to this was
appropriate and timely, recognising that
there was further work to do on this over
the medium-term.
• Retention – Employee turnover increased
from 8% to 10.5% during 2019 which was
higher than desired, driven in part by
market forces. At senior management
level we have also seen increased
turnover but this included several
retirements. Succession planning at all
levels remains a key focus and progress
has been made during 2019.
• Learning and development – During
2019, the aim was to combine the
employee and Partnership Learning
and Development teams to provide a
function that would be better placed to
scale with the business as it grows. This
integration was successfully achieved
and, combined with enhancements to our
digital capability have provided employees
and Partners with the ability to increase
ownership of their own development and
access a wider range of resources.
• Employee and Partner wellbeing –
During 2019 the Company introduced
a number of initiatives which raised
the awareness and importance of
employee and partner wellbeing as well
as enhancing the support and services
made available to staff at times of need.
• Diversity – Our progress against our wider
diversity aspirations are covered in more
detail in the Strategic Report. Management
was set with a target to increase the
number of women in senior roles from 53
to 66 by focusing on talent development,
communication and engagement,
recruitment and external accreditation.
Good progress was achieved during 2019
with the appointment of the first women to
ExBo. The overall number of women
in senior roles increased to 63, slightly
below our aim.
Risk management
• Management have continued to maintain
positive and constructive engagement
with the Group’s regulators and have
responded effectively to key regulatory
initiatives including the Senior Manager
and Certified Regime and Asset
Management Market Study, both of which
came into force during 2019.
• Various objectives designed to maintain
good systems and controls to manage
and mitigate the Group’s material risks
were also met.
• There were no material risk ratings and
where issues have arisen, management
response has been appropriate.
Taking all the above into account, the Committee awarded a bonus of 56.25% of salary in relation to the strategic element of the annual
bonus scheme.
2.1.3 Long-term incentive awards (audited)
Vesting of Performance Share Plan (PSP) awards
On 31 December 2019, the awards made on 27 March 2017 under the PSP reached the end of their three-year performance period. These
will vest on 27 March 2020, being the third anniversary of the date of grant. The vested shares for Executive Directors are subject to a
two-year post-vesting holding period (other than to sell shares to settle tax on vesting or exercise). The performance conditions which
applied to the 2017 PSP awards, and the actual performance achieved against these conditions, are set out in the tables below:
TSR relative to the FTSE 51 to 1501
Average annual adjusted EPS growth
(including the unwind of the discount
rate) in excess of RPI2
Average annual adjusted EPS growth
(excluding the unwind of the discount
rate) in excess of RPI3
Performance
required
Below Median
Median
Upper Quartile or above
39 out of 84 companies
Percentage of
one third of
award vesting
0%
25%
100%
37.5%
Performance
required
Below 5%
At least 5%
16% or above
11.1%
Percentage of
one third of
award vesting
0%
25%
100%
66.4%
Performance
required
Below 5%
At least 5%
16% or above
13.8%
Percentage of
one third of
award vesting
0%
25%
100%
84.8%
Performance level hurdle
Below threshold
Threshold
Stretch or above
Actual achieved
1 FTSE 51-150 index excluding investment trusts and companies in the FTSE oil, gas and mining sectors.
2 The first EPS performance condition is calculated by reference to the post-tax EEV operating profit (on a fully diluted per share basis). This measure excludes the direct impact
of the stock market fluctuations and changes in economic assumptions on the final year’s performance.
3 The second EPS performance condition is calculated by reference to an adjusted post-tax EEV operating profit, which strips out the unwind of the discount rate.
This adjustment is intended to remove indirect impacts of stock market fluctuations and economic assumptions from all years, thus removing any impact from the opening
value of in-force and the risk-free rate in the final year’s performance.
4 Straight-line vesting occurs in between threshold and maximum vesting.
5 No discretion was exercised by the Committee to override the outcome referred to above.
ST. JAMES’S PLACE PLC
109
Therefore, the total percentage of the 2017 PSP awards vesting was 62.9%, which resulted in the following awards to the Executive Directors:
Value of shares
vesting (£000)1
477,482
158,750
477,482
Total number of
shares granted
71,405
23,741
71,405
Percentage of
awards vesting
62.9%
62.9%
62.9%
Number of
shares vesting
44,912
14,932
44,912
Director
Andrew Croft
Craig Gentle
Ian Gascoigne
1 As these awards will not actually vest until 27 March 2020, a deemed share price is used to calculate the value of shares vesting for the purposes of this Report. This is taken
as the three-month average to 31 December 2019 being £10.63.
Granting of PSP awards in 2019
Details of PSP awards (at nil cost option) granted to the Executive Directors in 2019 is set out in the table below.
Director
Andrew Croft
Craig Gentle
Ian Gascoigne
Type of award
Basis of award
granted
Nil cost option 200% of salary
of £551,668
Nil cost option 200% of salary
of £398,898
Nil cost option 200% of salary
of £398,898
Average share
price at date
of grant
£10.26
Number of SJP
shares over which
award was
granted1
107,537
£10.26
77,757
£10.26
77,757
Percentage
of face value
that would vest
at threshold
performance
25%
25%
25%
Face value of
award (£’000)
£1,103
£798
£798
1 The number of shares awarded was calculated based on the average share price over a period of three days prior to the date of grant on 25 March 2019, being £10.26 per
share. The face value of the award figure is calculated by multiplying the number of shares awarded by the average share price figure of £10.26.
2 PSP awards are structured as nil cost options and there is therefore no exercise price payable on exercise. Dividend equivalents accrue to the Executive Directors between the
date of grant and exercise of the award (up to a maximum of six years from date of grant), but are released only to the extent that awards vest. Awards in 2019 were based on
the achievement of three equally weighted metrics: (a) EPS growth based on EEV adjusted profit; (b) EPS growth as above but excluding the impact of the EEV unwind of the
discount rate; and (c) Relative TSR performance. For each performance metric, a threshold and stretch level of performance is set. At threshold, 25% of the relevant element
vests rising on a straight line basis to 100% for attainment of levels of performance between threshold and maximum targets. These awards also have a post-vesting holding
period of two years from the vesting date. During this period, the vested shares cannot normally be sold, other than to the extent necessary to settle tax on vesting or exercise.
2.1.4 Share awards (audited)
The tables below set out details of share awards that have been granted to individuals who were Executive Directors during 2019 and which
had yet to vest or be exercised at some point during the year.
Performance Share Plan awards outstanding
Director
Andrew Croft
Craig Gentle
Ian Gascoigne
David Lamb
Date of grant
24 March 2016
27 March 2017
26 March 2018
25 March 2019
26 September 2016
27 March 2017
26 March 2018
25 March 2019
26 March 2015
24 March 2016
27 March 2017
26 March 2018
25 March 2019
24 March 2016
27 March 2017
26 March 20 18
Market
price at
grant
£9.10
£10.57
£10.80
£9.92
£9.53
£10.57
£10.80
£9.92
£9.8125
£9.10
£10.57
£10.80
£9.92
£9.10
£10.57
£10.80
Share
originally
awarded
73,874
71,405
96,656
107,537
48,805
23,741
69,890
77,757
68,932
73,874
71,405
69,890
77,757
73,874
71,405
69,890
Face value
(£)1
672,253
754,751
1,043,885
1,066,767
465,112
250,942
754,812
771,349
676,395
672,253
754,751
754,812
771,349
672,253
754,751
754,812
Vesting date
24 March 2019
27 March 2020
26 March 2021
25 March 2022
26 September 2019
27 March 2020
26 March 2021
25 March 2022
26 March 2018
24 March 2019
27 March 2020
26 March 2021
25 March 2022
24 March 2019
27 March 2020
26 March 2021
Remaining
unexercised at
31 December
2019
63,063
71,405
96,656
107,537
41,662
23,741
69,890
77,757
60,618
63,063
71,405
69,890
77,757
–
71,405
69,890
Shares
vested
63,063
–
–
–
41,662
–
–
–
60,618
63,063
–
–
–
63,063
–
–
1 The face value is calculated by using the market price of the shares at grant multiplied by the number of shares originally awarded.
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2
3
4
5
Section 2: Annual report on remuneration continued
Deferred Bonus Scheme – shares held during 2019
The table below sets out details of the awards held by the Executive Directors under the deferred element of the annual bonus scheme
during 2019:
Director
Andrew Croft
Craig Gentle
Ian Gascoigne
David Lamb
Balance at
1 January
2019
27,294
24,344
23,930
–
9,431
23,930
–
27,294
24,344
23,930
–
27,294
24,344
23,930
–
Released
in year1
27,294
–
–
–
–
–
–
27,294
–
–
–
27,294
–
–
–
Awarded
in year 2
–
–
–
24,806
–
–
17,936
–
–
–
17,936
–
–
–
17,936
Balance at
31 December
20193
–
24,344
23,930
24,806
9,431
23,930
17,936
–
24,344
23,930
17,936
–
24,344
23,930
17,936
Vesting date
24 March 2019
27 March 2020
26 March 2021
25 March 2022
27 March 2020
26 March 2021
25 March 2022
24 March 2019
27 March 2020
26 March 2021
25 March 2022
24 March 2019
27 March 2020
26 March 2021
25 March 2022
1 These deferred share awards were awarded on 24 March 2016 equal in value to 50% of the Director’s 2015 total annual bonus. The Company’s share price on the date of the
award was £9.10 and the exercise price on 24 March 2019 was £10.07.
2 These deferred share awards were awarded on 25 March 2019, equal in value to 50% of the Director’s 2018 total annual bonus. These shares will be held for a restricted period
ending on 25 March 2022. The price used to calculate the award was the three-day average prior to the invitation (1, 4 and 5 March 2019) which was £10.04.
3 Outstanding awards at the year-end relate to deferred share awards awarded in 2017, 2018 and 2019 (see (2) above). The share price used to calculate the 2017 award was
£10.87 and the 2018 award was £9.63.
Further details of the deferred element of the annual bonus scheme are set out on page 121. Dividends accrue to the Executive Directors
during the three-year period while the shares are subject to forfeiture and details of these dividends are set out on page 121.
SAYE share option scheme – shares held during 2019
Details of the options held by the Directors in 2019 under the SAYE scheme and any movements during the year are as follows:
Director
Andrew Croft
Craig Gentle
Ian Gascoigne
David Lamb
Options held at
1 January
2019
987
1,066
993
993
Granted
in year
–
–
1,167
1,167
Lapsed
in year
–
–
993
993
Exercised
in year
–
–
–
–
Options held at
31 December
2019
987
1,066
1,167
1,167
Exercise
price
£9.11
£8.44
£7.71
£7.71
Dates from which exercisable
01 May 2021 to 31 October 2021
01 May 2020 to 31 October 2020
01 May 2022 to 31 October 2022
01 May 2022 to 31 October 2022
At 31 December 2019 the mid-market price for the Company’s shares was £11.65. The range of prices between 1 January 2019 and
31 December 2019 was between £9.13 and £12.00.
ST. JAMES’S PLACE PLC 111
Share Incentive Plan – shares held during 2019
The table below sets out details of the awards held by the Directors under the Share Incentive Plan during 2019:
Director
Andrew Croft
Craig Gentle
Ian Gascoigne
Balance at
1 January
2019
642
325
167
174
188
181
–
188
–
502
210
167
174
188
181
–
Partnership
shares allocated
in year 1
–
–
–
–
–
–
175
–
175
–
–
–
–
–
–
175
Matching
shares allocated
in year 2
–
–
–
–
–
–
17
–
17
–
–
–
–
–
–
17
Dividend
shares allocated
in year 3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at
31 December
2019
642
325
167
174
188
181
192
188
192
502
210
167
174
188
181
192
Holding period
(matching shares)
26 March 2010 to 26 March 2013
26 March 2013 to 26 March 2016
26 March 2015 to 26 March 2018
24 March 2016 to 24 March 2019
24 March 2017 to 24 March 2020
29 March 2018 to 29 March 2021
25 March 2019 to 25 March 2022
24 March 2017 to 24 March 2020
25 March 2019 to 25 March 2022
28 March 2011 to 28 March 2014
26 March 2014 to 26 March 2017
26 March 2015 to 26 March 2018
24 March 2016 to 24 March 2019
24 March 2017 to 24 March 2020
29 March 2018 to 29 March 2021
25 March 2019 to 25 March 2022
1 Partnership shares are shares awarded in return for an investment of between £10 and £1,800. Partnership shares were awarded to Andrew Croft, Craig Gentle and Ian
Gascoigne on 25 March 2019 at a price of £10.26 per share, in return for £1,800 being deducted from pre-tax salary.
2 For every ten Partnership shares acquired, the Company awards one matching share. Matching shares were also awarded on 25 March 2019 in relation to the Partnership
shares mentioned above.
3 The Partnership, dividend and matching shares will be held by an employee benefit trust on behalf of the Director. The matching and dividend shares must be held for a
minimum period of three years from the date of the award.
Between 2 January 2020 and 27 February 2020 there were no exercises or other dealings in the Company’s share awards by the Directors.
2.1.5 Shareholding requirements and Directors’ share interests (audited)
Shareholding requirements
As from 2018, the Executive Directors were required to build up a shareholding equivalent to 200% of salary in Company shares. All of the
Executive Directors, except for Craig Gentle, have already met the shareholding requirements (as shown in the table overleaf). As Craig Gentle
joined the Board on the 1 January 2018, under the Policy, he has five years in which to build up his shareholding to meet the requirements.
An increase, to 300%, in the shareholding requirement for the Chief Executive and a new requirement to hold shares post-employment
have been included in the new Policy submitted to shareholders at the 2020 AGM. Whilst our Policy aims to broadly align with market
expectations, in practice, the Executive Directors continue to maintain shareholdings that far exceed the stated Policy. This demonstrates
their commitment to the long-term success of the Company and upholding the values that underpin our culture (see page 78 for further
details on our values).
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2
3
4
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Section 2: Annual report on remuneration continued
Shareholding requirements continued
Director
Andrew Croft
Craig Gentle
Ian Gascoigne
Iain Cornish
Simon Jeffreys
Rosemary Hilary
Baroness Wheatcroft
Roger Yates
Shares held at 1 January 2019
730,564
33,549
771,939
6,500
18,364
–
2,500
20,000
Shares held at 31 December 2019
728,268
51,677
763,940
6,500
18,364
–
2,500
30,000
Percentage of base salary held in
SJP shares as at 31 December 2019 1
1,344%
74%
1,962%
1 Calculated using the mid-market price at 31 December 2019 of £10.63. The overall % of base salary excludes the shares that would need to be sold to meet the notional tax
and employee NIC on bonus share awards that remained in their periods of deferral.
2 The interests of the Executive Directors set out above include Deferred Bonus Scheme awards held in trust for the Directors, details of which are set out on page 110.
The interests of the Executive Directors also include awards under the Share Incentive Plan, details of which are set out on page 111.
3 The Company’s register of Directors’ interests contains full details of Directors’ shareholdings and any share awards under the Company’s various share schemes.
4 Disclosure of the Directors’ interests in share awards is given on pages 109 to 111 and also in Note 23 – Related Party Transactions.
5 David Lamb’s shareholding as at 1 January 2019 and on his date of leaving the Board on 26 February 2019 was 516,897 shares.
6 Emma Griffin and Dame Helena Morrissey were not Directors of the Company during the year ended 31 December 2019. As at the date of this report neither held shares
in the Company.
Between 2 January 2020 and 27 February 2020 there were no transactions in the Company’s shares by the Directors.
Executive Directors’ shareholdings and outstanding share awards
Outstanding
PSP awards
(performance
conditions)2
338,661
213,050
342,733
141,295
Beneficially owned at
31 December 20191
728,268
51,677
763,940
516,897
Executive Director
Andrew Croft
Craig Gentle
Ian Gascoigne
David Lamb 6
SAYE options
(no performance
conditions)3
987
1,066
1,167
1,167
Outstanding
DBS awards
(no performance
conditions)4
73,080
51,297
66,210
66,210
SIP shares
(no performance
conditions)5
1,869
380
1,614
–
1 Beneficially owned shares include those DBS Awards and SIP Shares set out in columns (4) and (5) above.
2 Details of the PSP awards (including options that are vested but have not been exercised) are set out on page 109.
3 Details of the SAYE options (including options that are vested but have not been exercised) are set on page 110.
4 Details of DBS awards are set out on page 110.
5 Details of the SIP shares are set out on page 111.
6 David Lamb’s shareholdings and outstanding share awards are as the date he retired as a Director (26 February 2019).
2.1.6 Dilution (unaudited)
Dilution limits agreed by shareholders at the time of shareholder approval of the various long-term incentive schemes allow for up to 10%
of share capital in ten years to be used for grants to employees and members of the St. James’s Place Partnership under all share schemes
(i.e. both the employee and Partner share schemes), and up to 5% of share capital in ten years to be used for grants to employees under
discretionary schemes.
The table below sets out, as at 31 December 2019, the number of new ordinary shares in the Company which have been issued, or are
capable of being issued, (subject to the satisfaction of any applicable performance conditions) as a result of options or awards granted
under the various long-term incentive schemes operated by the Company in the ten years prior to 31 December 2019.
Share scheme
SAYE schemes
Executive share schemes
Partners’ share schemes
Total
Number of new ordinary
shares of 15 pence each
3,877,093
14,299,498
16,216,291
34,392,882
Percentage of total issued share
capital as at 31 December 2019
0.72%
2.67%
3.03%
6.43%
In addition, as at 31 December 2019, the Group’s Employee Share Trust held 2,389,402 shares in the Company which were acquired to meet
awards made under the PSP, Company Share Option Plan, the Deferred Bonus Scheme and the Restricted Share Plan. The number of shares
in the Company held in the Share Incentive Plan Trust as at 31 December 2019 was 467,624.
ST. JAMES’S PLACE PLC 113
2.1.7 Total shareholder return performance and CEO pay over the same period (unaudited)
The graph below shows a comparison of the Company’s TSR performance against the FTSE All-Share index over the last ten financial years.
The Company considers this to be the most appropriate comparative index, given the broad nature of the index and the companies within it.
Total shareholder return
Source: FactSet
1,000
)
d
e
s
a
b
e
r
(
£
e
u
a
V
l
900
800
700
600
500
400
300
200
100
0
St. James’s Place
FTSE All Share
31/12/09 31/12/10 31/12/11 31/12/12 31/12/13 31/12/14 31/12/15 31/12/16 31/12/17 31/12/18 31/12/19
This graph shows the value, by 31 December 2019, of £100 invested in St. James’s Place on 31 December 2009, compared with the value of £100
invested in the FTSE All Share Index on the same date. The other points plotted are the values at intervening financial year-ends.
The table below shows the total remuneration figure for the Chief Executive over the last ten financial years. The total remuneration figure
includes the annual bonus and long-term incentive awards which vested based on performance in those years (and ending in that year for
PSP scheme awards).
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Year ending 31 December
David Bellamy
Andrew Croft
Total
remuneration
Annual bonus
(% of maximum)
LTIP vesting
(% of maximum)
£1,495,600 £1,998,758 £2,410,380 £3,362,651 £3,646,514 £3,115,230 £2,631,667 £2,458,020 £1,886,774 £1,553,569
96%
57%
63%
83%
46%
87%
98%
95%
95%
93.3%
96.67%
96.67%
62%
37.5%
96%
100%
100%
87.94%
85.3%
62.9%
1 The deemed value of the PSP award in the table above for 2019 is £535,976. Of this, £2,763 is due to increases in the SJP share price over the vesting period, being an
increase of 1% (the share price of the PSP award on the date of grant was £10.57 and the deemed share price on the date of vesting was £10.63 calculated as set out in
Note 2 below).
2 As the actual vesting date for the PSP (performance period ending 31 December 2019) is not until 27 March 2020, a deemed value has been used. This is the average
of the Company’s share price in the three-month period to 31 December 2019, being £10.63. The 2018 figure for total remuneration has been updated by substituting the
three-month average figure used to calculate the value of long-term incentive awards in last year’s report by a revised figure based on the Company’s share price on the
date of vesting on 24 March 2019, being £9.92.
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4
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Section 2: Annual report on remuneration continued
2.1.8 Percentage change in CEO remuneration compared to average employee (unaudited)
The table below shows the percentage movement in the salary, benefits and annual bonus for the Chief Executive between the current and
previous financial year compared to that for the average Group employee.
Remuneration element
Salary
Benefits
Bonus
Percentage change 2019 to 2020
CEO Average employee
6.05%2
3%
1.39%1
3.90%
-19.55%
-37.70%
1 See the Benefits note on page 105 for further details.
2 This figure is higher than the average salary increase of the workforce set out on page 103 due to salary increases in respect of promotions and role changes being taken
into account.
2.1.9 Relative importance of spend on pay (unaudited)
The following table sets out the percentage change in profit, dividends and overall spend on pay in the year ending 31 December 2019,
compared to the year ending 31 December 2018.
IFRS profit after tax 1
EEV operating profit after tax 1
Dividends
Employee remuneration costs
2018
£’Million
173.5
831.0
255.2
184.4
2019
£’Million
146.6
790.6
265.4
196.9
Percentage
change
-16%
-5%
+4%
+7%
1 IFRS profit after tax has been presented to enable comparison between different companies, as it is a measure defined by International Financial Reporting Standards.
EEV operating profit after tax is an alternative performance measure (for further details see the Glossary of Alternative Performance Measures on page 219), which has been
presented as it is the financial performance measure upon which bonuses are based. Further information about these measures is set out in the Financial Review on pages
42 to 59.
2.1.10 CEO pay ratio (unaudited)
Year
2019
2018
Salary
Total pay
Method
Option A
Option C
CEO pay
£
548,990
1,553,569
25th percentile
pay ratio
45:1
62:1
P25 pay
£
27,500
34,437
Median
pay ratio
28:1
42:1
P50 pay
£
40,000
53,936
75th percentile
pay ratio
17:1
21:1
P75 pay
£
59,450
88,595
Although the new reporting requirements were not in force at the time, in last year’s Report we elected to voluntarily disclose a CEO pay ratio,
using Option C. We chose Option C as we did not have sufficient time to carry out an exercise using Option A, but were keen to provide an
early indication of what our ratio would look like. For 2019, we have chosen to calculate the CEO pay ratio using Option A, which requires us
to calculate the pay and benefits for all UK employees, using the same methodology that is used to calculate the CEO’s single figure, which
provides a more accurate comparison between the CEO and the workforce. This identified the three individuals at the 25th, 50th and 75th
percentiles (known as P25, P50 and P75, respectively) as at 31 December 2019 and their pay figures are then used to calculate the ratio.
We have chosen this methodology as it is the most statistically accurate methodology.
The fall in the ratios is largely due to the reduction in the value of the PSP awards vesting for our Chief Executive in 2019, when compared
to 2018. The ratios were also impacted by the financial (operating profit) outcome for the annual bonus, which had a greater impact on the
higher paid employees (including the CEO) where the annual bonus makes up a greater proportion of total remuneration.
The median ratio is consistent with our pay, reward and progression policies for employees which relate pay levels to performance and
market benchmarks. In 2019, 54% of our Chief Executive’s total remuneration was delivered through variable pay schemes. These are directly
linked to the Company’s performance as well as share price movements over the longer-term. Whilst none of the three employees identified
at the 25th, 50th and 75th percentiles are eligible to receive PSP Awards, all three received a bonus within the year and are invited to
participate in the SIP and SAYE on the same terms as the Chief Executive.
ST. JAMES’S PLACE PLC
115
2.2. Remuneration Committee (unaudited)
2.2.1 Role, activities and performance of the Committee
The Committee’s primary purpose is to ensure that there is a clear link between reward and performance and that the Policy structure and
levels of remuneration for both Executive Directors (EDs), FCA Remuneration Code Staff and Solvency II Staff (the latter two are referred to
as ‘Code Staff’) are appropriate. In particular, the Committee reviews the list of those employees who are considered to be Code Staff and
monitors compliance with the Remuneration Codes in relation to that population. The key responsibilities of the Committee are set out on
in its terms of reference which can be found on the Company’s website www.sjp.co.uk.
The Committee’s key areas of activity during the year included:
Topic
Summary of activity
Directors’
Remuneration
Policy
Taking account of investor feedback, institutional investor guidelines and the latest regulations
and legislation, agreeing the key changes to the Directors’ Remuneration Policy. The Chair of
the Committee consulted major investors on the changes to the Policy before its presentation
to the 2020 AGM.
Find out more
See page 119
Bonus objectives
and new awards
The Committee considered and set the strategic objectives for 2019 and approved the
2018 bonus awards, having reviewed individual and collective performance again the 2018
objectives.
See page 107
Payments to EDs
and Code Staff
In accordance with best practice and the requirements of relevant regulation, certain
subsidiaries within the Group are required to maintain remuneration codes. The Committee
approved the remuneration codes and the lists of Code Staff to which the codes applied.
PSP awards and
vestings
Assessing risk
Determining the grants and performance conditions for PSP awards to be made to Directors,
senior management and Code Staff. The Committee also considered if there were any
circumstances which warranted the application of malus or clawback provisions or the
exercise of discretion permitted under scheme rules.
See page 108
Assessing the alignment of the Group’s remuneration policies with risk appetite and regulatory
requirements and seeking assurance from the Chief Risk Officer, and relevant management
from across the business, that the remuneration outcomes were in line with the policies, were
appropriate and did not warrant discretionary changes.
Monitoring the
remuneration of
employees
Receiving regular updates on the remuneration structure for the wider workforce, including
specific demographic data by region and gender and the CEO pay ratio, to assist in setting
remuneration for Executives that was not misaligned to that of the wider workforce.
See page 114
Regulatory
developments
and feedback
from investors
Regular updates were received from the Company Secretary and Aon on regulatory
developments, investor guidelines and feedback from investor meetings. These were taken into
account by the Committee when drafting the Remuneration Policy to be put to the 2020 AGM.
The Committee’s effectiveness was reviewed by the Board as part of its overall assessment of its effectiveness (see page 88) and the
Board remains satisfied that, as a whole, the Committee has the experience and qualifications necessary to successfully perform its role.
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Section 2: Annual report on remuneration continued
2.2.2 Committee membership and attendance in 2019
This is set out on page 85. No Director was present when their own remuneration was considered or agreed.
2.2.3 Advisers to the Committee
The Committee appointed, via a tender process, independent remuneration consultants from the Executive Compensation Practice of
Aon plc (Aon), to advise on remuneration matters generally. Aon is a signatory to the Remuneration Consultants’ Code of Conduct which
requires its advice to be impartial and Aon has confirmed its compliance with the Code to the Committee.
The total fees paid to Aon for the advice provided to the Committee during the year were £128,708 (excluding VAT). Fees are charged on
a ‘time spent’ basis.
Certain subsidiaries of Aon have provided services to the Group, not related to Directors’ remuneration, during 2019 for which the fees were
£20,985 (excluding VAT). The Committee has been advised of the basis on which Aon’s Executive Compensation Practice is organised and
managed as part of the wider Aon organisation and the basis on which its staff are remunerated and is satisfied that the additional services
provided by other Aon group companies did not in any way compromise the independence of advice provided to the Committee.
2.2.4 Voting at the 2019 Annual General Meeting
The votes cast at the 2019 Annual General Meeting in respect of the resolution on the Directors’ Remuneration Report and the votes cast
at the 2018 Annual General Meeting in respect of the resolution on the Directors’ Remuneration Policy are summarised below.
Directors’
Remuneration
Policy vote
(2017 AGM)
415,662,589 1
1,565,604
417,228,193
15,118,178
Directors’
Remuneration
Report vote
(2019 AGM)
424,140,433
12,290,061
436,430,494
651,639
Votes for:
Votes against:
Total votes cast:
Total votes withheld:
Percentage of
votes cast
97.18%
2.82%
Percentage of
votes cast
99.62%
0.38%
1 including ‘for’ discretionary votes lodged in favour of the Chair.
2.3. Implementation of the new Remuneration Policy in 2020 (unaudited)
2.3.1 2020 salary
The base salaries of the Executive Directors are being increased in 2019. The current salaries as at 1 March 2019 and from 1 March 2020 are
as follows. The increase is in line with the percentage increase for the wider workforce:
Executive Director
Andrew Croft
Craig Gentle
Ian Gascoigne
Salary from
1 March 2019
Salary from
1 March 2020
£
551,668
398,898
398,898
£
568,218
410,865
410,865
Percentage
increase
3%
3%
3%
ST. JAMES’S PLACE PLC 117
2.3.2 Annual bonus for 2020
The Executive Directors’ maximum bonus opportunity for 2020 will be the same as for 2019 being 150% of salary. Half of the annual bonus
will be determined by EEV operating profit and half by key strategic targets.
50% of the annual bonus earned for performance in 2019 will be paid in cash and the remaining 50% will be deferred in the Company’s
shares for a three-year period and subject to continued service. Malus and clawback provisions apply to both cash and deferred elements
of the bonus.
The Board considers that the performance targets for the annual bonus are commercially sensitive and is not disclosing them at this time.
The performance metrics and performance against them will be disclosed in the 2020 Remuneration Report to the extent that they do not
remain commercially sensitive at that time.
The strategic element of the 2020 annual bonus will be assessed by reference to key strategic targets based around the 2020 business plan,
including elements relating to clients, shareholders and other key stakeholders.
2.3.3 Performance Share Plan awards for 2020
The Executive Directors will each receive a PSP award in 2020 of 200% of salary. The existing and proposed new Policy caps PSP awards
at 250% of base salary. The Committee intends to use this capacity on a prudent and restrained basis, and whilst the new Policy permits the
Committee to make awards up to the cap, without consulting with shareholders, it does not intend to increase the level of awards for 2020.
These awards will be subject to a relative TSR performance condition for one-third of the award and earnings per share growth targets for
two-thirds of the award as follows:
Performance level hurdle
Below threshold
Threshold
Stretch or above
TSR relative to the
FTSE 51 to 1501
Performance
required
Below Median
Median
Upper Quartile or above
Percentage of one
third of award vesting
0%
25%
100%
Average annual adjusted EPS
growth in excess of RPI2
Performance
required
Below 5%
At least 5%
16% or above
Percentage of two
thirds of award vesting
0%
25%
100%
1 FTSE 51 to 150, excluding investment trusts and companies in the FTSE oil, gas producers and mining sectors.
2 The EPS performance condition is calculated by reference to the post-tax EEV operating profit (on a fully diluted per share basis). This measure includes the direct impact
of the stock market fluctuations and changes in economic assumptions on the final year’s performance.
3 Straight-line vesting occurs in between threshold and maximum vesting.
4 Awards are subject to a three-year performance period. Vested shares cannot normally be sold for a further two years other than to the extent necessary to settle tax on
vesting or exercise.
5 Malus and clawback provisions apply.
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Section 2: Annual report on remuneration continued
2.3.4 Shareholding requirement
As proposed under the amended Policy, from 2020 onwards, the Chief Executive will be required to build and maintain a shareholding
equivalent to 300% of salary in the Company’s shares. For other Executive Directors, the shareholding requirement remains at 200%
of salary.
2.3.5 Fees for the Board Chair and Non-executive Directors for 2020
The fees for the Board Chair and Non-executive Directors for 2020 and 2019 are as set out below. Providing adequate compensation to all
Board members is essential if the Board is to be able to recruit and retain high calibre directors and maintain effective succession plans for
all Board roles. During the year, the fees for our Non-executive Directors and Chair were reviewed to take account of the increased workload
and regulatory responsibilities of the Board (including board membership of regulated subsidiaries) and they were compared to benchmarks
of relevant peer organisations. The review found that the fees paid to our Non-executive Directors were significantly below the benchmarks
and did not reflect the time they commit to their roles. As a result, it was agreed that the fees for our Non-executive Directors be increased,
but to a level below the median benchmark for financial services companies of comparable size, consistent with the below-median positioning
of the CEO’s salary relative to benchmark. Effective 1 January 2020 the Non-executive Directors’ base fee, which includes Committee
membership responsibilities, was increased by 26.4%, the Board Chair’s fee was increased by 3%, the Committee Chairs’ fee was increased
by 3% and the Senior Independent Director fee was increased by 3%. As the Chair’s fee remains below the benchmarks, the Committee
intends to increase the Board Chair’s fee over the next few years to the extent necessary to bring this fee in line with relevant benchmarks.
Fees from
1 January to
31 December 2019
Fees from
1 January to
31 December 2020
£
215,250
66,950
22,403
6,031
£
221,707
84,650
23,075
6,212
Percentage
increase
from 2019
3%
26.4%
3%
3%
Chair
Base fee (including Committee membership responsibilities)
Committee Chair
Senior Independent Director
No separate Committee membership fees are payable.
This Report was approved by the Board of Directors and signed on its behalf by:
ROGER YATES
Chair of the Remuneration Committee
26 February 2020
ST. JAMES’S PLACE PLC 119
Section 3: 2020 Directors’ Remuneration Policy
Overview of the Directors’ Remuneration Policy
(Policy)
How the Remuneration Committee (the ‘Committee’)
operates to set the Remuneration Policy
The Committee, on behalf of the Board, draws up and recommends
the Policy and determines the remuneration packages of the
Executive Directors of the Company and the Chair of the Board. In
addition, the Committee determines the remuneration of the senior
management team (including the Chief Risk Officer and his senior
colleagues in the Group Risk Division) and any other employees
classified as Material Risk Takers or Identified Staff under relevant
financial services regulations. The Committee also oversees
remuneration policy and practice for the wider employee population,
including the operation of any share schemes.
Approach to, and objectives of, the Policy
Our current Policy was approved by shareholders in the required
triennial vote at the 2017 AGM and has operated during 2017, 2018
and 2019. The overall approach to remuneration adopted by
St. James’s Place has been in place for many years and this Policy
was very little changed from that approved by shareholders in 2014.
The Policy is designed to meet the following objectives:
• To support the retention of individuals with the experience and
skills to drive the performance of the Company;
• To ensure remuneration is transparent and reflects the
performance of the Group in the relevant year and the longer-term.
Annual bonus and long-term incentive opportunities are therefore
linked to the achievement of demanding performance targets; and
• To align pay with the strategic objectives of the Company and the
interests of our shareholders whilst giving due regard to principles
of best practice and relevant regulations.
The Committee carried out a detailed review of the current Policy
during 2019, taking into account the 2018 UK Corporate Governance
Code, pay and employment conditions of other employees in the
Group and the shareholder feedback received during the year.
Following the review, the Committee decided to propose a number
of amendments to the Policy to simplify the remuneration
arrangements for Executive Directors and to ensure the Policy
continues to be in line with best practice and shareholder expectations.
The amended Policy will apply to awards in respect of the 2020
performance year onwards for all Executive Directors. A summary
of the proposed amendments to the current Policy is provided on
the right.
Considerations when setting the Policy
In setting the Policy for the Executive Directors, the Committee also
takes into consideration a number of factors:
• The Committee applies the principles set out in the UK Corporate
Governance Code and also takes into account best practice
guidance issued by the major UK institutional investor bodies, the
PRA and FCA (including the provisions of any applicable
Remuneration Codes) and other relevant organisations;
• The Committee has overall responsibility for the remuneration
policies and structures for employees of the Group as a whole and
it reviews remuneration policy on a firm-wide basis. When the
Committee determines and reviews the Policy, it considers and
compares it against the pay, policy and employment conditions of
the Group to ensure that there is alignment between the two; and
• The Committee considers the external market in which the Group
operates and uses comparator remuneration data from time to
time to inform its decisions. However, the Committee recognises
that such data should be used as a guide only (recognising that
data can be volatile and may not be directly relevant) and that
there is often a need to phase-in changes over a period of time.
The Committee’s overall policy, having had due regard to the factors
above, is that a substantial proportion of total remuneration should
be in the form of variable pay. This is achieved by setting base
pay and benefits up to mid-market levels, with annual bonus and
long-term incentive opportunities linked to the achievement of
demanding performance targets. The Policy ensures alignment
of the total remuneration paid to the Executive Directors with the
interests of shareholders. Historically, the levels of annual bonus
and long-term incentive awarded or vested to the Executives have
varied considerably, reflecting the performance of the Group in the
relevant year. Committee members are not permitted to vote on
elements of the Policy that apply to them, in line with the procedures
established by the Board for the management of conflicts of interest
(see page 86).
Engagement with shareholders
The Committee engages with, and seek the views of, its major
investors and investor representative bodies on any significant
changes to the Policy. The Committee also engages from time to
time with shareholders when considering important questions about
the implementation of the Policy. Views expressed by shareholders
are considered by the Committee as part of any review of the Policy,
or sooner if appropriate. The Committee has consulted with major
shareholders and proxy voting agencies on the proposed
amendments to the Policy.
Summary of proposed amendments to the
current Policy:
• Increase the minimum shareholding requirement from 200%
to 300% of base salary for the Chief Executive;
• Allow the Committee flexibility to make PSP awards up to the
existing maximum limit in the Policy, but using this on a prudent
and restrained basis. For 2020, our Executive Directors will receive
PSP awards of not more than 200% of base salary, below the
Policy maximum of 250% of base salary;
• Ensure the Committee has powers of discretion to override
formulaic incentive outcomes;
• Introduction of a post-cessation minimum shareholding
requirement, for two years after leaving service; and
• A commitment to reduce the pension allowances for existing
Executive Directors to 15% of base salary by 1 January 2023.
This will align the pension with the level provided to long-serving
employees in the wider workforce. Note that the policy already
includes workforce alignment of pension for new Executive
Director appointments.
For information, the Committee has also simplified the EPS
performance metric in the PSP for awards from 2020 onwards.
Previously, EPS was measured using two different methods; it will
now be measured on one method only, as described on page 117.
The Committee will continue to set challenging targets under this
metric.
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Remuneration Policy for Executive Directors
The following table summarises each element of the Policy, explaining how each element operates and links to corporate strategy.
Element
Base salary
Purpose and
link to strategy
To provide the core
reward for the role.
Sufficient level to recruit
and retain individuals of
the necessary calibre,
taking into account the
required skills,
experience, demands
and complexity of the
role.
Pension
Helps recruit and retain
Executives.
Provides a discrete
element of the package
to contribute to
retirement income.
Other
benefits
Operate competitive
benefits to help recruit,
retain and support the
wellbeing of employees.
Operation including maximum opportunity
Performance metrics
Normally reviewed annually from 1 March, taking into account:
role, experience and performance of the individual; Company
performance; external economic conditions; average changes
in broader workforce salary; and periodic benchmarking for
each role against similar UK listed companies.
Percentage increases will normally be capped at the level of
increases for the Company’s wider employee population. Increase
may be higher in exceptional circumstances, such as a change in
role and/or a significant change in responsibility or role size.
Where new appointees have been given a starting salary below
mid-market level, increases above those granted to the wider
workforce (in percentage terms) may be awarded, subject to
individual performance and development in the role.
Whilst there are no
performance targets
attached to the payment
of base salary, performance
is considered in the annual
salary review process
alongside those factors
outlined under ‘Operation’.
Provide either defined contribution to a pension scheme or an
equivalent cash amount via non-pensionable allowance if the
Executive is affected by HMRC limits.
N/A
The maximum pension level for Executive Directors who joined
the Board before the 2018 AGM is currently 20% of base salary.
This will be reduced to 15% of base salary by 1 January 2023.
This brings it into line with the pension allowance for long-serving
employees in the wider workforce.
For any Executive Directors joining the Board after the 2018 AGM,
the pension allowances are aligned to that of the wider workforce,
which is currently an employer contribution of 10% of salary on
joining, which increases with service up to a maximum of 15%.
In response to changes in legislation or similar developments,
the Company may amend the form of an Executive Director’s
pension arrangements.
Including but not limited to:
Company car (or salary supplement in lieu);
N/A
Private medical insurance;
Life cover;
Critical illness;
Death in service cover;
Relocation assistance where necessary; and
Use of a driver for business purposes.
Executive Directors are eligible to participate in any all-employee
share plan (e.g. SIP and SAYE) operated by the Company on the
same terms as other eligible employees. The maximum level of
participation is subject to limits imposed by HMRC (or a lower
cap set by the Company).
Any reasonable business expenses (including tax thereon) may
be reimbursed.
ST. JAMES’S PLACE PLC 121
Element
Purpose and
link to strategy
Annual bonus Rewards the
achievements of annual
financial and strategic
business plan targets
and delivery of key,
non-financial objectives.
Deferred element aids
retention, encourages
long-term shareholding,
discourages excessive
risk taking and aligns
with shareholders’
interests.
Performance metrics
reflect the key
performance drivers
of the annual business
plan, achievement of
which will reflect
performance in line
with the Group’s
strategy.
Performance
Share Plan
Supports long-term
retention.
Focuses the Executive
on longer-term
corporate performance
and objectives.
Aligns interests to those
of shareholders.
Operation including maximum opportunity
Performance metrics
Maximum opportunity for the Executive Directors is 150% of
base salary.
Performance below threshold results in zero payout. Payouts
are on a scale from 20% to 100% of the maximum opportunity
for performance between threshold and maximum.
50% of any bonus payable is paid in cash and the remaining 50%
deferred into SJP shares, the vesting of which is normally subject
to a three-year continuous service requirement but not further
performance conditions.
Dividends in the form of shares accrue on the deferred shares
and are paid to the Executive Directors during the three-year
deferral period.
All bonus payments are at the discretion of the Committee.
The Committee has the discretion to override formulaic
bonus outcomes, where necessary, under both financial
and non-financial performance metrics, to take account of
overall performance.
The Company Malus and Clawback Policy applies.
Performance measures,
targets and weightings are
reviewed annually and set
in line with the annual
business plan.
Performance is measured
over one year. At least half
of the bonus is based on
financial measures,
reflecting the key priorities
of the business for the
relevant year. Up to half of
the annual bonus can be
based on the achievement
of key non-financial
objectives set at the start
of the year.
Actual measures and
weightings may change
from year to year to reflect
the business priorities at
that time.
Details of performance
criteria and targets set for
the year under review and
performance against them
are provided in the Annual
Report on Remuneration.
Awards may be granted annually, up to 250% of salary as at date
of grant. The Committee intends to use this maximum capacity
prudently. Awards in 2020 for existing Executive Directors will not
exceed 200% of base salary.
Awards vest to the extent
of achievement of the
following performance
metrics:
Vesting is usually on the third anniversary of the date of grant,
dependent on the achievement of stretching performance
conditions measured over a period of three financial years.
Executive Directors are required to retain vested PSP shares, net
of tax, for a further period of two years.
Dividend equivalents may accrue, in the form of shares, on
awards made between the date of grant and the end of the
two-year post-vesting holding period. These dividend equivalents
will be released only to the extent that awards vest.
The Committee has the discretion to override formulaic
vesting outcomes, where necessary, to take account of
overall performance.
The Committee has the discretion, in exceptional circumstances,
to grant and/or settle an award in cash.
The Company Malus and Clawback Policy applies.
EPS growth based on EEV
adjusted profit; and
Relative TSR performance.
The Committee may
choose different measures,
and weightings between
them, if it deems it
appropriate, taking into
account the strategic
objectives of the Company.
For each performance
metric, a threshold and
stretch level of performance
is set. At threshold, 25% of
the relevant element vests,
rising on a straight-line
basis to 100% for
performance between
threshold and maximum.
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Purpose and
link to strategy
Operation including maximum opportunity
Performance metrics
N/A
N/A
Neither the Chair nor the
Non-executive Directors
are eligible for any
performance-related
remuneration.
Element
Minimum
shareholding
requirements
To ensure alignment of
the long-term interests
of Executive Directors
and shareholders.
Executives are required to build and maintain a minimum
shareholding equivalent to 300% of base salary for the Chief
Executive and 200% of base salary for other Executives, to be
achieved normally within five years of appointment.
Post-
cessation
shareholding
requirements
To ensure continued
alignment of the
long-term interests
of Executive Directors
and shareholders
post-cessation.
Non-
executive
Directors’
fees
To attract high
quality, experienced
Non-executive
Directors.
Until the threshold is reached, at least 50% of vested shares from
the PSP and other share awards (less tax liability) must be
retained.
Executives are required to maintain a shareholding equivalent to
the in-employment shareholding requirement immediately prior
to departure (or the actual share and award holding on departure,
if lower) for the first year post-cessation; and 50% of the holding
for the second year post-cessation.
There are appropriate arrangements in place to ensure
enforceability.
The Chair of the Board is paid an all-inclusive annual fee which is
reviewed periodically by the Committee.
All Non-executive Directors receive a basic annual fee for carrying
out their duties, together with additional fees being paid in respect
of Board Committee Chairship and, where appropriate,
membership, and other responsibilities, with fee levels reviewed
periodically by the Board. They may also be paid additional fees
in the event of exceptional levels of additional time being required.
PLC Board Directors who are also members of subsidiary Boards
of the Company, may receive fees in respect of their duties on the
subsidiary Boards.
Any reasonable business expenses (including tax thereon if
applicable) may be reimbursed.
There is no prescribed maximum individual fee level or annual
increase. Reviews take into account market data for similar
non-executive roles in other companies of a similar size,
complexity and/or business to St. James’s Place as well
as the time commitment of its Non-executive Directors.
The policy is to pay up to the mid-market level based on
similar time commitments of chair and non-executives in
comparable companies.
Notes to the Policy table:
The performance measures and targets that are set for the Executive Directors’ annual bonus and Performance Share Plan (PSP) awards are carefully selected to align with
the Company’s strategic and key performance indicators.
For the annual bonus, financial and strategic measures are reviewed and selected by the Committee annually. The measures selected and weighting between them may vary
annually depending on the key priorities of the business for the year ahead. Robust and demanding targets will be set annually taking into account the economic environment,
market expectations and the Company’s budget and business plan for the year ahead. EEV operating profit has been used to assess financial performance as this measure
reflects a number of key metrics including new business, retention of funds under management and cost control. The remaining bonus is determined based on strategic
measures set annually on a balanced scorecard basis.
The Company has used a relative TSR measure and EPS growth targets for the PSP for a number of years in line with the Group’s strategy of delivering profitable growth and
superior returns to its shareholders. The Committee will continue to review the choice of performance measures and the appropriateness of targets prior to each PSP award
being made and will set robust and stretching measures for any alternative measures used. For the EPS growth measure, stretching targets will be set annually taking into
account the economic environment, market expectations and the Company’s budget and business plan at that time. For the comparative TSR measure the Committee’s policy
is to set threshold vesting for median performance rising to full vesting for upper quartile performance. The Committee will assess annually the appropriateness of the TSR
comparator group.
No performance targets are set for the SAYE and SIP awards as these form part of all employee arrangements designed to encourage employees across the Group to purchase
shares in the Company.
ST. JAMES’S PLACE PLC 123
Committee discretion
The Committee will operate the annual bonus plan, deferred bonus
plan, PSP and all-employee share plans according to the rules of
each respective plan and consistent with normal market practice
and the Listing Rules, where relevant. The Committee will retain
flexibility in a number of areas regarding the operation and
administration of these plans, including (but not limited to) the following:
and in considering the quantum for each element of the package,
the skills and experience of the candidate, the market rate for a
candidate of that experience as well as the importance of securing
the best candidate. For new appointments, base salary and total
remuneration may be set initially at below normal market rates on
the basis that it may be increased once expertise and performance
has been proven and sustained.
• Who participates in the plans;
• When to make awards and payments;
• How to determine the size of an award, a payment, or when and
how much of an award should vest;
• How to deal with a change of control or restructuring of the Group;
• In the case of stated good leaver reasons or otherwise, whether
a Director is a good/bad leaver for incentive plan purposes and
whether and what proportion of awards vest at the time of leaving
or at the original vesting date(s) as relevant; and
• How and whether an award may be adjusted in certain
circumstances (e.g. for a rights issue, a corporate restructuring
or for special dividends).
The Committee also has the discretion within the Policy to adjust
targets and/or set different measures and alter weightings for the
annual bonus plan and the PSP if events happen that cause it to
determine that the original targets or conditions are no longer
appropriate and the amendment is required so that the targets or
conditions achieve their original purpose and are not materially less
difficult to satisfy. The Committee has the discretion to adjust the
application of the minimum shareholding requirements, in role or
post-cessation, to take account of exceptional circumstances.
Any use of exceptional discretion to override formulaic outcomes
would, where relevant, be explained in the Annual Report on
Remuneration, as appropriate.
Awards made prior to the effective date
For the avoidance of doubt, in approving the Policy, authority was
given to the Company to honour any commitments entered into with
current or former Directors that have been disclosed to shareholders
in previous remuneration reports. This includes all historic awards
that were granted under any current or previous share schemes
operated by the Company but remain outstanding (detailed in the
Annual Report on Remuneration) and which will remain eligible to
vest based on their original award terms. Awards made under the
Performance Share Plan in 2017, 2018 and 2019 will continue to be
based on the achievement of three equally weighted metrics:
• EPS growth based on EEV adjusted profit;
• EPS growth as above but excluding the impact of the EEV unwind
of the discount rate; and
• Relative TSR performance.
For each performance metric, a threshold and stretch level of
performance is set. At threshold, 25% of the relevant element vests
rising on a straight line basis to 100% for attainment of levels of
performance between threshold and maximum targets. Details
of payments to former Directors will be set out in the Annual
Remuneration Report, where required by the relevant regulations,
as they arise.
Approach to remuneration for recruitment and
promotions
The Committee aims to set a new Executive Director’s remuneration
package in line with the Policy in place at the time of appointment.
The Committee will take into account, in arriving at a total package
Annual bonus and long-term incentive maximum award sizes will
comply with the maximum opportunity set out in the Policy table
(not including any arrangements to replace forfeited deferred pay).
Participation in the annual bonus plan will normally be pro-rated for
the year of joining and different performance measures may be set
from those applying to the other Directors, if it is appropriate to do
so to reflect the individual’s responsibilities and the point in the year
in which they joined the Board. A PSP award can be made shortly
following an appointment (assuming the Company is not in a close
period). Where it is essential for the purposes of recruitment, such
as where a new external recruit has not had any bonus deferral in
their previous role, bonus deferral may be phased in over a short
period. The standard approach will be for deferral to apply as stated
in the Policy table.
The Committee may make additional cash and/or share-based
awards as it deems appropriate and, if the circumstances so
demand, to take account of deferred pay forfeited by an executive
on leaving a previous employer. Awards to replace deferred pay
forfeited would, where possible, reflect the nature of awards
forfeited in terms of delivery mechanism (cash or shares), time
horizons, attributed expected value and performance conditions.
Other payments may be made in relation to relocation expenses
and other incidental expenses as appropriate.
In the case of an internal appointment, any variable pay element
awarded in respect of the prior role would be allowed to pay
out according to its terms and any other ongoing remuneration
obligations existing prior to appointment would continue.
For an overseas appointment, the Committee will have the discretion
to offer benefits and pension provisions which reflect local market
practice and relevant legislation.
If appropriate and in exceptional circumstances the Committee
may agree, on the recruitment of a new Executive, a notice period
of in excess of 12 months but reducing to 12 months over
a specified period.
For the appointment of a new Chair or Non-executive Director,
the fee arrangement would be set in accordance with the approved
Policy at that time.
Risk management
Risk is managed within the Policy through the Committee:
• Taking into consideration the recommendations contained in any
applicable Remuneration Codes and associated guidance which
apply to the Group;
• Structuring the annual bonus plan to contain a mix of financial
and strategic performance metrics, where performance
conditions are tailored to the business outlook and strategy,
including the management of risk within the business. The
Committee also retains the discretion to reduce the bonus
and PSP out-turns where appropriate;
• Assessing the performance metrics from a risk perspective,
with input from the Risk Committee;
• Requiring deferral of 50% of annual bonus payments into the
Company’s shares which are deferred for three years;
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Risk management continued
• Requiring the Executive Directors to retain shares acquired on
vesting of PSP awards granted from 1 January 2015 onward for
a post-vesting holding period of two years on the shares vesting.
During this period the vested shares cannot normally be sold other
than to the extent necessary to settle tax on vesting or exercise;
• Ensuring that the majority of the incentive pay comes in the form
of a long-term incentive plan subject to stretching performance
targets measured over multi-year performance periods, with
the performance period for subsequent awards overlapping the
previous award, together with an additional two year holding
period. This ensures that there is no particular incentive to
maximise performance over a particular period;
• Incorporating withholding and recovery provisions into the
Company’s bonus and long-term incentive plans; and
• Requiring the Executive Directors to build and maintain a
substantial shareholding in the Company, and to retain a
shareholding for two years post-cessation.
Remuneration Policy across the Group
The Policy is designed with regard to the remuneration policy for
employees across the Group as a whole and the Committee aims,
where appropriate, for there to be a consistent approach applied.
For instance, the suite of benefits in kind is generally consistent
(other than in relation to quantum) and all employees participate
in annual bonus plans. All employees, including the Executive
Directors, are offered the opportunity to participate in the Group’s
SAYE Share Option Plan and Share Incentive Plan. Senior managers
participate in the long-term incentive plan.
The Policy is more weighted towards variable pay than for other
employees to make a greater part of their pay conditional on the
successful delivery of business strategy, and in line with shareholder
interests. In addition, more of senior level remuneration is deferred
than is the case for the workforce as a whole.
Employees are not specifically consulted on Directors’ Remuneration
Policy. However, the Board has established a process for engaging
with the workforce on a range of topics, which include, amongst other
matters, taking views on the Company’s approach to remuneration.
Remuneration scenarios for Executive Directors
The chart below shows how the proportion of each Executive
Director’s remuneration package varies at different levels of
performance in accordance with the Policy to be implemented
in 2020 and using the assumptions set out below. A significant
proportion of remuneration is linked to performance, particularly
at maximum performance levels.
Remuneration Scenarios for Executive Directors
£3,287
52%
£2,719
42%
£1,810
31%
28%
31%
26%
£730
100%
40%
27%
22%
3,500
3,000
2,500
2,000
1,500
1,000
500
0
)
s
0
0
0
£
(
n
o
i
t
a
r
e
n
u
m
e
R
£2,383
52%
£1,972
42%
£2,461
50%
£2,050
40%
£1,315
31%
28%
31%
26%
£534
100%
41%
27%
22%
£1,393
29%
27%
30%
25%
£612
100%
44%
30%
25%
Fixed pay
Annual bonus
Long-term incentives
Minimum Target
Maximum Maximum
+ 50% share
price growth
Minimum Target Maximum Maximum
+ 50% share
price growth
Minimum Target Maximum Maximum
+ 50% share
price growth
Chief Executive Officer –
Andrew Croft
Chief Financial Officer –
Craig Gentle
Managing Director –
Ian Gascoigne
Assumptions
Threshold = fixed pay only (salary, benefits and pension).
Target = fixed pay plus 60% vesting of the annual bonus and 50% vesting of PSP awards.
Maximum = fixed pay plus 100% vesting of the annual bonus and PSP awards.
Maximum + 50% share price growth = maximum pay + the impact of an assumed 50% share price growth on the PSP award.
Salaries used are those applying on 1 March 2020 and taxable benefits are those reported for the year ending 31 December 2019.
Pension is based on 2020 Policy applied to 1 March 2020 salaries.
Amounts have been rounded to the nearest £1,000. The assumptions noted for ‘on-target’ PSP performance in the graph above are provided for illustration purposes
only. Participation in all employee plans, dividends payable on PSP awards over the vesting period or on deferred share bonus awards are not included in the above
scenarios and the table assumes no increase to the share price.
ST. JAMES’S PLACE PLC
125
Service contracts and loss of office
The Company’s policy is that service contracts may be terminated
with 12 months’ notice from either the Company or from the
Executive Director (except in certain exceptional recruitment
situations where a longer notice period from the Company may be
set provided it reduces to a maximum of 12 months with a specified
time limit). Service contracts do not contain a fixed end date.
Under their service contracts the Executive Directors are entitled
to salary, pension contributions and benefits for their notice period
(except on termination for events such as gross misconduct where
payment will be for sums earned up to the date of termination with
no notice period only). The Company would seek to ensure that any
payment is mitigated by use of phased payments and offset against
earnings elsewhere in the event that an Executive Director finds
alternative employment during their notice period. There are no
contractual provisions in force other than those set out above
that impact any termination payment.
Executive Directors are also subject to the Company’s post-
employment shareholding policy.
When considering the size of any proposed termination payment,
the Committee would take into account a number of factors
including the health, length of service and performance of the
relevant Executive, including the duty to mitigate their own loss,
with a broad aim to avoid rewarding poor performance while dealing
fairly with cases where the departure is due to other reasons, for
example illness or redundancy.
In summary the position on cessation of employment is as follows:
Any unvested awards held under the PSP schemes will lapse at
cessation of employment, unless the individual is leaving for certain
reasons (defined under the plan such as death, injury, ill-health,
disability, redundancy, retirement, their office or employment being
either a company which ceases to be a Group member or relating
to a business or part of a business which is transferred to a person
who is not a Group member, or any other reason the Committee
so decides). In these circumstances, unvested awards will normally
vest at the normal vesting date (unless the Committee decides they
should vest at cessation of appointment) subject to performance
conditions being met and normally subject to scaling back in
respect of actual service as a proportion of the total vesting period
(unless the Committee decides that scaling back is inappropriate).
The same approach applies on a change of control.
Any unvested awards held under the Deferred Bonus Scheme will
lapse at cessation of employment unless the Committee exercises
discretion to allow them to be retained. In these circumstances the
Committee may determine whether unvested awards will vest at the
normal vesting date or at cessation of employment.
The Committee may agree to the payment of disbursements such
as legal costs and outplacement services if appropriate and depending
on the circumstances of the leaving Executive.
The Committee may pay any legal entitlements or settle or
compromise claims in connection with a termination of employment,
where considered in the best interests of the Company.
Provision
Notice period
Termination payment
Detailed terms
12 months by either party
Base salary plus benefits (including pension). An express obligation on the Executive to mitigate
his loss. Payments can be made on a monthly basis and reduced if an Executive is able to secure
alternative employment.
In addition any statutory amounts would be paid as necessary.
Remuneration entitlements
on cessation of appointment
A pro-rata bonus may also become payable for the period of active service along with the vesting
of outstanding share awards (in certain circumstances as described below).
Change of control
As on termination and with remuneration entitlements as described above.
External appointments
Executive Directors are permitted to be appointed to an external
board or committee so long as this is unlikely to interfere with the
business of the Group. Any fees received in respect of external
appointments are retained by the relevant Executive Director.
Non-executive Directors’ letters of appointment
The Non-executive Directors (including the Chair) do not have
service contracts or any benefits in kind arrangements and do not
participate in any of the Group’s pension or incentive arrangements.
The appointment of each Non-executive Director can be terminated
by giving three months’ notice (subject to annual re-appointment at
the AGM). Any period of service longer than six years is subject to
particularly rigorous review by the Nomination Committee of the
Board. The Non-executive Directors’ letters of appointment do not
provide for any payment on termination except for accrued fees and
expenses to the date of termination.
The terms and conditions of Executive Directors’ service contracts and
the letters of appointment of the Non-executive Directors are available
for inspection at the Company’s registered office during normal
business hours and at the AGM, the details of which can be found
in the Directors’ Report in the Company’s Annual Report and Accounts.
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G O V E R N A N C E
Directors’ Report
The Directors present their report together
with the audited Consolidated Financial
Statements of the Group for the year ended
31 December 2019. This report has been
prepared in accordance with requirements
outlined within The Large and Medium-
sized Companies and Groups (Accounts
and Reports) Regulations 2008 and,
together with the Strategic Report, forms
the management report as required under
the UK Financial Conduct Authority’s (FCA)
Disclosure and Transparency Rule DTR4.1.
Certain information that fulfils the
requirements of the Directors’ report
can be found elsewhere in this document
and is referred to below. This information
is incorporated into this Directors’ report
by reference.
Information disclosed in accordance with
the requirements of the sections of the
FCA’s Listing Rule LR9.8 (Annual Financial
Report) and Disclosure and Transparency
Rule DTR7 (Corporate Governance) that
are applicable can be found in the
following sections:
Disclosure
Details of Long-term
incentive schemes
Location
The Directors’
Remuneration
Report
This Directors’
Report
This Directors’
Report
This Directors’
Report
The Directors’
Remuneration
Report
This Directors’
Report
Corporate
Governance
Statement
The Report of the
Audit Committee
Contracts of
significance
Shareholder waivers
of dividends
Shareholder waivers
of future dividends
Directors’ interests
in the Company’s
shares
Major shareholders’
interests
Authority to
purchase own
shares
Internal controls
As permitted by legislation, some of the
matters required to be included in the
Directors’ Report have instead been
included in the Strategic Report:
• future business developments
(throughout the Strategic Report);
• risk management on pages 60 to 65;
• details of branches operated by the
Company on page 191; and
• the Group’s impact on the environment,
including those required regarding
greenhouse gas emissions, on pages
34 and 35.
If those default shares represent at least
0.25% of their class, any dividend payable
in respect of the shares will be withheld by
the Company and (subject to certain limited
exceptions) no transfer, other than an
excepted transfer, of any shares held
by the member in certificated form will
be registered.
Articles of Association
The full rights and obligations attaching
to the ordinary shares of the Company are
set out in the Articles. Holders of ordinary
shares are entitled to receive the Company’s
Reports and Accounts; attend, speak and
exercise voting rights; and appoint proxies
to attend General Meetings.
Restrictions on share transfers
There are restrictions on share transfers,
all of which are set out in the Articles.
Restrictions include transfers made in
favour of more than four joint holders and
transfers held in certificated form. Directors
may decline to recognise a transfer, unless
it is in respect of only one class of share and
lodged (and duly stamped) with the Transfer
Office. The Directors may also refuse to
register any transfer of shares held in
certificated form which are not fully paid.
Directors may also choose to decline
requests for share transfers from a US
Person (as defined under Regulation S of
the United States Securities Act 1933) that
would cause the aggregate number of
beneficial owners of issued shares who
are US Persons to exceed 70.
The registration of transfers may be
suspended at such times and for such
periods (not exceeding 30 days in any year)
as the Directors may from time to time
determine in respect of any class of shares.
The Company is not aware of any
agreements between shareholders that
restrict the transfer of shares or voting
rights attached to the shares.
The interests of the Directors, and any
persons closely associated, in the issued
share capital of the Company are shown
on page 112.
Status of Company
The Company is registered as a public
limited company under the Companies
Act 2006. For details of the Company’s
subsidiaries and overseas branches, please
see Note 22 on pages 191 to 194.
Going concern
In conjunction with its assessment of
longer-term viability as set out on pages
64 and 65, the Board concluded that it
remained appropriate to adopt the going
concern basis of accounting in preparing
the Consolidated Financial Statements as
it believes the Group will continue to be in
business, with neither the intention nor the
necessity of liquidation, ceasing trading or
seeking protection from creditors pursuant
to laws or regulations for a period of at least
12 months from the date of approval of the
Group Financial Statements.
Share capital
Structure of the Company’s capital
As at 31 December 2019, the Company’s
issued and fully paid-up share capital was
534,800,626 ordinary shares of 15 pence
each. All ordinary shares are quoted on the
London Stock Exchange, and can be held in
uncertificated form via CREST. All shares
have equal rights to dividends and to
participate in a distribution on winding up.
Details of the movement in the issued share
capital during the year are provided in Note
19 to the Financial Statements on page 185.
Voting rights
At any General Meeting, on a show of
hands, each member who is present in
person has one vote and every proxy
present who has been duly appointed by
a member entitled to vote on a resolution
has one vote. On a poll, every member who
is present in person or by proxy shall have
one vote for every share of which he or she
is the holder.
Restrictions on voting rights
If any shareholder has been sent a notice
by the Company under section 793 of the
Companies Act 2006 and has failed to
supply the relevant information for a period
of 14 days, then the shareholder may not
(for so long as the default continues) be
entitled to attend or vote either personally
or by proxy at a shareholders’ meeting,
or to exercise any other right conferred
by membership in relation to
shareholders’ meetings.
ST. JAMES’S PLACE PLC 127
Substantial shareholders
As at 25 February 2020, the Company had been notified of the following interests disclosed to the Company under Disclosure and
Transparency Rule 5:
Shareholder
M&G Plc
BlackRock, Inc.
Ameriprise Financial, Inc. and its group
Norges Bank
BLS Capital Fondsmaeglerselskab A/S
1 Percentage provided was correct at the date of notification.
Holding at
31 Dec 2019
33,626,116
31,912,394
26,288,280
21,279,405
15,994,742
Percentage
held at
31 Dec 20191
6.29%
5.97%
4.97%
3.98%
3.00%
Holding at
25 Feb 2020
33,626,116
31,590,014
26,288,280
15,726,429
15,994,742
Percentage
held at
25 Feb 20201
6.29%
5.90%
4.97%
2.94%
3.00%
Results and dividends
The Financial Review on pages 42 to 59
sets out the consolidated results for the year.
An interim dividend of 18.49 pence per
share, which equates to £98.5 million,
was paid on 27 September 2019 (2018:
18.49 pence per share/£97.7 million). The
Directors recommend that shareholders
approve a final dividend of 31.22 pence
per share, which equates to £167.0 million
(2018: final dividend of 29.73 pence per
share/£157.5 million) to be paid on 22 May
2020 to shareholders on the register at the
close of business on 17 April 2020.
Details of the Dividend Reinvestment Plan
(DRP) are set out on page 212.
Our people
Details of the Company’s approach to
maintaining an appropriately skilled and
diverse workforce, including recruitment
practices, development opportunities,
employee engagement and equal
opportunities can be found in Our
Social Value report on pages 24 to 37.
The Workforce Engagement section of the
Corporate Governance Statement (page 81)
summarises how the Board has engaged
with employees. This engagement and the
presence of a designated Non-executive
Director on the Board, ensures that the
Board is able to take account of interests of
employees in its discussions and when
making decisions. Engagement during 2019
has contributed to the Board’s consideration
of key strategic topics and the determination
of policies affecting the workforce, including
the Inclusion and Diversity Policy.
Fostering business relationships
Engagement with the Board’s key
stakeholders, including suppliers and clients
is summarised in the Corporate Governance
Statement on pages 80 and 81. In many
cases the Group’s primary point of
engagement with these stakeholders is
through the business, where regular dialogue
is maintained. Focus on strategic topics
and regular reporting from management
enables the Board to establish a clear
view on business relationships with these
stakeholders and has provided important
context in its deliberations and decision
making. Further details are set out in the
Section 172 Statement on page 66.
Significant contracts and
change of control
The Company has a number of contractual
arrangements which it considers essential
to the business of the Company. Specifically,
these are committed loan facilities from a
number of banks and arrangements with
fund managers and third-party providers
of administrative services.
A change of control of the Company may
cause some agreements to which the
Company is a party to alter or terminate.
These include bank facility agreements,
securitisation arrangements and employee
share plans.
The Group had committed facilities totalling
£458.5 million as at 25 February 2020
which contain clauses which require
lender consent for any change of control.
In addition, the Group guarantees the
obligations of loans made to Partners in
connection with facilities agreed with
various lenders totalling £186.7 million in
aggregate. Should consent not be given, a
change of control would trigger mandatory
repayment of the said facilities.
The Group also had committed securitisation
facilities totalling £175.0 million which
contain clauses which require lender
consent for any change of control. Should
such consent not be given, a change of
control would trigger early amortisation
of the facilities.
All the Company’s employee share plans
contain provisions relating to a change of
control. Outstanding awards and options
may vest and become exercisable on
a change of control, subject where
appropriate to the satisfaction of any
performance conditions at that time
and pro-rating of awards.
Financial instruments
An indication of the Group’s use of financial
instruments can be found in Note 17 to the
Financial Statements on pages 172 to 183.
Directors and Directors’
indemnities
Details of the Directors of the Company at
the date of this Report and during the year
ended 31 December 2019 can be found
in the Corporate Governance Report on
page 85. Details of the indemnity provisions
in place for the Directors, including
qualifying third-party indemnity provisions,
can be found on page 86.
Political and charitable donations
It is the Group’s policy not to make any
donations to political parties within the
meaning of the definitions set out in the
Political Parties, Elections and Referendums
Act 2000 and sections 362 to 379 of the
Companies Act 2006. During the year we
have donated £5.7 million to the
St. James’s Place Charitable Foundation,
more details of which can be found on
pages 68 to 71.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONGOVERNANCE 128
G O V E R N A N C E
Directors’ Report continued
Annual General Meeting
The Company plans to hold its Annual
General Meeting on Thursday 7 May 2020.
Full details of the meeting, including
location, time and the resolutions to be put
to shareholders at the meeting, are included
in a separate Notice of Annual General
Meeting, which is available on our website.
Disclosure of information
to auditors
Each of the Directors, at the date of approval
of this report, confirms that:
• so far as each Director is aware, there
is no relevant audit information of which
the auditors are unaware; and
• each Director has taken all steps that
he ought to have taken as a Director to
make himself aware of any relevant audit
information and to establish that the
Company’s auditors are aware of such
information.
This confirmation is given and should
be interpreted in accordance with the
provisions of section 418 of the Companies
Act 2006.
On behalf of the Board:
ANDREW CROFT
Chief Executive
CRAIG GENTLE
Chief Financial Officer
26 February 2020
ST. JAMES’S PLACE PLC Statement of Directors’ Responsibilities
129
The Directors are also responsible for
safeguarding the assets of the Group and
the Parent Company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group
and Parent Company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group and
the Parent Company and enable them to
ensure that the Financial Statements and
the Directors’ Remuneration Report comply
with the Companies Act 2006 and, as
regards the Group Financial Statements,
Article 4 of the IAS Regulation.
The Directors are responsible for the
maintenance and integrity of the Group’s
website. Legislation in the United Kingdom
governing the preparation and dissemination
of Financial Statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual
Report and Accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group and
Parent Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and
functions are listed in the Board of Directors
section of the Annual Report and Accounts
confirm that, to the best of their knowledge:
• the Parent Company Financial Statements,
which have been prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’, and
applicable law) give a true and fair view of
the assets, liabilities, financial position
and profit of the Parent Company;
• the Group Financial Statements, which
have been prepared in accordance with
IFRSs as adopted by the European Union,
give a true and fair view of the assets,
liabilities, financial position and profit
of the Group; and
• the Strategic Report includes a fair review
of the development and performance
of the business and the position of the
Group and Parent Company, together
with a description of the principal risks
and uncertainties that it faces.
By order of the Board:
ELIZABETH KELLY
Company Secretary
26 February 2020
The Directors are responsible for preparing
the Annual Report and the Financial
Statements in accordance with applicable
law and regulation.
Company law requires the Directors to
prepare Financial Statements for each
financial year. Under that law the Directors
have prepared the Group Financial
Statements in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union, and the
Parent Company Financial Statements in
accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting Standards,
comprising FRS 101 ‘Reduced Disclosure
Framework’, and applicable law). Under
company law the Directors must not
approve the Financial Statements unless
they are satisfied that they give a true and
fair view of the state of affairs of the Group
and the Parent Company and of the profit or
loss of the Group and Parent Company for
that period. In preparing the Financial
Statements, the Directors are required to:
• select suitable accounting policies and
then apply them consistently;
• state whether applicable IFRSs as
adopted by the European Union have
been followed for the Group Financial
Statements and United Kingdom
Accounting Standards, comprising FRS
101, have been followed for the Parent
Company Financial Statements, subject
to any material departures disclosed and
explained in the Financial Statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the Financial Statements on
the going concern basis unless it is
inappropriate to presume that the
Group and Parent Company will
continue in business.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTFINANCIAL STATEMENTSOTHER INFORMATIONGOVERNANCE 130
03
Financial
Statements
Independent Auditors’
Report to the Members
of St. James’s Place plc ..................... 132
Consolidated Financial
Statements under International
Financial Reporting Standards ........ 138
Consolidated Statement
of Comprehensive Income ........... 138
Consolidated Statement
of Changes in Equity ...................... 139
Consolidated Statement
of Financial Position ....................... 140
Consolidated Statement
of Cash Flows ................................... 141
Notes to the Consolidated
Financial Statements Under
International Financial
Reporting Standards ...................... 142
Parent Company Financial
Statements Reporting under
Financial Reporting Standard 101 ... 196
Supplementary Information:
Consolidated Financial Statements
on a Cash Result Basis (unaudited) .. 203
Investing in our office infrastructure
The increasing scale of the Partnership requires
us to continue to invest in the supporting
infrastructure. Consequently, during the year we
opened a new office in Cardiff and consolidated
the Academy, our previous City office, and a
number of corporate functions into a new office in
Lombard Street in the City. Both offices have very
good environmental credentials.
These offices, along with the existing properties
we occupy, are leased. On 1 January 2019 we
applied IFRS 16, the new accounting standard for
leases, which meant that each of our property
leases were recognised on the Group’s Statement
of Financial Position for the first time. This led to
substantial increases in our property and
equipment and other payables balances year-on-
year. Further information on our transition to IFRS
16 is set out in Note 1, and detail about the assets
for which we are the lessee is set out in Note 10.
IFRS profit before shareholder tax
£187.1m
IFRS profit after tax
£146.6m
IFRS basic earnings per share
27.6p
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS
131
“ The increasing scale of
the Partnership requires
us to continue to invest
in the supporting
infrastructure”
ANDREW CROFT, Chief Executive
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 132
Independent Auditors’ Report
to the Members of St. James’s Place plc
Report on the audit of the Financial Statements
Opinion
In our opinion:
• St. James’s Place plc’s Group Financial Statements and Parent Company Financial Statements (the ‘Financial Statements’) give a true and
fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2019 and of the Group’s profit and cash flows
for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union;
• the Parent Company Financial Statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable law); and
• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
Financial Statements, Article 4 of the IAS Regulation.
We have audited the Financial Statements, included within the Annual Report and Accounts (the ‘Annual Report’), which comprise: the
Consolidated and Parent Company Statements of Financial Position as at 31 December 2019; the Consolidated Statement of Comprehensive
Income, the Consolidated Statement of Cash Flows, the Consolidated and Parent Company Statements of Changes In Equity for the year then
ended; and the notes to the Financial Statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the Financial Statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the Financial Statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to the
Group or the Parent Company.
Other than those disclosed in Note 5 to the Financial Statements, we have provided no non-audit services to the Group or the Parent
Company in the period from 1 January 2019 to 31 December 2019.
Our audit approach
Overview
Materiality
Audit scope
• Overall Group materiality: £15.0 million (2018: £15.0 million), which represents 5.6% of underlying cash generated
in the year.
• Overall Parent Company materiality: £12.3 million (2018: £13.0 million), based on 1% of total assets.
• The Group Financial Statements comprise the consolidation of approximately 60 individual components, each of
which represents an individual legal entity within the Group or consolidation adjustments.
• We assessed each component and considered the contribution it made to the Group’s performance in the year,
whether it displayed any significant risk characteristics and/or whether it contributed a significant amount to any
individual financial statement line item.
• The above assessment resulted in us identifying nine components that required audit procedures for the purpose
of the audit of the Group Financial Statements.
• Eight of the nine components are based in the UK and were audited by the PwC UK audit team. The remaining
component is based in the Republic of Ireland and was audited by Grant Thornton Republic of Ireland.
• By performing audit procedures on these nine components we achieved coverage greater than 93% of each
material financial statement line item within the Group’s Financial Statements.
Key audit matters
• We performed a full scope audit of all material line items in the Parent Company’s Financial Statements.
• Valuation of investments with a judgemental valuation, being investment property, level 3 investments in the
Diversified Assets Fund and derivatives.
• Valuation of the operational readiness prepayment in respect of the development of an administration platform
at an outsourced provider.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 133
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the Financial Statements.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and its industry, we identified that the principal risks of non-compliance with laws and regulations
related to breaches of UK and Irish regulatory principles, such as those governed by the Prudential Regulation Authority and the Financial
Conduct Authority and the Central Bank of Ireland, and we considered the extent to which non-compliance might have a material effect on
the Financial Statements. We also considered those laws and regulations that have a direct impact on the preparation of the Financial
Statements such as the Companies Act 2006 and UK and Irish tax legislation.
We evaluated management’s incentives and opportunities for fraudulent manipulation of the Financial Statements (including the risk of
override of controls), and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or
reduce expenditure, and management bias in accounting estimates specifically investments with a judgemental valuation, being investment
property, level 3 investments in the Diversified Assets Fund and derivatives and the valuation of the prepayment asset in respect of the
development of an administration platform at an outsourced provider (see Key Audit Matters). The Group engagement team shared this risk
assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work
Audit procedures performed by the Group engagement team and/or component auditors included:
• Enquiries of compliance, risk, internal audit, and the Group’s legal function, including consideration of known or suspected instances of
non-compliance with laws and regulation and fraud;
• Reading key correspondence with the Prudential Regulation Authority, the Financial Conduct Authority and the Central Bank of Ireland in
relation to compliance with laws and regulations;
• Reviewing relevant meeting minutes including those of the Board, Audit Committee and Risk Committee;
• Reviewing data regarding policyholder complaints, and the Group’s register of litigation and claims, in so far as they related to
non-compliance with laws and regulations and fraud;
• Procedures relating to the valuation of investments with a judgemental valuation, being investment property, level 3 investments in the
Diversified Assets Fund and derivatives and the valuation of the prepayment asset in respect of the development of an administration
platform at an outsourced provider described in the related key audit matters below;
• Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations or posted by senior
management;
• Designing audit procedures to incorporate unpredictability around the nature, timing or extent of our testing; and
• Testing disclosure Note 18 affected by the regulatory solvency requirements of the Prudential Regulation Authority.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations
is from the events and transactions reflected in the Financial Statements, the less likely we would become aware of it. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the Financial
Statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 134
Independent Auditors’ Report
to the Members of St. James’s Place plc continued
Key audit matter
Valuation of investments with a judgemental valuation,
being investment property, level 3 assets in the
diversified assets fund and derivatives
The Group Financial Statements show a net
£113.3 billion of investments (including cash). The
investments are mostly straight forward financial
instruments and do not require significant judgement
in calculating the valuation of the holdings.
How our audit addressed the key audit matter
Investment properties
We engaged our in house real estate valuation experts to review the methodology
and key assumptions used by CBRE in valuing the property portfolio. They
obtained and reviewed the valuation reports produced by CBRE and confirmed
that the methodology adopted was appropriate. They benchmarked the key
assumptions used by CBRE against industry norms for all properties in the
portfolio and performed further testing to understand and validate the
assumptions where they fell outside of the expected ranges.
However £2.4 billion of the investments are in
derivatives, investment properties and level 3 assets
in the Diversified Assets Fund (DAF), which require
management to use estimates and judgements in
order to calculate the year-end valuation. Due to the
magnitude of these balances and the level of judgement
involved, this was an area of focus for our audit.
Level 3 assets in the Diversified Assets Fund
We engaged our in house valuation experts to review the methodology and key
assumptions used by KKR in valuing a sample of individual level 3 investments
within the DAF. They met with KKR and reviewed the year end valuation report for
each asset in the sample. They challenged KKR on the appropriateness of the
methodology and assumptions, given the specifics of each of the assets in
question.
SJP outsources investment valuation activities for
derivatives, to State Street and for assets in the DAF
to Kohlberg Kravis Roberts & Co. Inc (KKR). The
investment property portfolio is managed by Orchard
Street, with title deeds held by DLA Piper and regular
valuations are performed by CBRE.
This key audit matter only relates to the Group Financial
Statements and does not impact the Parent Company.
Valuation of the operational readiness prepayment in
respect of the development of an administration
platform at an outsourced provider
The Group is charged costs by an outsourced provider
in respect of the development of a policy administration
platform.
These costs are recognised as a prepayment and
are unwound over the duration of the related service
agreement with the provider. The balance of the
prepayment asset at 31 December 2019 was
£299.2 million. The maximum prepayment that
can be recognised is capped at the net present
value of future cost savings.
Due to the nature and magnitude of the amount arising
from the contractual terms, the valuation of the
prepayment asset was an area of focus for our audit.
This key audit matter only relates to the Group Financial
Statements and does not impact the Parent Company.
Derivatives
We obtained and read the International Standard on Assurance Engagements
(ISAE) 3402 ‘Assurance Reports on Controls at a Service Organisation’ for State
Street’s Global Fund Accounting and Custody operations, which provided a
description of the systems and controls in place and the results of testing of the
operational effectiveness of those controls. We placed reliance on the controls
described in the ISAE 3402 report over the valuation of the derivatives within the
portfolio.
We engaged our valuation specialists to independently reprice a sample of
derivative contracts, as at the year end. We compared our independent prices to
those provided by State Street.
From the evidence obtained when testing the valuation of derivatives, investment
properties and level 3 assets in the DAF, we found the assumptions and
methodology used, and the resulting valuations, to be appropriate.
In testing whether the asset was valued appropriately and whether an impairment
was necessary we:
• agreed amounts capitalised in the year to the service agreement and cash
payments to the provider;
• assessed the reasonableness of the assumptions underlying management’s
discounted cash flow analysis calculating the anticipated future cost savings
that support the valuation of the asset;
• agreed that the cost savings had been calculated using appropriate service
tariffs.
• performed a sensitivity analysis on the inflation and discount rate assumptions
as well as business flow levels to determine the potential impact of changes in
these assumptions to check whether they would affect the carrying value of the
asset; and
• considered the headroom available under what we considered to be reasonably
possible downside scenarios and whether additional disclosure was necessary.
We determined that the accounting, recognition and disclosure of the asset in the
Financial Statements was supported by the evidence obtained.
We determined that there were no key audit matters applicable to the Parent Company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the Financial Statements as a
whole, taking into account the structure of the Group and the Parent Company, the accounting processes and controls, and the industry in
which they operate.
The Group is structured to reflect its vertically integrated wealth management business and operates predominantly within the United
Kingdom. Six of the components within the Group required an audit of their complete financial information. Of these, five components
(St. James’s Place UK plc, St. James’s Place Unit Trust Group Limited, St. James’s Place Investment Administration Limited,
St. James’s Place Management Services Limited and St. James’s Place Wealth Management plc) were considered financially significant.
The remaining component (St. James’s Place International plc) had specific risk characteristics which led us to include in our scope an audit
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 135
of its complete financial information. St. James’s Place International plc is a regulated insurance company giving rise to complex accounting
entries, such as the calculation of insurance reserves and DAC and DIR balances.
All components aside from St. James’s Place International plc were audited by PwC UK. St. James’s Place International plc is incorporated
and regulated in the Republic of Ireland and was audited by Grant Thornton Republic of Ireland. At the planning stage of the audit we provided
written instructions to Grant Thornton Republic of Ireland to confirm the work we required them to complete and the materiality level they
should work to. We held regular phone calls and meetings with the Grant Thornton Republic of Ireland engagement leader and director
through the planning, execution and completion phases of the audit to inform them of developments at a Group level and to understand from
them any local developments that were relevant for our audit of the Group. During the execution phase, senior members of the UK
engagement team visited the Republic of Ireland and we obtained access to their electronic audit working papers and reviewed selected
elements of their work, focusing on their work to address the significant and elevated risks identified.
In addition to the full scope audit of the six components noted above, we also performed specific audit procedures on certain financial
statement line items within three other components. These financial statement line items were selected for testing to ensure that we had
sufficient coverage of each financial statement line item within the Group Financial Statements.
Together with additional procedures performed at a Group level on the consolidation, the result of the above scoping was that we achieved
greater than 93% coverage of each material financial statement line item within the Group Financial Statements, giving us the evidence we
needed for our audit opinion.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate
on the Financial Statements as a whole.
Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:
Group Financial Statements
£15.0 million (2018: £15.0 million).
Overall materiality
How we determined it 5.6% of underlying cash generated in the year.
Rationale for
benchmark applied
The engagement team concluded that £15.0 million is the most appropriate
figure when setting an overall materiality on the 2019 engagement. The
quantum of £15.0 million was determined by considering the various
benchmarks available to us as auditors, our experience of auditing the
Group and the business performance during 2019. £15.0 million represents
5.6% of underlying cash generated in the year.
Parent Company Financial Statements
£12.3 million (2018: £13.0 million).
1% of total assets.
The purpose of the Parent Company
is to hold investments in other Group
companies. As such PwC considers it
appropriate to use total assets as the
benchmark for overall materiality.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £0.5 million and £12.5 million. Certain components were audited to a local statutory
audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.8 million (Group audit)
(2018: £0.8 million) and £0.6 million (Parent Company audit) (2018: £0.7 million) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
In accordance with guidance on the audit of insurers issued in the United Kingdom issued by the Financial Reporting Council we have applied
a higher materiality of £450 million solely for the purpose of identifying and evaluating the effect of misstatements that are likely only to lead
to a reclassification between line items within assets and liabilities.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
We are required to report if we have anything material to add or draw
attention to in respect of the directors’ statement in the Financial
Statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting in preparing the
Financial Statements and the directors’ identification of any material
uncertainties to the Group’s and the Parent Company’s ability to
continue as a going concern over a period of at least twelve months
from the date of approval of the Financial Statements.
We are required to report if the directors’ statement relating to Going
Concern in accordance with Listing Rule 9.8.6R(3) is materially
inconsistent with our knowledge obtained in the audit.
Outcome
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted,
this statement is not a guarantee as to the Group’s and Parent
Company’s ability to continue as a going concern. For example,
the terms of the United Kingdom’s withdrawal from the European
Union are not clear, and it is difficult to evaluate all of the potential
implications on the Group’s trade, customers, suppliers and the
wider economy.
We have nothing to report.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
136
Independent Auditors’ Report
to the Members of St. James’s Place plc continued
Reporting on other information
The other information comprises all of the information in the Annual Report other than the Financial Statements and our auditors’ report
thereon. The directors are responsible for the other information. Our opinion on the Financial Statements does not cover the other information
and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the Financial Statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report, Directors’ Report and Corporate Governance Statement, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK)
and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below
(required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 December 2019 is consistent with the Financial Statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
Corporate Governance Statement
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement (on
pages 94 and 126) about internal controls and risk management systems in relation to financial reporting processes and about share capital
structures in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook of the FCA (DTR) is
consistent with the Financial Statements and has been prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in this information. (CA06)
In our opinion, based on the work undertaken in the course of the audit, the information given in the Corporate Governance Statement (on
pages 78 to 88) with respect to the Parent Company’s corporate governance code and practices and about its administrative, management
and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the DTR. (CA06)
We have nothing to report arising from our responsibility to report if a corporate governance statement has not been prepared by the Parent
Company. (CA06)
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency
or liquidity of the Group
We have nothing material to add or draw attention to regarding:
The directors’ confirmation on page 78 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.
The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
The directors’ explanation on pages 64 and 65 of the Annual Report as to how they have assessed the prospects of the Group, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope
than an audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the ‘Code’); and considering whether the
statements are consistent with the knowledge and understanding of the Group and Parent Company and their environment obtained in the
course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
The statement given by the directors, on page 129, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Parent Company’s position and
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 137
performance, business model and strategy is materially inconsistent with our knowledge of the Group and Parent Company obtained in the
course of performing our audit.
The section of the Annual Report on pages 89 to 94 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
The directors’ statement relating to the Parent Company’s compliance with the Code does not properly disclose a departure from a relevant
provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006. (CA06)
Responsibilities for the Financial Statements and the audit
Responsibilities of the directors for the Financial Statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the Financial
Statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also
responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from
material misstatement, whether due to fraud or error.
In preparing the Financial Statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these Financial Statements.
A further description of our responsibilities for the audit of the Financial Statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Parent Company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Parent Company Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the Directors on 7 December 2009 to audit the Financial
Statements for the year ended 31 December 2009 and subsequent financial periods. The period of total uninterrupted engagement is 11
years, covering the years ended 31 December 2009 to 31 December 2019.
ANDREW MOORE (SENIOR STATUTORY AUDITOR)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 February 2020
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 138
Consolidated Statement of Comprehensive Income
Insurance premium income
Less premiums ceded to reinsurers
Net insurance premium income
Fee and commission income
Investment return
Net income/(expense)
Policy claims and benefits
– Gross amount
– Reinsurers’ share
Net policyholder claims and benefits incurred
Change in insurance contract liabilities
– Gross amount
– Reinsurers’ share
Net change in insurance contract liabilities
Movement in investment contract benefits
Expenses
Profit/(loss) before tax
Tax attributable to policyholders’ returns
Profit before tax attributable to shareholders’ returns
Total tax (expense)/credit
Less: tax attributable to policyholders’ returns
Tax attributable to shareholders’ returns
Profit and total comprehensive income for the year
Loss attributable to non-controlling interests
Profit attributable to equity shareholders
Profit and total comprehensive income for the year
Basic earnings per share
Diluted earnings per share
The results relate to continuing operations.
Year ended
31 December
2019
Year ended
31 December
2018
Note
4
6
6
5
3
7
7
7
7
£’Million
42.6
(26.8)
15.8
2,374.1
14,173.6
16,563.5
(56.0)
22.4
(33.6)
(48.5)
5.9
(42.6)
(14,070.6)
(1,707.8)
708.9
(521.8)
187.1
(562.3)
521.8
(40.5)
146.6
–
146.6
146.6
19
19
Pence
27.6
27.5
£’Million
46.5
(29.6)
16.9
1,523.7
(4,235.0)
(2,694.4)
(54.0)
19.6
(34.4)
36.5
–
36.5
4,249.2
(1,641.5)
(84.6)
296.5
211.9
258.1
(296.5)
(38.4)
173.5
–
173.5
173.5
Pence
33.0
32.4
The Notes and information below and on pages 142 to 195 form part of these Consolidated Financial Statements.
As permitted by Section 408 of the Companies Act 2006, no Statement of Comprehensive Income is presented for the Company.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Consolidated Statement of Changes in Equity
Note
19
19
19
19
19
At 1 January 2018
Profit and total comprehensive
income for the year
Dividends
Exercise of options
Consideration paid for own shares
Shares sold during the year
Retained earnings credit in
respect of share option charges
At 31 December 2018
Profit and total comprehensive
income for the year
Dividends
Issue of share capital
Exercise of options
Consideration paid for own shares
Shares sold during the year
Proceeds from exercise of shares
held in trust
Retained earnings credit in
respect of share option charges
At 31 December 2019
Equity attributable owners of the Parent
Share
capital
£’Million
79.4
Share
premium
Shares in
trust reserve
£’Million
171.7
£’Million
(26.7)
Retained
earnings
£’Million
832.1
Misc.
reserves
£’Million
2.5
–
–
–
–
–
–
–
2.8
–
–
–
–
–
(6.0)
9.0
–
79.4
–
174.5
–
(23.7)
–
–
0.1
0.7
–
–
–
–
–
3.9
4.0
–
–
–
–
–
–
–
(0.1)
7.4
173.5
(242.7)
–
–
(9.0)
33.4
787.3
146.6
(256.0)
–
–
–
(7.4)
–
0.2
–
80.2
–
182.4
–
(16.4)
28.7
699.4
–
2.5
–
–
–
–
–
–
–
–
–
–
–
–
139
Non-
controlling
interests
£’Million
(0.9)
–
–
–
–
–
Total
£’Million
1,059.0
173.5
(242.7)
2.8
(6.0)
–
Total
equity
£’Million
1,058.1
173.5
(242.7)
2.8
(6.0)
–
–
2.5
33.4
1,020.0
–
(0.9)
33.4
1,019.1
146.6
(256.0)
4.0
4.7
(0.1)
–
0.2
28.7
948.1
–
–
–
–
–
–
–
146.6
(256.0)
4.0
4.7
(0.1)
–
0.2
–
(0.9)
28.7
947.2
The number of shares held in the shares in trust reserve is given in Note 19 Share capital, earnings per share and dividends on page 185.
Miscellaneous reserves represent other non-distributable reserves.
The Notes and information below and on pages 142 to 195 form part of these Consolidated Financial Statements.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 140
Consolidated Statement of Financial Position
Assets
Goodwill
Deferred acquisition costs
Intangible assets
– Purchased value of in-force business
– Computer software
Property and equipment
Deferred tax assets
Reinsurance assets
Other receivables
Income tax assets
Investments
– Investment property
– Equities
– Fixed income securities
– Investment in Collective Investment Schemes
– Derivative financial instruments
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Deferred tax liabilities
Insurance contract liabilities
Deferred income
Other provisions
Other payables
Investment contracts benefits
Derivative financial instruments
Net asset value attributable to unit holders
Income tax liabilities
Preference shares
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Shares in trust reserve
Miscellaneous reserves
Retained earnings
Equity attributable to owners of the Parent Company
Non-controlling interests
Total equity
Net assets per share
As at
31 December
2019
As at
31 December
2018
Note
£’Million
£’Million
8
8
8
8
9
7
14
12
11
11
11
11
11
11
16
7
14
8
15
13
11
11
11
19
15.6
490.0
20.8
8.9
166.3
131.1
88.6
2,127.1
–
1,750.9
72,694.2
26,275.6
5,166.4
1,342.9
7,013.6
117,292.0
403.7
493.7
556.6
614.7
40.6
1,782.7
83,558.5
948.8
27,830.0
115.4
0.1
116,344.8
947.2
80.2
182.4
(16.4)
2.5
699.4
948.1
(0.9)
947.2
Pence
177.1
15.6
558.5
24.0
1.4
28.5
147.1
82.8
1,952.3
9.7
1,820.7
56,077.9
21,966.0
4,756.1
508.8
6,877.6
94,827.0
348.6
172.9
508.1
648.3
22.7
1,290.8
67,796.1
517.4
22,502.9
–
0.1
93,807.9
1,019.1
79.4
174.5
(23.7)
2.5
787.3
1,020.0
(0.9)
1,019.1
Pence
192.5
The Consolidated Financial Statements on pages 138 to 195 were approved by the Board of Directors on 26 February 2020 and signed on its
behalf by:
ANDREW CROFT
Chief Executive
CRAIG GENTLE
Chief Financial Officer
The Notes and information on pages 142 to 195 form part of these Consolidated Financial Statements.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Consolidated Statement of Cash Flows
Cash flows from operating activities
Profit/(loss) before tax for the year
Adjustments for:
Amortisation of purchased value of in-force business
Amortisation of computer software
Depreciation
Share-based payment charge
Interest income
Interest expense
Increase in provisions
Exchange rate losses/(gains)
Changes in operating assets and liabilities
Decrease in deferred acquisition costs
Decrease/(increase) in investment property
Increase in other investments
Increase in reinsurance assets
Increase in other receivables
Increase/(decrease) in insurance contract liabilities
Increase in financial liabilities (excluding borrowings)
(Decrease)/increase in deferred income
Increase in other payables
Increase in net assets attributable to unit holders
Cash generated from/(used in) operating activities
Interest received
Interest paid
Income taxes paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of property and equipment
Acquisition of intangible assets
Acquisition of subsidiaries and other business combinations, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of share capital and exercise of options
Consideration paid for own shares
Proceeds from exercise of shares held in trust
Additional borrowings
Repayment of borrowings
Lease payments
Dividends paid
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange (losses)/gains on cash and cash equivalents
Cash and cash equivalents at 31 December
The Notes and information on pages 142 to 195 form part of these Consolidated Financial Statements.
141
Year ended
31 December
2019
Year ended
31 December
2018
Note
£’Million
£’Million
708.9
(84.6)
8
8
9
20
15
8
8
7
9
8
16
16
19
11
11
3.2
1.4
20.7
29.2
(45.4)
12.6
6.7
0.4
68.5
69.8
(22,170.3)
(5.8)
(169.3)
48.5
16,193.8
(33.6)
369.0
5,327.1
435.4
45.4
(12.6)
(102.8)
365.4
(17.3)
(8.9)
(3.0)
(29.2)
8.7
(0.1)
0.2
390.0
(334.8)
(8.1)
(256.0)
(200.1)
136.1
6,877.6
(0.1)
7,013.6
3.2
1.1
6.5
34.1
(35.1)
6.1
2.7
(0.3)
64.5
(189.8)
(4,794.4)
–
(330.3)
(36.5)
4,108.9
2.0
57.2
1,153.8
(30.9)
35.1
(6.1)
(213.2)
(215.1)
(8.6)
(0.1)
(4.1)
(12.8)
2.8
(6.0)
–
232.5
(162.2)
–
(242.7)
(175.6)
(403.5)
7,280.6
0.5
6,877.6
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 142
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards
1. Accounting policies
St. James’s Place plc (the Company) is a company incorporated and
domiciled in the United Kingdom, and registered in England and Wales.
i. Statement of compliance
The Group Financial Statements consolidate those of the Company
and its subsidiaries (together referred to as the Group).
The Group Financial Statements have been prepared and approved
by the Directors in accordance with International Financial
Reporting Standards as adopted by the EU (adopted IFRSs)
and interpretations issued by the IFRS Interpretations Committee
(IFRS IC) and those parts of the Companies Act 2006 that are
applicable when reporting under IFRS.
As at 31 December 2019, the following relevant amended standards,
which the Group has adopted as of 1 January 2019, have not had any
material impact on the Group’s Consolidated Financial Statements:
• IFRIC 23 Uncertainty over Income Tax Treatments;
• IAS 28 Amendment – Long-term Interests in Associates and
Joint Ventures; and
• Annual Improvements 2015-2017 Cycle.
New accounting standards which were adopted as of 1 January
2019 are covered in section ii below.
ii. Adoption of new accounting standards
IFRS 16 Leases was adopted as of 1 January 2019.
For lessees, IFRS 16 removes the distinction between operating
and finance leases and requires almost all leases to be recognised
on the Statement of Financial Position. The right to use the leased
item is recognised as an asset, and the present value of future lease
payments is recognised as a financial liability (the ‘lease liability’).
The only exceptions are for short-term or low-value leases. The
standard has changed the way that the Group accounts for leases
previously classified as operating leases.
On adoption of IFRS 16 the Group’s lease portfolio transitioned
following the modified retrospective approach. As a result, prior
period comparatives have not been restated. The Group took
advantage of the exemptions offered by the standard for short-term
and low-value leases, and the practical expedients available on
transition to:
• not reassess whether an existing contract is, or contains a lease;
• account for leases with a remaining lease term of less than
12 months from 1 January 2019 as short-term leases;
• exclude initial direct costs from the measurement of leased assets
at transition;
• use hindsight in determining the lease term where a contract
contains options to extend or terminate the lease; and
• apply a single discount rate to a portfolio of leases where they
have reasonably similar characteristics.
Upon transition, the Group recognised a right-of-use asset of
£91.8 million and a lease liability of £83.2 million, along with a lease
provision recognised under IAS 37 Provisions, Contingent Liabilities
and Contingent Assets of £8.6 million. The value of the right-of-use
asset equalled the value of the lease liability plus the lease provision,
and so no adjustment was made to opening reserves.
In the year to 31 December 2019, £21.7 million lease expense on
the transitioned portfolio was recognised under IFRS 16. The lease
expense comprises depreciation of the right-of-use asset, which is
recognised on a straight-line basis over the remaining term of the
lease, and interest expense on the lease liability, which is recognised
using the effective interest method. This means that the interest
expense reduces each year over the course of the lease term. As
the Group has a number of significant leases which are in the early
stages of their lease term, the lease expense under IFRS 16 is higher
than it would have been under IAS 17.
The disclosure of total operating lease commitments presented
under IAS 17 in the Financial Statements for the year ended
31 December 2018 reconciles to the opening lease liabilities
recognised on 1 January 2019 under IFRS 16 as follows:
IAS 17 total undiscounted operating lease
commitments disclosed at 31 December 2018
Less discount using the Group’s weighted average
incremental borrowing rate of 2.4%
Less lease commitments to which the short-term
exemption has been applied
Less lease commitments to which the low-value asset
exemption has been applied
Less service/non-lease components of lease contracts
Less VAT
IFRS 16 lease liability at 1 January 2019
£’Million
141.3
(16.3)
(6.3)
(2.4)
(15.1)
(18.0)
83.2
In addition to the leases which transitioned to IFRS 16 on 1 January
2019, the Group entered into a number of new leases in the year
to 31 December 2019. Detail of the right-of-use assets and lease
liabilities at 1 January and 31 December 2019 in Note 10.
The Group is lessor for a number of investment properties. The
accounting for these properties has not changed, but additional
disclosures have been presented in Note 11.
iii. New and amended accounting standards
not yet adopted
As at 31 December 2019, the following new and amended
standards, which are relevant to the Group but have not been
applied in the Financial Statements, were in issue but are not yet
effective. Those standards or amendments which have been
endorsed by the EU are marked with an ‘*’:
• IFRS 17 Insurance Contracts;
• Amendments to IAS 1 Presentation of Financial Statements and
IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors – definition of material *;
• Amendments to IFRS 3 Business Combinations – definition of
a business;
• Amendments to IFRS 9 Financial Instruments, IAS 39 Financial
Instruments: Recognition and Measurement and IFRS 7 Financial
Instruments: Disclosures – Interest Rate Benchmark Report *;
• Amendments to IFRS 10 Consolidated Financial Statements and
IAS 28 Investments in Associates and Joint Ventures – Sale or
contribution of assets between an investor and its associate or
joint venture; and
• Revised Conceptual Framework of Financial Reporting. *
The Group is currently assessing the impact that the adoption of the
above standards, amendments and clarifications will have on the
Group’s results reported within the Financial Statements. The only
standard or amendment expected to have a significant impact on
the Group’s Financial Statements is IFRS 17 Insurance Contracts.
Further information on this standard is given overleaf.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 143
IFRS 17 Insurance Contracts
IFRS 17 incorporates revised principles for the recognition,
measurement, presentation and disclosure of insurance contracts.
The Group closed to new insurance business, as defined under
accounting standards, in 2011. At 31 December 2019, the Group
has £92.4 million of non-unit-linked insurance contract liabilities,
which are substantially reinsured, and £464.2 million of unit-linked
insurance contract liabilities. As a result, the Group’s net exposure
on this business is not material.
The vast majority of the business written by the Life companies within
the Group is defined as investment, rather than insurance, business
under accounting standards. Investment business is outside the
scope of IFRS 17: refer to Note 2 for further information on the
classification of contracts between insurance and investment business.
Management is currently assessing the impacts of adopting the new
standard. The effective date of the standard is currently 1 January
2021, subject to EU endorsement, however the IASB are carrying
out due process to amend the effective date to 1 January 2022.
The Group Financial Statements also comply with the revised
Statement of Recommended Practice issued by the Association of
British Insurers in December 2005 (as amended in December 2006),
to the extent that it is consistent with IFRS standards.
iv. Basis of preparation
The going concern basis has been adopted in preparing these
Financial Statements.
The Financial Statements are presented in pounds Sterling, rounded
to the nearest one hundred thousand pounds. They are prepared on
a historical cost basis, except for assets classified as investment
property and financial assets and liabilities at fair value through
profit and loss.
The preparation of Financial Statements in conformity with IFRSs
requires management to make judgements, estimates and
assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. The
estimates and associated assumptions are based on historical
experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the year in which the estimate is revised if the revision affects only
that year, or in the year of the revision and future years, if the revision
affects both current and future years.
Judgements made by management in the application of IFRSs that
have significant effect on the Financial Statements and estimates
with a significant risk of material adjustment in the next year are
discussed in Note 2.
The Financial Statements are prepared in accordance with the
Companies Act 2006 as applicable to companies reporting
under IFRS and the accounting policies set out below have been
applied consistently to all years presented in these Consolidated
Financial Statements.
v. Summary of significant accounting policies
(a) Basis of consolidation
The consolidated financial information incorporates the assets,
liabilities and the results of the Company and of its subsidiaries.
Subsidiaries are those entities which the Group controls. Control
exists if the Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its power over the entity (including unit trusts
in which the Group holds more than 30% of the units). Further
information on how control is assessed, including the judgement
taken in consolidating SJP Partner Loans No.1 Limited, the Group’s
securitisation entity, is set out in Note 2.
Associates are all entities over which the Group has significant
influence but not control, and are accounted for at fair value
through the profit or loss. The Group uses the acquisition method
of accounting to account for business combinations and expenses
all acquisition costs as they are incurred. The Financial Statements
of subsidiaries are included in the Consolidated Financial Statements
from the date that control commences until the date that control
ceases. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with policies adopted by
the Group.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be
an asset or liability is recognised in accordance with IFRS 9 in the
Consolidated Statement of Comprehensive Income.
The treatment of transactions with non-controlling interests
depends on whether, as a result of the transaction, the Group alters
control of the subsidiary. Changes in the Parent’s ownership interest
in a subsidiary that do not result in a loss of control are accounted
for as equity transactions; any difference between the amount by
which the non-controlling interests are adjusted and the fair value
of the consideration paid or received is recognised directly in equity
and attributed to the owners of the Parent entity. Where the Group
loses control of the subsidiary, at the date when control is lost the
amount of any non-controlling interest in that former subsidiary is
derecognised and any investment retained in the former subsidiary
is re-measured to its fair value; the gain or loss that is recognised
in profit or loss on the partial disposal of the subsidiary includes
the gain or loss on the re-measurement of the retained interest.
Intra-group balances, and any income and expenses or unrealised
gains and losses arising from intra-group transactions, are
eliminated in preparing the Consolidated Financial Statements.
The St. James’s Place Charitable Foundation is not consolidated
within the financial information. This is because the Company does
not control the Charitable Foundation in accordance with IFRS 10.
(b) Fee and commission income
Fee and commission income comprises:
(i) advice charges paid by clients who receive advice alongside
their investment in a St. James’s Place or third-party retail
investment product. Advice may be provided at initial
investment, and on an on-going basis;
(ii) third-party fee and commission income, due from third-party
product providers in respect of products sold on their behalf;
(iii) wealth management fees paid by clients for the ongoing
administration of their investment product;
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 144
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
1. Accounting policies continued
(b) Fee and commission income continued
(iv) investment management fees paid by clients for all aspects of
investment management, including fees taken by the Group to
pay third-party investment advisers;
(v) fund tax deductions, which are fees charged to clients to match
the policyholder tax expense;
(vi) discretionary fund management fees generated through the
services provided by our DFM business; and
(vii) the unwinding of income that has been deferred. This relates to
initial product charges and dealing margins from unit trusts.
The provision of initial advice is a distinct performance obligation.
As a result, initial advice charges are recognised in full on
acceptance and inception of the associated policy by the relevant
product provider, which may be a Group company or a third party.
On-going advice charges are recognised as revenue on an on-going
basis, consistent with the nature of the performance obligation
being discharged, rather than at a single point in time.
Third-party fee and commission income is recognised in full on
acceptance and inception of the associated policy by the relevant
third-party product provider. The performance obligation is the initial
advice provided to a client which leads to investment in a third-party
product, hence it is appropriate that this revenue stream is
recognised on the same basis as initial advice charges. Where
the third-party product provider retains the right to clawback of
commission on an indemnity basis, revenue on sale of these
products is recognised to the extent that it is highly probable the
revenue will not be clawed back. A provision is recognised for any
amounts received which do not meet the ‘highly probable’ threshold.
Wealth management fees, investment management fees, fund tax
deductions and discretionary fund management fees relate to
services provided on an on-going basis, and revenue is recognised
on an on-going basis to reflect the nature of the performance
obligations being discharged.
When initial product charges and dealing margins do not relate to a
distinct performance obligation satisfied at inception of a contract,
the income is deferred and amortised over the anticipated period in
which the services will be provided.
(c) Insurance and reinsurance premiums
Unit-linked insurance contract premiums are recognised as revenue
when the liabilities arising from them are recognised. All other
premiums are accounted for when due for payment.
(d) Insurance claims and reinsurance recoveries
Insurance contracts death claims are accounted for on notification
of death. Critical illness claims are accounted for when admitted.
All other claims and surrenders are accounted for when payment is
due. Reinsurance recoveries, in respect of insurance claims, are
accounted for in the same period as the related claim.
(e) Investment return
Investment return comprises investment income and investment
gains and losses. Investment income includes dividends, interest
and rental income from investment properties under operating
leases. Dividends are accrued on an ex-dividend basis, and rental
income is recognised in the Statement of Comprehensive Income
on a straight-line basis over the term of the lease. Interest, which
is generated on assets classified as fair value through profit or loss,
is accounted for using the effective interest method.
(f) Expenses
(i) Payments to Partners
Payments to Partners comprises initial commission and initial
advice fees (IAF) (paid for initial advice, at policy outset and within
an initial period for regular contribution), renewal commission and
renewal advice fees (payable on regular contributions) and fund fee
commission or ongoing advice fee (OAF) (based on funds under
management). Initial and renewal commission and advice fees are
recognised in line with the associated premium income, but initial
commission on insurance and investment contracts may be
deferred as set out in accounting policy (k). Fund fee commission
and ongoing advice fee are recognised on an accruals basis.
(ii) Lease expenses
Policy applicable for the year ended 31 December 2019
Lease expenses under IFRS 16 comprise depreciation of the
right-of-use asset and interest expense on the lease liability. Further
information on depreciation of the right-of-use asset is set out in the
accounting policy for property and equipment, which includes leased
assets and can be found on page 146. Interest expense on the lease
liability is calculated using the effective interest method. It is charged
to expenses within the Statement of Comprehensive Income.
The Group recognises lease payments associated with short-term
leases and leases of low-value assets on a straight-line basis over
the lease term.
Policy applicable for the year ended 31 December 2018
Leases where a significant proportion of the risks and rewards
of ownership is retained by the lessor are classified as operating
leases. Payments made under operating leases are recognised in
the Statement of Comprehensive Income on a straight-line basis
over the term of the lease. Lease incentives received are recognised
in the Statement of Comprehensive Income as an integral part of
the total lease expense and are spread over the life of the lease.
(g) Income taxes
Income tax on the profit or loss for the year comprises current
and deferred tax payable by the Group in respect of policyholders
and shareholders. Income tax is recognised in the Statement of
Comprehensive Income except to the extent that it relates to items
recognised directly in equity, in which case it is recognised in equity.
Tax liabilities are recognised when it is considered probable that
there will be a future outflow of funds to a taxing authority and are
measured using a best-estimate approach.
(i) Current tax
Current tax is the expected tax payable on the taxable income for
the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of
previous years.
(ii) Deferred tax
Deferred tax is provided using the liability method, providing for
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts
used for taxation purposes. The following differences are not
provided for: the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, and differences relating to
investments in subsidiaries to the extent that they will probably
not reverse in the foreseeable future. The amount of deferred
tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the reporting date.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 145
A deferred tax asset is recognised only to the extent that it is probable
that future taxable profits will be available against which the asset can
be utilised. Deferred tax assets are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax
liabilities, and when the deferred tax assets and liabilities relate to
income taxes levied by the same taxation authority on either the
taxable entity or different taxable entities where there is an intention
to settle the balances on a net basis.
(iii) Policyholder and shareholder tax
The total income tax charge is a separate adjustment within the
Statement of Comprehensive Income based on the movement
in current and deferred income taxes in respect of income, gains
and expenses. The total charge reflects tax incurred on behalf of
policyholders as well as shareholders, and so it is useful to be able
to identify these separately.
Shareholder tax is estimated by making an assessment of the
effective rate of tax that is applicable to the shareholders on the
profits attributable to shareholders. This is calculated by applying
the appropriate effective corporate tax rates to the shareholder
profits. The remainder of the tax charge represents tax on
policyholders’ investment returns.
(h) Dividends paid
Dividend distributions to the Company’s shareholders are
recognised in the period in which the dividends are declared, that
is when they are appropriately authorised and no longer at the
discretion of the Company. The final dividend for the financial year
is disclosed but unpaid and awaiting approval by the Company’s
shareholders at the Annual General Meeting.
(i) Investment contract deposits and withdrawals
Investment contract payments in and out are not included in the
Statement of Comprehensive Income but are reported as deposits
to or deductions from investment contract benefits in the Statement
of Financial Position. The movement in investment contract benefits
within the Statement of Comprehensive Income principally
represents the investment return credited to policyholders.
Explicit advice charges are payable by most clients who wish to
receive advice with their investment in a St. James’s Place retail
investment product. St. James’s Place facilitates the payment of
these charges for the client, by arranging withdrawals from the
client’s policy, which are then recognised as income to the Group.
A proportion of the charge is then paid to the St. James’s Place
adviser who provides the advice (see (b)(i) Fee and commission
income and (f)(i) Expenses).
(j) Goodwill
Goodwill represents the excess of the cost of an acquisition over
the fair value of the Group’s share of the identifiable net assets of
the acquired entity at the date of acquisition. Where the fair value of
the Group’s share of the identifiable net assets of the acquired entity
is greater than the cost of acquisition, the excess is recognised
immediately in the Statement of Comprehensive Income.
Goodwill is recognised as an asset at cost and is reviewed at least
annually for impairment or when circumstances or events indicate
there may be uncertainty over this value. If an impairment is
identified, the carrying value of the goodwill is written down
immediately through the Statement of Comprehensive Income and
is not subsequently reversed. At the date of disposal of a subsidiary,
the carrying value of attributable goodwill is included in the
calculation of the profit or loss on disposal except where it has
been written off directly to reserves in the past.
(k) Deferred acquisition costs
For insurance contracts, acquisition costs comprise direct costs
such as initial commission and the indirect costs of obtaining and
processing new business. Acquisition costs which are incurred
during a financial year, net of any impairment losses, are deferred
and then amortised to expenses in the Statement of Comprehensive
Income on a straight-line basis over the period during which the
costs are expected to be recoverable and in accordance with the
incidence of future related margins.
For investment contracts, only directly attributable acquisition
costs, which vary with and are related to securing new contracts
and renewing existing contracts, are deferred, and only to the extent
that they are recoverable out of future revenue. These deferred
acquisition costs, which represent the contractual right to benefit
from providing investment management services, net of any
impairment losses, are amortised to expenses in the Statement of
Comprehensive Income on a straight-line basis over the expected
lifetime of the Group’s investment contracts. All other costs are
recognised as expenses when incurred.
The periods over which costs are expected to be recoverable are
as follows:
Insurance contracts:
Investment contracts:
5 years
14 years
(l) Intangible assets
(i) Purchased value of in-force business
The purchased value of in-force business in respect of insurance
business represents the present value of profits that are expected
to emerge from insurance business acquired on business
combinations. It is calculated at the time of acquisition using
best-estimate actuarial assumptions for interest, mortality,
persistency and expenses, net of any impairment losses, and it
is amortised on a straight-line basis as profits emerge over the
anticipated lives of the related contracts in the portfolio. An
intangible asset is also recognised in respect of acquired investment
management contracts, representing the fair value of contractual
rights acquired under those contracts. The purchased value of
in-force business is expressed as a gross figure in the Statement
of Financial Position, with the associated tax included within
deferred tax liabilities. It is assessed for impairment at each
reporting date and any movement is charged to the Statement
of Comprehensive Income.
The estimated useful economic life of acquired in-force business
is 20 years.
(ii) Computer software
Computer software is stated at cost less accumulated amortisation
and any recognised impairment loss. The carrying value is reviewed
for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable.
Computer software is recognised as an intangible asset during
development with amortisation commencing when the software
is operational. Amortisation is charged to the Statement of
Comprehensive Income to expenses on a straight-line basis over
four years, being the estimated useful life of the intangible asset,
except for software development additions during 2019 which are
estimated to have a useful life of five years.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 146
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
1. Accounting policies continued
(m) Property and equipment
Policy applicable for the year ended 31 December 2019
Property and equipment comprises those assets which are owned
and those which are leased.
(i) Initial and subsequent measurement of owned assets
Owned items of property and equipment are stated at cost less
accumulated depreciation. Cost includes the original purchase price
of the asset and the costs attributable to bringing the asset to its
working condition for its intended use. Depreciation is charged
to expenses within the Statement of Comprehensive Income on
a straight-line basis over the estimated useful lives of the property
and equipment, which are as follows:
Fixtures, fittings and office equipment: 5–15 years
Computer equipment:
3 years
(ii) Initial and subsequent measurement of leased assets
A right-of-use asset is recognised within property and equipment
for leased items which are not subject to the short-term or
low-value lease exemptions set out in IFRS 16. This comprises the
Group’s leased property portfolio. The right-of-use asset recognised
on the commencement date of the lease is the value of the lease
liability (refer to the other payables accounting policy on page 148),
plus expected dilapidations costs, initial direct costs (that is,
incremental costs that would not have been incurred if the lease
had not been obtained, such as legal fees) and lease payments
made before or at the commencement date of the lease. Following
initial recognition, depreciation is charged to expenses within the
Statement of Comprehensive Income on a straight-line basis over
the lease term.
(iii) Impairment of owned and leased assets
The carrying value of owned and leased assets is reviewed for
impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable. Any assets that
may have suffered impairment are reviewed for possible reversal
of the impairment at each reporting date.
Policy applicable for the year ended 31 December 2018
Items of property and equipment are stated at cost less accumulated
depreciation. Cost includes the original purchase price of the asset
and the costs attributable to bringing the asset to its working
condition for its intended use. Land is shown at fair value, based
on valuations by external independent valuers. The carrying value is
reviewed for impairment when events or changes in circumstances
indicate that the carrying value may not be recoverable and any
assets that may have suffered impairment are reviewed for possible
reversal of the impairment at each reporting date.
Depreciation is charged to the Statement of Comprehensive Income
to expenses on a straight-line basis over the estimated useful lives
of the property and equipment, which are as follows:
Fixtures, fittings and office equipment: 5–10 years
Computer equipment:
3 years
(n) Reinsurance assets
Reinsurance assets represent amounts recoverable from reinsurers
in respect of non-unit-linked insurance contract liabilities, net of any
future reinsurance premiums.
(o) Other receivables
Other receivables held within unit-linked and unit trust funds
are classified at fair value through profit and loss (FVTPL), as
management has made an irrevocable decision to designate them
as such in order to align the measurement of these financial assets
with the measurement of their associated unit-linked liabilities.
Therefore, these other receivables are initially and subsequently
recognised at FVTPL.
Most shareholder other receivables are initially recognised at fair
value and subsequently held at amortised cost less impairment
losses, as the business model for these assets is hold to collect
contractual cash flows, which consistent solely of payments of
principal and interest. The exception to this is renewal income
assets which are classified as fair value through profit and loss and
are initially, and subsequently, recognised at fair value. The value of
any impairment recognised is the difference between the asset’s
carrying amount and the present value of the estimated future
cash flows, discounted at the original effective interest rate. See
accounting policy (ad) for information relating to the treatment
of impaired amounts.
Other receivables include prepayments, which are recognised where
services are paid for in advance of being received. The prepayment
reduces, and an expense is recognised in the Statement of
Comprehensive Income, as the service is received.
Commission and advice fees in respect of some insurance and
investment business may be paid to Partners in advance on
renewal premiums and accelerated by up to five years. The
unearned element of this accelerated remuneration is recognised
as advanced payments to Partners within other receivables.
Should the contributions reduce or stop within the initial period,
any unearned amount is recovered.
(p) Investment property
Investment properties, which are all held within the unit-linked
funds, are properties which are held to earn rental income and/or
for capital appreciation. They are stated at fair value. An external,
independent valuer, having an appropriate recognised professional
qualification and recent experience in the location and category of
property being valued, values the portfolio every month.
The fair values are based on open market values, being the
estimated amount for which a property could be exchanged on the
date of valuation between a willing buyer and a willing seller in an
arm’s length transaction after proper marketing wherein the parties
had each acted knowledgeably, prudently and without compulsion.
Any gain or loss arising from a change in fair value is recognised in
the Statement of Comprehensive Income within investment income.
Rental return from investment property is accounted for as
described in accounting policy (e).
(q) Equities, fixed income securities and investment
in Collective Investment Schemes
These financial assets are initially and subsequently recognised at
fair value through profit or loss, with all gains and losses recognised
within investment income in the Statement of Comprehensive Income.
The vast majority of these financial assets are quoted, and so the
fair value is based on the value within the bid-ask spread that is
most representative of fair value. If the market for a financial asset
is not active, the Group establishes fair value by using valuation
techniques such as recent arm’s length transactions, reference to
similar listed investments, discounted cash flow models or option
pricing models.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 147
(u) Investment contract benefits
All of the Group’s investment contracts are unit-linked. Unit-linked
liabilities are measured at fair value by reference to the value of the
underlying net asset value of the Group’s unitised investment funds,
determined on a bid value, at the reporting date. An allowance for
deductions due to (or from) the Group in respect of policyholder
tax on capital gains (and losses) in the life assurance funds is also
reflected in the measurement of unit-linked liabilities. Investment
contract benefits are recognised when units are first allocated to
the policyholder; they are de-recognised when units allocated to
the policyholder have been cancelled.
The decision by the Group to designate its unit-linked liabilities as
fair value through profit and loss (FVTPL) reflects the fact that the
matching investment portfolio, which underpins the unit-linked
liabilities, is recognised at FVTPL.
(v) Deferred income
The initial margin on financial instruments (including dealing
margins from unit trusts) is deferred and recognised on a straight-
line basis over the expected lifetime of the financial instrument,
which is between six and 14 years.
(w) Net asset value attributable to unit holders
The Group consolidates unit trusts in which it holds more than 30%
of the units and exercises control. The third-party interests in these
unit trusts are termed the net asset value attributable to unit holders
and are presented in the Statement of Financial Position. They are
classified as FVTPL, hence are initially and subsequently measured
at fair value. The decision by the Group to designate the net asset
value attributable to unit holders as FVTPL reflects the fact that the
underlying investment portfolios are recognised at FVTPL.
Income attributable to the third-party interests is accounted for
within investment return, offset by a corresponding change in
investment contract benefits.
(x) Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events such that it is
probable that an outflow of economic benefits will be required to
settle the obligation and a reliable estimate of the amount of the
obligation can be made. Provisions are measured as the discounted
expected future cash flows taking account of the risks and
uncertainties associated with the specific liability where appropriate.
(y) Borrowings
Borrowings are measured initially at fair value, net of directly
attributable transaction costs, and subsequently stated at
amortised cost. The difference between the proceeds and the
redemption value is recognised in the Statement of Comprehensive
Income over the borrowing period on an effective interest rate basis.
Borrowings are recognised on drawdown and derecognised on
repayment.
Subsequent measurement of these financial assets at fair value
through profit or loss (FVTPL) is required by IFRS 9 for debt
instruments for which the objectives of the Group’s business model
are not met by either holding the instrument to collect contractual
cash flows or selling the instruments, or where the contractual
terms of the instrument do not give rise to cash flows which are
solely payments of principal and interest. Where both the ‘business
model’ and ‘solely payments of principal and interest’ tests are met,
management has made an irrevocable decision to designate the
debt instruments at FVTPL as doing so aligns the measurement
of the financial assets with the measurement of their associated
unit-linked liabilities.
Management has not made the irrevocable election to present
changes in the fair value of equity instruments in other
comprehensive income, and so all equity instruments are
also designated at FVTPL.
The Group recognises purchases and sales of investments on trade
date. The costs associated with investment transactions are included
within expenses in the Statement of Comprehensive Income.
(r) Derivative financial instruments
The Group uses derivative financial instruments within some
unit-linked funds, with each contract initially and subsequently
recognised at fair value, based on observable market prices.
All changes in value are recognised within investment income
in the Statement of Comprehensive Income.
(s) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short-term highly liquid investments, and bank
overdrafts to the extent that they are an integral part of the Group’s
cash management.
Cash and cash equivalents held within unit-linked and unit trust
funds are classified at fair value through profit and loss (FVTPL),
as management has made an irrevocable decision to designate
them as such in order to align the measurement of these financial
assets with the measurement of their associated unit-linked
liabilities. Therefore, these cash and cash equivalents are initially
and subsequently recognised at FVTPL, with gains and losses
recognised within investment return in the Statement of
Comprehensive Income.
All other cash and cash equivalents are classified as amortised cost,
as the business model for these assets is hold to collect contractual
cash flows, which consistent solely of payments of principal and
interest. They are initially recognised at fair value and subsequently
measured at amortised cost using the effective interest method,
less impairment losses.
(t) Insurance contract liabilities
Insurance contract liability provisions are determined following an
annual actuarial investigation of the long-term fund in accordance
with regulatory requirements. The provisions are calculated on the
basis of current information and using the gross premium valuation
method. The Group’s accounting policies for insurance contracts
meet the minimum specified requirements for liability adequacy
testing under IFRS 4, as they consider current estimates of all
contractual cash flows, and of related cash flow such as claims
handling costs.
Insurance contract liabilities can never be definitive as to their timing
nor the amount of claims and are, therefore, subject to subsequent
reassessment on a regular basis.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 148
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
1. Accounting policies continued
(z) Other payables
Policy applicable for the year ended 31 December 2019
Other payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
Other payables include lease liabilities calculated in accordance with
IFRS 16. On the commencement date of the lease the lease liability
is measured as the present value of the future lease payments to
be made over the lease term. For the Group, future lease payments
include those which are fixed and those which vary depending on
an index or rate. The future lease payments are discounted at the
Group’s incremental borrowing rate at the commencement date of
the lease, which varies depending on the lease term. The lease term
includes the non-cancellable period for which the Group has the
right to use the leased asset, plus periods covered by extension
options where the option is reasonably certain to be taken.
Conversely, the non-cancellable period is reduced if it is
reasonably certain that a termination option will be taken.
The incremental borrowing rate is management’s judgement as to
the rate of interest that the Group would have to pay to borrow, over
a similar term and with similar security, the funds necessary to
obtain an asset of a similar value to the cost of the right-of-use
asset. This has been determined with reference to the rate of
interest of existing borrowings held by the Group and market
rates adjusted to take into account the security and term
associated with the lease.
The Group has applied the practical expedient on transition to
IFRS 16 of applying a single discount rate to a portfolio of leases
with reasonably similar characteristics by grouping leases by asset
type and remaining lease term on the date of transition.
Policy applicable for the year ended 31 December 2018
Other payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.
For cash-settled plans, the fair value is remeasured at each reporting
date and the date of settlement, with any changes in fair value
recognised in the Statement of Comprehensive Income for the period.
At each reporting date, the Group revises its estimate of the number
of awards that are expected to vest and it recognises the impact
of the revision of original estimates, if any, in the Statement of
Comprehensive Income, such that the amount recognised for
employee, Partner and adviser services are based on the number
of awards that actually vest. The charge to the Statement of
Comprehensive Income is not revised for any changes in market
vesting conditions.
(ab) Share capital
Ordinary shares are classified as equity. Where any Group entity
purchases the Company’s equity share capital (shares held in trust),
the consideration paid is deducted from equity attributable to
shareholders, as disclosed in the Shares in Trust reserve. Where
such shares are subsequently sold, reissued or otherwise disposed
of, any consideration received is included in equity attributable to
shareholders, net of any directly attributable incremental transaction
costs and the related income tax effects.
(ac) Product classification
The Group’s products are classified for accounting purposes as
either insurance contracts or investment contracts.
(i) Insurance contracts
Insurance contracts are contracts that transfer significant insurance
risk. The Group’s historic product range includes a variety of term
assurance and whole-of-life protection contracts involving
significant insurance risk transfer.
(ii) Investment contracts
Contracts that do not transfer significant insurance risk are treated
as investment contracts. The majority of the business written by the
Group is unit-linked investment business and is classified as
investment contracts.
(aa) Employee benefits
(i) Pension obligations
The Group operates a defined contribution personal pension plan
for its employees. Contributions to this plan are recognised as an
expense in the Statement of Comprehensive Income as incurred.
The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current
and prior periods.
(ad) Impairment
(i) Non-financial assets
Assets that are subject to amortisation are reviewed for impairment
when circumstances or events indicate there may be uncertainty
over this value. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less
costs to sell or its value in use. Refer to accounting policy (j) for the
Group’s impairment policy for goodwill.
(ii) Share-based payments
The Group operates a number of share-based payment plans for
employees, Partners and advisers. The fair value of share-based
payment awards granted is recognised as an expense spread over
the vesting period of the instrument which accords with the period
for which related services are provided, with a corresponding
increase in equity in the case of equity-settled plans and the
recognition of a liability for cash-settled plans.
The total amount to be expensed is determined by reference to the
fair value of the awards, measured using standard option pricing
models as the fair value of the services provided by employees,
Partners and advisers cannot be reliably measured. For equity-
settled plans, the fair value is determined at grant date and not
subsequently remeasured.
(ii) Financial assets
Financial assets held at amortised cost are impaired using an
expected credit loss model. The model splits financial assets into
those which are performing, underperforming and non-performing
based on changes in credit quality since initial recognition. At initial
recognition financial assets are considered to be performing.
They become underperforming where there has been a significant
increase in credit risk since initial recognition, and non-performing
when there is objective evidence of impairment. 12 months of
expected credit losses are recognised within ‘Expenses’ in the
Statement of Comprehensive Income and netted against the
financial asset in the Statement of Financial Position for all
performing financial assets, with lifetime expected credit
losses recognised for underperforming and non-performing
financial assets.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 149
Expected credit losses are based on the historic levels of loss
experienced for the relevant financial assets, with due consideration
given to forward-looking information.
2. Critical accounting estimates and
judgements in applying accounting policies
(ae) Foreign currency translation
The Group’s presentation and the Company’s functional currency
is pounds Sterling.
Foreign currency transactions are translated into Sterling using the
exchange rate prevailing at the date of the transactions. Monetary
assets and liabilities denominated in foreign currencies are
translated using the rate of exchange ruling at the reporting
date and the gain or losses on translation are recognised in
the Statement of Comprehensive Income.
Non-monetary assets and liabilities which are held at historical
cost are translated using exchange rates prevailing at the date of
transaction; those held at fair value are translated using exchange
rates ruling at the date on which the fair value was determined.
(af) Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, responsible for allocating
resources and assessing performance of the operating segments,
has been identified as the Executive Board.
(ag) Current and non-current disclosure
Assets which are expected to be recovered or settled no more
than 12 months after the reporting date are disclosed as current
within the Notes to the Financial Statements. Those expected to
be recovered or settled more than 12 months after the reporting
date are disclosed as non-current.
Liabilities which are expected or due to be settled no more than
12 months after the reporting date are disclosed as current within
the Notes to the Financial Statements. Those liabilities which are
expected or due to be settled more than 12 months after the
reporting date are disclosed as non-current.
(ah) Alternative performance measures
Within the Financial Statements, a number of alternative
performance measures (APMs) are disclosed. An APM is a measure
of financial performance, financial position or cash flows which is
not defined by the relevant financial reporting framework, which for
the Group is International Financial Reporting Standards (IFRSs) as
adopted by the European Union. APMs are used to provide greater
insight into the performance of the Group and the way it is managed
by the Directors. The Glossary of Alternative Performance Measures
on pages 216 to 218 defines each APM, explains why it is used and,
where applicable, explains how the measure can be reconciled to
the IFRS Financial Statements.
Judgements
The primary areas in which the Group has applied judgement are
as follows:
Classification of contracts between insurance
and investment business
Contracts with a significant degree of insurance risk are treated as
insurance contracts. All other contracts are treated as investment
contracts. It is this classification that management considers to
be a critical judgement; however, due to the carrying value of the
insurance contract liabilities within the Statement of Financial
Position, management does not consider insurance business
to be significant to the Group.
Consolidation
Entities are consolidated within the Group Financial Statements
if they are controlled by the Group. Control exists if the Group is
exposed to, or has rights to, variable returns from its involvement
with the entity and the Group has the ability to affect those returns
through its power over the entity. Significant judgement can be
involved in determining whether the Group controls an entity,
such as in the case of the structured entity set up for the Group’s
securitisation transaction, SJP Partner Loans No.1 Limited, and
for the Group’s unit trusts.
A structured entity is one that has been designed so that voting or
similar rights are not the dominant factor in deciding who controls
the entity. As a result, factors such as whether a Group entity is able
to direct the relevant activities of the entity and the extent to which
the Group is exposed to variability of returns are considered. In the
case of SJP Partner Loans No.1 Limited, it was determined that the
Group does control the entity and hence it is consolidated. This is
due to an entity in the Group holding the junior tranche of loan notes,
hence being subject to variability of returns, and the same entity
being able to direct the relevant activities of the structured entity
through its role of servicer to the securitised portfolio.
Unit trusts are consolidated when the Group holds more than 30%
of the units in that unit trust. This is the threshold at which the Group
is considered to achieve control, having regard for factors such as:
• the scope of decision making authority held by St. James’s Place
Unit Trust Group Limited, the unit trust manager;
• rights held by external parties to remove the unit trust manager; and
• the Group’s exposure to variable returns through its holdings in the
unit trusts and the unit trust manager’s remuneration.
Determining non-performing business loans to Partners
Business loans to Partners are considered to be non-performing,
in the context of the definition prescribed within IFRS 9, if they are
in default. This is defined as a loan to either:
• a Partner who has left the St. James’s Place Partnership; or
• a Partner who management considers to be at significant risk
of leaving the Partnership where an orderly settlement of debt
is considered to be in question.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 150
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
2. Critical accounting estimates and
judgements in applying accounting policies
continued
The IFRS 9 presumption that default occurs when a loan is more
than 90 days past due has been rebutted. Because of the quality
of cash flows on which loans are secured together with the direct
control exercised over them from source, past evidence supports
the assertion that the vast majority of loans to Partners who remain
in the Partnership are repaid in full, irrespective of the number of
days past due the loan may be.
Estimates
Critical accounting estimates are those which give rise to a
significant risk of material adjustment to the balances recognised
in the Financial Statements within the next 12 months. The Group’s
critical accounting estimates are:
• determining the value of insurance contract liabilities;
• determining the fair value of investment property; and
• determining the fair value of Level 3 fixed income securities
and equities.
Estimates are also applied in other assets of the Financial
Statements, including determining the value of deferred tax assets,
investment contract benefits, the operational readiness prepayment
and other provisions.
Measurement of insurance contract liabilities
The assumptions used in the calculation of insurance contract
liabilities that have an effect on the Statement of Comprehensive
Income of the Group are:
• the lapse assumption, which is set prudently based on an
investigation of experience during the year;
• the level of expenses, which is based on actual expenses in 2019
and expected rates in 2020 and the long term;
• the mortality and morbidity rates, which are based on the results
of an investigation of experience during the year; and
• the assumed rate of investment return, which is based on current
gilt yields.
Greater detail on the assumptions applied, and sensitivity analysis,
is shown in Note 14.
Whilst the measurement of insurance contract liabilities is
considered to be a critical accounting estimate for the Group,
the vast majority of non-unit-linked insurance business written
is reinsured. As a result, the impact of a change in estimate in
determining the value of insurance contract liabilities would be
mitigated to a significant degree by the impact of the change in
estimate in determining the value of reinsurance assets.
Determining the fair value of investment property
In accordance with IAS 40, the Group initially recognises investment
properties at cost, and subsequently re-measures its portfolio to fair
value in the Statement of Financial Position. Fair value is determined
monthly by professional external valuers. It is based on anticipated
market values for the properties in accordance with the guidance
issued by The Royal Institution of Chartered Surveyors, being the
estimated amount that would be received from a sale of the assets
in an orderly transaction between market participants.
The valuation of investment property is inherently subjective as it
requires, among other factors, assumptions to be made regarding
the ability of existing tenants to meet their rental obligations over
the entire life of their leases, the estimation of the expected rental
income into the future, an assessment of a property’s potential to
remain as an attractive technical configuration to existing and
prospective tenants in a changing market and a judgement to be
reached on the attractiveness of a building, its location and the
surrounding environment. As such, investment properties are
classified as Level 3 in the IFRS 13 fair value hierarchy because
they are valued using techniques which are not based on observable
inputs. Further details of the valuation of investment properties,
including sensitivity analysis, are set out in Note 17.
Determining the fair value of Level 3 fixed income
securities and equities
In accordance with IFRS 9, the Group elects to classify its portfolio
of policyholder fixed income securities at fair value through profit
and loss to match the accounting for policyholder liabilities. Its
portfolio of equities is required to be held at fair value through profit
and loss. As a result, all fixed income securities and equities are
initially held at cost and are subsequently re-measured to fair value
at the reporting date.
During 2019, a number of investments were made into private
credit and private equity assets, which are recognised within fixed
income securities and equities on the Consolidated Statement of
Financial Position respectively. The fair value of these assets is
determined following a monthly valuation process which uses
two different valuation models and includes verification by
professional external valuers. The models use suitable market
comparatives and an estimate of future cash flows expected to
flow from the issuing entity.
The valuations are inherently subjective as they require a number
of assumptions to be made, such as determining which entities
provide suitable market comparatives and their relevant
performance metrics (for example earnings before interest, tax,
depreciation and amortisation), determining appropriate discount
rates and cash flow forecasts to use in models, the weighting to
apply to each valuation methodologies and the point in the range of
valuations to select as the fair value. As the inputs to the valuation
models are unobservable, the investments in private credit and
private equity assets are classified as Level 3 in the IFRS 13 fair
value hierarchy.
Further detail about the valuation models, including sensitivity
analysis, are set out in Note 17.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 151
3. Segment reporting
IFRS 8 Operating Segments requires operating segments to be identified, on the basis of internal reports about components of the Group
that are regularly reviewed by the Board, in order to allocate resources to each segment and assess its performance.
The Group’s only reportable segment under IFRS 8 is a ‘wealth management’ business – which is a vertically-integrated business providing
support to our clients through the provision of financial advice and assistance through our Partner network, and financial solutions including
(but not limited to) wealth management products manufactured in the Group, such as insurance bonds, pensions, unit trust and ISA
investments, and a DFM service.
Separate geographical segmental information is not presented since the Group does not segment its business geographically. Most of its
customers are based in the United Kingdom, as is management of the assets. In particular, the operation based in south-east Asia is not yet
sufficiently material for separate consideration.
Segment revenue
Revenue received from fee and commission income is set out in Note 4, which details the different types of revenue received from our wealth
management business.
Segment profit
Two separate measures of profit are monitored on a monthly basis by the Board. These are the post-tax Underlying cash result and pre-tax
European Embedded Value (EEV).
Underlying cash result
The measure of cash profit monitored on a monthly basis by the Board is the post-tax Underlying cash result. This reflects emergence of
cash available for paying a dividend during the year. Underlying cash is based on the cash flows within the IFRS results, but with no allowance
for intangibles, principally DAC, DIR, PVIF, goodwill and deferred tax, or short-term costs associated with the back-office infrastructure
project. As the cost associated with non-cash-settled share options is reflected in changes in shareholder equity, they are also not included
in the Underlying cash result.
More detail is provided on pages 47 to 51 of the Financial Review.
The Cash result should not be confused with the IFRS Consolidated Statement of Cash Flows which is prepared in accordance with IAS 7.
Underlying cash result after tax
Non-cash-settled share-based payments
Impacts of deferred tax
Back-office infrastructure
Impact in the year of DAC/DIR/PVIF
Other
IFRS profit after tax
Shareholder tax
Profit before tax attributable to shareholders’ returns
Tax attributable to policyholder returns
IFRS profit/(loss) before tax
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
273.1
(28.7)
(10.4)
(38.8)
(26.2)
(22.4)
146.6
40.5
187.1
521.8
708.9
£’Million
309.0
(33.4)
(31.8)
(35.8)
(54.4)
19.9
173.5
38.4
211.9
(296.5)
(84.6)
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 152
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
3. Segment reporting continued
EEV operating profit
EEV operating profit is monitored on a monthly basis by the Board. The components of the EEV operating profit are included in more detail
in the Financial Review section of the Annual Report and Accounts.
EEV operating profit before tax
Investment return variance
Economic assumption changes
EEV profit before tax
Adjustments to IFRS basis
Deduct: amortisation of purchased value of in-force
Movement of balance sheet life value of in-force (net of tax)
Movement of balance sheet unit trust and DFM value of in-force (net of tax)
Tax of movement in value of in-force
Profit before tax attributable to shareholders’ returns
Tax attributable to policyholder returns
IFRS profit/(loss) before tax
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
952.0
768.6
(27.0)
1,693.6
(3.2)
(946.6)
(310.9)
(245.8)
187.1
521.8
708.9
£’Million
1,002.0
(460.9)
(15.1)
526.0
(3.2)
(243.7)
(16.5)
(50.7)
211.9
(296.5)
(84.6)
The movement in life, unit trust and DFM value of in-force is the difference between the opening and closing discounted value of the profits
that will emerge from the in-force book over time, after adjusting for DAC and DIR impacts which are already included under IFRS.
Segment assets
Funds under management (FUM)
FUM, as reported in Section 1 of the Financial Review on page 43, is the measure of segment assets which is monitored on a monthly basis
by the Board.
Investment
Pension
UT/ISA and DFM
Total FUM
Exclude client and third-party holdings in non-consolidated unit trusts and DFM
Other
Gross assets held to cover unit liabilities
IFRS intangible assets (see page 52 adjustment 2) including goodwill, DAC, PVIF, reinsurance and deferred tax
Shareholder gross assets (see page 52)
Total assets
31 December
2019
31 December
2018
£’Million
31,220.0
52,840.0
32,930.0
116,990.0
(5,185.1)
1,742.0
113,546.9
658.6
3,086.5
117,292.0
£’Million
27,620.0
40,720.0
27,210.0
95,550.0
(4,701.6)
666.9
91,515.3
720.9
2,590.8
94,827.0
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 4. Fee and commission income
Advice charges (post-RDR)
Third-party fee and commission income
Wealth management fees
Investment management fees
Fund tax deductions
Discretionary fund management fees
Fee and commission income before DIR amortisation
Amortisation of DIR
Total fee and commission income
153
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
749.7
120.8
724.8
71.6
521.8
16.2
2,204.9
169.2
2,374.1
£’Million
743.2
113.0
721.9
85.7
(296.5)
13.8
1,381.1
142.6
1,523.7
For all post-RDR business, advice charges are received from clients for the provision of initial and ongoing advice in relation to an investment
into a St. James’s Place or third-party product.
Where an investment has been made into a St. James’s Place product, the initial product charge and any dealing margin is deferred and
recognised as a deferred income liability. This liability is extinguished, and income recognised, over the expected life of the investment.
The income is the amortisation of DIR in the table above. Ongoing product charges for St. James’s Place products are recognised within
wealth management fees. This line also includes advice charges on pre-RDR business, for which an explicit advice charge was not made.
Where an investment has been made into a third-party product, third-party fee and commission income is received from the product provider.
Investment management fees are received from clients for the provision of all aspects of investment management. Broadly, investment
management fees match investment management expenses.
Fund tax deductions represent amounts deducted from, or credited to, the underlying funds to match policyholder tax charges or credit. This
arises because the UK tax regime includes a policyholder tax element within the Group’s tax arrangements. The amount of tax attributable to
policyholders reflects investment return in the underlying funds. During 2019, market gains led to a significant policyholder tax charge, hence
£521.8 million of deductions were made from the funds. In contrast, during 2018, market falls led to a significant policyholder tax credit,
hence a credit of £296.5 million to the funds.
Discretionary fund management fees are received from clients for DFM services.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 154
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
5. Expenses
The following items are included within the expenses disclosed in the Statement of Comprehensive Income:
Payments to Partners
Payments under operating leases
Fees payable to the Company’s auditors and its associates
For the audit of the Company and Consolidated Financial Statements
For other services:
– The audit of the Company’s subsidiaries (excluding unit trusts)
– Audit of the Company’s unit trusts
– Audit-related assurance services
– Other assurance services
Total fees payable to the Company’s auditors and its associates
Employee costs
Wages and salaries
Social security costs
Other pension costs
Cost of employee share awards and options
Total employee costs
Average monthly number of persons employed by the Group during the year
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
814.7
–
£’Million
781.9
20.8
0.2
0.5
0.4
0.4
–
1.5
151.5
17.5
13.8
12.4
195.2
2,575
0.1
0.7
0.3
0.8
0.1
2.0
140.3
16.2
11.5
16.4
184.4
2,302
Payments under operating leases ceased upon adoption of IFRS 16 Leases on 1 January 2019. Further information about lease expenses
under this standard is set out in Note 10.
Included within fees payable to the Company’s auditors and its associates for audit-related assurance services is £0.1 million (2018: £0.1 million)
for non-audit services as defined by the Group’s Policy on Auditor Independence, which is available on our website at: www.sjp.co.uk.
The above employee costs information includes Directors’ remuneration. Full details of the Directors’ remuneration, share options, pension
entitlements and interests in shares are disclosed in the Directors’ Remuneration Report on pages 104 to 118, and further information is
provided below.
All pension costs related to defined contribution schemes and cash supplements in lieu of contributions to defined contribution pension
schemes. At 31 December 2019, the number of Directors to whom retirement benefits are accruing, including those receiving a cash
supplement in lieu of contributions to defined contribution pension schemes is three (2018: four), with the total cost being £0.3 million
(2018: £0.3 million). Retirement benefits are accruing in defined contribution pension schemes for one (2018: one) Director at the year end.
The number of Directors who exercised options over shares in the Company during the year is nil (2018: three). The number of Directors in
respect of whose qualifying services shares were receivable under long-term incentive schemes is three (2018: three), and the total amount
receivable by the Directors under long-term incentive schemes is £1.9 million (2018: £1.6 million). The aggregate gains made by Directors
on the exercise of share options and the receipt of deferred bonus scheme shares during the year was during the year was £0.5 million
(2018: £2.2 million).
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 155
6. Investment return and movement in investment contract benefits
The majority of the business written by the Group is unit-linked investment business, and so investment contract benefits are measured by
reference to the underlying net asset value of the Group’s unitised investment funds. As a result, investment return on the unitised investment
funds and the movement in investment contract benefits are linked.
Investment return
Investment return on net assets held to cover unit liabilities:
Rental income
Loss on revaluation of investment properties
Net investment return on financial instruments classified as fair value through profit and loss
Attributable to unit-linked insurance contract liabilities
Attributable to unit-linked investment contract benefits
Income attributable to third-party holdings in unit trusts
Investment return on shareholder assets:
Net investment return on financial instruments classified as fair value through profit and loss
Interest income on financial instruments held at amortised cost
Total investment return
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
£’Million
94.1
(74.2)
10,741.6
10,761.5
65.4
10,696.1
10,761.5
3,374.5
14,136.0
18.7
18.9
37.6
14,173.6
90.9
(22.8)
(3,046.0)
(2,977.9)
6.6
(2,984.5)
(2,977.9)
(1,264.7)
(4,242.6)
(4.5)
12.1
7.6
(4,235.0)
Included in the net investment return on financial instruments classified as fair value through profit and loss within investment return on net
assets held to cover unit liabilities is dividend income of £1,285.6 million (2018: £987.7 million).
Movement in investment contract benefits
Balance at 1 January
Deposits
Withdrawals
Movement in unit-linked investment contract benefits
Less: fees and other adjustments
Balance at 31 December
Current
Non-current
Movement in unit liabilities
Unit-linked investment contract benefits
Third-party unit trust holdings
Movement in investment contract benefits in Consolidated Statement of Comprehensive Income
See accounting policy (ag) for further information on the current and non-current disclosure.
2019
2018
£’Million
67,796.1
10,852.9
(4,641.4)
10,696.1
(1,145.2)
83,558.5
5,316.4
78,242.1
83,558.5
10,696.1
3,374.5
14,070.6
£’Million
64,014.3
11,307.4
(4,168.5)
(2,984.5)
(372.6)
67,796.1
4,188.2
63,607.9
67,796.1
(2,984.5)
(1,264.7)
(4,249.2)
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 156
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
7. Income and deferred taxes
Tax for the year
Current tax
UK corporation tax
– Current year charge
– Adjustment in respect of prior year
Overseas taxes
– Current year charge
– Adjustment in respect of prior year
Deferred tax
Unrealised capital gains/(losses) in unit-linked funds
Unrelieved expenses
– Additional expenses recognised in the year
– Utilisation in the year
Capital losses
– Revaluation in the year
– Utilisation in the year
– Adjustment in respect of prior year
DAC, DIR and PVIF
Other items
Overseas losses
Adjustments in respect of prior periods
Total tax charge/(credit) for the year
Attributable to:
– policyholders
– shareholders
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
£’Million
215.7
1.0
11.0
0.2
227.9
79.1
(2.7)
4.9
0.1
81.4
333.8
(359.2)
(11.6)
12.9
1.1
10.3
(0.3)
(11.0)
1.1
(0.7)
(1.2)
334.4
562.3
521.8
40.5
(11.1)
15.0
(1.8)
29.7
2.4
(11.5)
(3.4)
(0.5)
0.9
(339.5)
(258.1)
(296.5)
38.4
562.3
(258.1)
The prior year adjustment of £1.2 million in current tax above represents a credit of £0.1 million in respect of policyholder tax (2018: £0.9 million
charge) and a charge of £1.3 million in respect of shareholder tax (2018: £3.5 million credit). The total prior year adjustments in deferred tax
relate entirely to shareholder tax.
Included within the deferred tax on ‘other items’ is a charge of £1.5 million (2018: £0.8 million credit) relating to share-based payments.
Details of share-based payments are disclosed in Note 20 Share-based Payments.
In arriving at the profit before tax attributable to shareholders’ return, it is necessary to estimate the analysis of the total tax charge between
that payable in respect of policyholders and that payable by shareholders. Shareholder tax is estimated by making an assessment of the
effective rate of tax that is applicable to the shareholders on the profits attributable to shareholders. This is calculated by applying the
appropriate effective corporate tax rates to the shareholder profits. The remainder of the tax charge represents tax on policyholders’
investment returns. This calculation method is consistent with the legislation relating to the calculation of tax on shareholder profits.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Reconciliation of tax charge to expected tax
Profit/(loss) before tax
Tax attributable to policyholders’ returns
Profit before tax attributable to shareholders’ return
Shareholder tax charge at corporate tax rate of 19% (2018: 19%)
Adjustments:
Lower rates of corporation tax in overseas subsidiaries
Expected shareholder tax
Effects of:
Non-taxable income
Revaluation of historic capital losses in the Group
Adjustment in respect of prior year
– Current tax
– Deferred tax
Differences in accounting and tax bases in relation to employee share schemes
Disallowable expenses
Other
Tax losses not recognised
Shareholder tax charge
Policyholder tax charge/(credit)
Total tax charge/(credit) for the year
Year ended
31 December
2019
£’Million
708.9
(521.8)
187.1
35.5
(0.5)
35.0
(1.3)
1.1
1.3
(1.5)
1.2
2.3
(0.2)
2.6
5.5
40.5
521.8
562.3
Year ended
31 December
2018
£’Million
(84.6)
296.5
211.9
40.3
(0.3)
40.0
(0.2)
(1.8)
(3.5)
0.9
(1.1)
2.0
–
2.1
(1.6)
38.4
(296.5)
(258.1)
19%
(0.3%)
18.7%
2.9%
21.6%
157
19%
(0.1%)
18.9%
(0.8%)
18.1%
Tax calculated on profit/(loss) before tax at 19% (2018: 19%) would amount to £134.7 million (2018: £(16.1) million). The difference of
£427.6 million (2018: £(242.0) million) between this number and the total tax of £562.3 million (2018: £(258.1) million) is made up of the
reconciling items above which total £5.0 million (2018: £(1.9) million) and the effect of the apportionment methodology on tax applicable
to policyholder returns of £422.6 million (2018: £(240.1) million).
Tax paid in the year
Current tax charge for the year
(Payments to be made)/refunds due to be received in future years in respect of current year
(Refunds received)/payments made in current year in respect of prior years
Other
Tax paid
Tax paid can be analysed as:
– Taxes paid in UK
– Taxes paid in overseas jurisdictions
– Withholding taxes suffered on investment income received
Total
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
227.9
(115.4)
(7.9)
(1.8)
102.8
91.2
1.9
9.7
102.8
£’Million
81.4
9.7
124.7
0.7
216.5
211.5
1.5
3.5
216.5
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 158
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
7. Income and deferred taxes continued
Deferred tax balances
Deferred tax assets
At 1 January 2018
(Charge)/credit to the Statement
of Comprehensive Income
At 31 December 2018
(Charge)/credit to the Statement
of Comprehensive Income
At 31 December 2019
Expected utilisation period
As at 31 December 2018
As at 31 December 2019
Deferred tax liabilities
At 1 January 2018
(Credit)/charge to the Statement
of Comprehensive Income
Impact of acquisitions
At 31 December 2018
Charge/(credit) to the Statement
of Comprehensive Income
Impact of acquisition
At 31 December 2019
Expected utilisation period
As at 31 December 2018
As at 31 December 2019
Unrelieved
expenses
Deferred
income (DIR)
Capital losses
(available for
future relief)
£’Million
46.4
£’Million
37.9
£’Million
86.0
Share-based
payments
£’Million
7.5
Fixed asset
temporary
differences
£’Million
3.7
Other
temporary
differences
£’Million
1.2
(3.9)
42.5
(1.3)
41.2
(2.3)
35.6
(3.0)
32.6
(30.3)
55.7
(11.1)
44.6
0.5
8.0
(1.5)
6.5
0.3
4.0
0.9
4.9
0.1
1.3
–
1.3
6 years
6 years
14 years
14 years
6 years
7 years
3 years
3 years
6 years
6 years
Unrealised
capital gains on
life insurance
(BLAGAB)
assets backing
unit liabilities
£’Million
445.5
Deferred
acquisition
costs (DAC)
£’Million
84.0
Purchased
value of
in-force
business
(PVIF)
£’Million
4.8
Renewal
income assets
£’Million
10.6
Other
temporary
differences
£’Million
1.9
(359.2)
–
86.3
333.8
–
420.1
(13.1)
–
70.9
(13.4)
–
57.5
(0.7)
–
4.1
(0.6)
–
3.5
(1.4)
1.2
10.4
(1.7)
2.4
11.1
(0.7)
–
1.2
0.3
–
1.5
6 years
6 years
14 years
14 years
7 years
6 years
20 years
20 years
Total
£’Million
182.7
(35.6)
147.1
(16.0)
131.1
Total
£’Million
546.8
(375.1)
1.2
172.9
318.4
2.4
493.7
Appropriate investment income, gains or profits are expected to arise against which the tax assets can be utilised. Whilst the actual rates
of utilisation will depend on business growth and external factors, particularly investment market conditions, they have been tested for
sensitivity to experience and are resilient to a range of reasonably foreseeable scenarios.
The expected utilisation period for the deferred tax asset on capital losses has been extended in the year. The increase reflects the impact
of the extension of the existing loss restriction rules to also cover capital losses, which is expected to have effect from 1 April 2020.
At the reporting date there were unrecognised deferred tax assets of £12.0 million (2018: £7.5 million) in respect of £71.5 million (2018:
£44.9 million) of losses in companies where appropriate profits are not considered probable in the forecast period. These losses primarily
relate to our Asia-based businesses and can be carried forward indefinitely.
Future tax changes
Future tax rate changes, including the reduction in the corporation tax rate to 17% effective from 1 April 2020 which was enacted in the
Finance Act 2016, were incorporated into the deferred tax balances in 2016.
In November 2019, the UK Prime Minister pledged to postpone this reduction in the corporation tax rate to 17%. This change has yet to be
substantively enacted and therefore is not reflected in the above numbers. The impact, were the change to be substantively enacted, would
be immaterial.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 159
8. Goodwill, intangible assets, deferred acquisition costs and deferred income
Cost
At 1 January 2018
Additions
At 31 December 2018
Additions
At 31 December 2019
Accumulated amortisation
At 1 January 2018
Charge for the year
At 31 December 2018
Charge for the year
At 31 December 2019
Carrying value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Current
Non-current
Outstanding amortisation period
At 31 December 2018
At 31 December 2019
Goodwill
The carrying value of goodwill split by acquisition is as follows:
SJP Asia companies
Technical Connection Limited
Rowan Dartington companies
Balance at 31 December
Purchased
value of
in-force
business
Computer
software and
other specific
software
developments
DAC
DIR
£’Million
£’Million
£’Million
£’Million
73.4
–
73.4
–
73.4
46.2
3.2
49.4
3.2
52.6
27.2
24.0
20.8
3.2
17.6
20.8
16.0
0.1
16.1
8.9
25.0
13.6
1.1
14.7
1.4
16.1
2.4
1.4
8.9
2.4
6.5
8.9
1,686.7
33.7
1,720.4
28.1
1,748.5
1,063.7
98.2
1,161.9
96.6
1,258.5
623.0
558.5
490.0
92.2
397.8
490.0
(1,669.4)
(144.6)
(1,814.0)
(135.6)
(1,949.6)
(1,023.1)
(142.6)
(1,165.7)
(169.2)
(1,334.9)
(646.3)
(648.3)
(614.7)
(156.0)
(458.7)
(614.7)
Goodwill
£’Million
15.6
–
15.6
–
15.6
–
–
–
–
–
15.6
15.6
15.6
–
15.6
15.6
n/a
n/a
7 years
6 years
3 years
2–5 years
14 years
14 years
6–14 years
6–14 years
31 December
2019
31 December
2018
£’Million
10.1
3.7
1.8
15.6
£’Million
10.1
3.7
1.8
15.6
Goodwill is reviewed at least annually for impairment, or when circumstances or events indicate there may be uncertainty over this value.
The recoverable amount has been based on value-in-use calculations using pre-tax cash flows. Details of the assumptions made in these
calculations are provided below:
Key assumptions based on experience:
Value of new business
Projection period:
Five years of detailed forecasts extrapolated into perpetuity
using a long-term growth rate
Long-term growth rate based on economic forecasts:
1.3% (2018: 1.3%)
Pre-tax discount rate based on a risk-free rate plus a risk margin:
4.0% (2018: 4.5%)
It is considered that any reasonably possible levels of change in the key assumptions would not result in impairment of the goodwill.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 160
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
8. Goodwill, intangible assets, deferred acquisition costs and deferred income continued
Purchased value of in-force business/DAC/computer software
Amortisation is charged to expenses in the Statement of Comprehensive Income. Amortisation profiles are reassessed annually.
DIR
Amortisation is credited within fee and commission income in the Statement of Comprehensive Income. Amortisation profiles are
reassessed annually.
9. Property and equipment, including leased assets
Cost
At 1 January 2018
Additions
Disposals
At 31 December 2018
Recognised on adoption of IFRS 16 Leases
Additions
Disposals
At 31 December 2019
Accumulated depreciation
At 1 January 2018
Charge for the year
Eliminated on disposal
At 31 December 2018
Charge for the year
Eliminated on disposal
At 31 December 2019
Net book value
At 1 January 2018
At 31 December 2018
At 31 December 2019
Fixtures,
fittings
and office
equipment
Computer
equipment
£’Million
£’Million
Leased
assets:
properties
£’Million
46.2
6.6
(0.1)
52.7
–
16.2
(0.8)
68.1
22.7
4.7
(0.1)
27.3
4.0
(0.7)
30.6
23.5
25.4
37.5
5.7
2.0
–
7.7
–
1.1
(0.4)
8.4
2.8
1.8
–
4.6
1.8
(0.2)
6.2
2.9
3.1
2.2
–
–
–
–
91.8
49.7
–
141.5
–
–
–
–
14.9
–
14.9
–
–
126.6
Total
£’Million
51.9
8.6
(0.1)
60.4
91.8
67.0
(1.2)
218.0
25.5
6.5
(0.1)
31.9
20.7
(0.9)
51.7
26.4
28.5
166.3
Amortisation period (estimated useful life)
5–15 years
3 years
1–23 years
Leased assets: properties were recognised for the first time on 1 January 2019, upon adoption of IFRS 16 Leases. Further information about
the adoption of this new accounting standard can be found in Note 1.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 161
10. Leases
This note provides information on leases where the Group is a lessee. For information on leases where the Group is a lessor, refer to Note 11.
The Group’s leasing activities and how these are accounted for
The Group leases a portfolio of office properties, equipment and vehicles. The exemptions available under IFRS 16 for low-value or short-
term leases have been applied to all leased equipment and vehicles, and so the leased assets and lease liabilities on the Consolidated
Statement of Financial Position, and the depreciation charge for leased assets and interest expense on lease liabilities in the Consolidated
Statement of Comprehensive Income, relate to the Group’s portfolio of office properties only.
Leases are negotiated on an individual basis and hence contain a variety of different terms and conditions. They contain covenants and
restrictions but generally these are standard and to be expected in a modern, commercial lease created under open-market terms. Typical
covenants include paying the annual rent, insurance premiums, service charge, rates and VAT and keeping the property in good repair and
condition throughout the lease. Typical restrictions include permitting office use only and not transferring or assigning the lease to a third
party without the lessor’s consent. There are no residual value guarantees.
At 31 December 2019 the Group has committed to the lease of an office property, which will commence on 1 January 2020 with a 15-year
lease term and annual rent payments of £1.0 million excluding VAT. On the commencement date of this lease, in accordance with IFRS 16
the Group will recognise a right-of-use asset of £11.7 million and a lease liability of £11.4 million.
The Group is exposed to variability in lease payments as a number of leases include rent reviews during the lease term which are linked to
an index or market rates. In accordance with IFRS 16, these variable lease payments are initially measured based on the index or rate at the
commencement date of the lease. Estimates of future rent changes are not made; these changes are taken into account in the lease liabilities
and leased assets only when the lease payments change and so the variability is resolved. There are no variable lease payments which are
not linked to an index or market rates.
The Group has not entered into any sale and leaseback transactions.
Details regarding the accounting policies applied to leases are set out in Note 1, refer to policies (f)(ii) Lease expenses, (m) Property and
equipment and (z) Other payables. The disclosures required upon transition to IFRS 16 are set out in Note 1, section II. Adoption of new
accounting standards.
Amounts recognised in the Consolidated Statement of Financial Position
The following amounts are recognised in the Consolidated Statement of Financial Position:
Within the property and equipment balance – refer to Note 9
Leased assets – properties
Within the other payables balance – refer to Note 13
Lease liabilities – properties
31 December
2019
£’Million
1 January
20191
£’Million
126.6
118.6
91.8
83.2
1 Comparatives are presented as at 1 January 2019, being the date of transition to IFRS 16 and hence the date of initial recognition for these balances.
A movement schedule for leased assets, setting out additions during the year and depreciation charged, is presented in Note 9.
Amounts recognised in the Consolidated Statement of Comprehensive Income
The following amounts are recognised within expenses in the Consolidated Statement of Comprehensive Income:
Depreciation charge for leased assets – properties
Interest expense on lease liabilities – properties
Lease expense relating to short-term leases
Lease expense relating to low-value assets
Total lease expense for the year
Total cash outflow for leases during the year
Year ended
31 December
2019
£’Million
14.9
2.9
2.6
1.3
21.7
11.1
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 162
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
11. Investments, investment property and cash and cash equivalents
Net assets held to cover unit liabilities
Included within the Statement of Financial Position are the following assets and liabilities comprising the net assets held to cover unit liabilities.
The assets held to cover unit liabilities are set out in adjustment 1 of the IFRS to Solvency II Net Assets Balance Sheet reconciliation on
page 52.
Assets
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Cash and cash equivalents
Other receivables
Derivative financial instruments
– Currency forwards
– Interest rate swaps
– Index options
– Contracts for differences
– Equity rate swaps
– Foreign currency options
– Total return swaps
– Fixed income options
– Credit default swaps
Total derivative financial assets
Total assets
Liabilities
Other payables
Derivative financial instruments
– Currency forwards
– Interest rate swaps
– Index options
– Contracts for differences
– Equity rate swaps
– Foreign currency options
– Total return swaps
– Credit default swaps
– Fixed income options
Total derivative financial liabilities
Total liabilities
Net assets held to cover linked liabilities
Investment contract benefits
Net asset value attributable to unit holders
Unit-linked insurance contract liabilities
Net unit-linked liabilities
31 December
2019
31 December
2018
£’Million
£’Million
1,750.9
72,694.2
26,270.4
4,034.6
6,720.8
733.1
588.2
76.7
23.3
359.3
8.1
7.0
129.0
41.4
109.9
1,342.9
113,546.9
1,820.7
56,077.9
21,960.6
3,459.1
6,629.1
1,059.1
153.7
70.0
45.6
8.4
3.5
21.4
139.0
55.9
11.3
508.8
91,515.3
745.4
277.7
295.2
81.5
49.1
357.7
40.1
6.1
88.3
24.2
6.6
948.8
1,694.2
111,852.7
83,558.5
27,830.0
464.2
111,852.7
199.4
52.2
26.5
10.1
5.8
0.7
194.5
20.6
7.6
517.4
795.1
90,720.2
67,796.1
22,502.9
421.2
90,720.2
Net assets held to cover linked liabilities, and third-party holdings in unit trusts, are considered to have a maturity of up to one year since the
corresponding unit liabilities are repayable and transferable on demand. See accounting policy (ag) for further information on current and
non-current disclosure.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Investment property
Balance at 1 January
Additions
Capitalised expenditure on existing properties
Disposals
Changes in fair value
Balance at 31 December
163
2019
£’Million
1,820.7
42.5
14.4
(52.5)
(74.2)
1,750.9
2018
£’Million
1,630.9
274.0
3.3
(64.7)
(22.8)
1,820.7
The Group is the lessor for a portfolio of properties which meet the definition of investment property. The portfolio is held within unit-linked
funds, leased out under operating leases and is considered current. However, since investment properties are not traded in an organised
public market they are relatively illiquid compared with many other asset classes. There are no restrictions on the realisability of the Group’s
individual properties, or on the remittance of income or proceeds of disposal.
The Group follow various strategies to minimise the risks associated with any rights the Group retains in the investment properties. These
strategies include:
• actively reviewing and monitoring the condition of the properties and maintaining appropriate repairs, capital works projects and investments;
• engaging professional legal advisors in drafting prudent lease terms governing the use of the properties and engaging specialist asset
managers to oversee adherence to these terms on an ongoing basis;
• actively reviewing and monitoring lessee financial covenant positions;
• maintaining appropriate and prudent insurance for the properties; and
• senior management regularly reviewing the investment property portfolio to oversee diversification and performance, and to maximise
value and occupancy rates.
Investment property is valued monthly by external chartered surveyors in accordance with the guidance issued by The Royal Institution of
Chartered Surveyors. The investment property valuation has been prepared using the ‘market approach’ valuation technique: that is, using
prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets.
The historical cost of investment properties held at 31 December 2019 is £1,726.7 million (2018: £1,706.6 million). This represents the price
paid for investment properties, prior to any subsequent revaluation.
The rental income and direct operating expenses recognised in the Statement of Comprehensive Income in respect of investment properties
are set out below. All expenses relate to property generating rental income.
Rental income
Direct operating expenses
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
94.1
8.1
£’Million
90.9
7.6
At the year-end contractual obligations to purchase, construct or develop investment property amounted to £24.5 million (2018: £23.0 million).
The most significant contractual obligations at 31 December 2019 were:
• £13.7 million for the funding of a pre-let hotel development, which commenced in 2018 and is scheduled for completion in 2020. The lease
will complete upon delivery of the finished building; and
• £5.6 million for the redevelopment of a vacant 2.9 acre estate to accommodate modern, high-quality industrial space, also scheduled for
completion in 2020.
Contractual obligations to dispose of investment property amounted to nil (2018: £nil).
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 164
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
11. Investments, investment property and cash and cash equivalents continued
A maturity analysis of undiscounted contractual rental income to be received on an annual basis for the next five years, and the total to be
received thereafter, is set out below.
Undiscounted contractual rental income to be received in:
2020
2021
2022
2023
2024
2025 onwards
Total undiscounted contractual rental income to be received
Cash and cash equivalents
Cash and cash equivalents not held to cover unit liabilities
Balances held to cover unit liabilities
Total cash and cash equivalents
All cash and cash equivalents are considered current.
12. Other receivables
Receivables in relation to unit liabilities excluding policyholder interests
Other receivables in relation to insurance and unit trust business
Operational readiness prepayment
Advanced payments to Partners
Other prepayments
Business loans to Partners
Renewal income assets
Miscellaneous
Total other receivables on the Solvency II Net Assets Balance Sheet1
Policyholder interests in other receivables (see Note 11)
Miscellaneous (see adjustment 2 on page 52)
Total other receivables
Current
Non-current
31 December
2019
£’Million
86.8
83.4
77.3
71.7
65.0
339.1
723.3
31 December
2019
31 December
2018
£’Million
292.8
6,720.8
7,013.6
£’Million
248.5
6,629.1
6,877.6
31 December
2019
31 December
2018
£’Million
313.6
83.6
299.2
59.8
67.6
476.5
85.7
5.9
1,391.9
733.1
2.1
2,127.1
1,310.9
816.2
2,127.1
£’Million
1.0
68.6
236.4
44.9
70.1
394.5
72.1
2.5
890.1
1,059.1
3.1
1,952.3
1,297.7
654.6
1,952.3
1 This note has been represented in 2019 to include a sub-total for ‘Total other receivables on the Solvency II Net Assets Balance Sheet’.
All items within other receivables meet the definition of financial assets with the exception of prepayments and advanced payments to
Partners. The fair value of those financial assets held at amortised cost is not materially different from amortised cost.
Receivables in relation to unit liabilities and policyholder interests in other receivables primarily relate to outstanding market trade
settlements (sales) in the life unit-linked funds and the consolidated unit trusts. Other receivables in relation to insurance and unit trust
business primarily relate to outstanding policy-related settlement timings. Both of these categories of receivables are short-term, typically
settled within three days.
The operational readiness prepayment relates to the Bluedoor administration platform which has been developed by our key outsourced
back-office administration provider. Management has assessed the recoverability of this prepayment against the expected cost saving
benefit of lower future tariff costs arising from the new platform. It is believed that any reasonably possible change in the assumptions
applied within this assessment, such as levels of future business, the anticipated future service tariffs and the discount rate, would have
no impact on the carrying value of the asset.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 165
Renewal income assets represent the present value of future cash flows associated with books of business acquired by the Group. Typically
they arise through business combinations, where the asset represents the value of non-Group related business on the date of acquisition.
Business loans to Partners
Business loans to Partners directly funded by the Group
Securitised business loans to Partners
Total business loans to Partners
31 December
2019
31 December
2018
£’Million
316.0
160.5
476.5
£’Million
295.5
99.0
394.5
Business loans to Partners are interest-bearing (linked to Bank of England base rate plus a margin), repayable in line with the terms of the
loan contract and secured against the future income streams of the Partner.
The Group has securitised £160.5 million (31 December 2018: £99.0 million) of the business loans to Partners portfolio. Legal ownership
of the securitised business loans to Partners has been transferred to a structured entity, SJP Partner Loans No.1 Limited, which has issued
loan notes secured upon them. Note 16 Borrowings and financial commitments provides information on these loan notes. The securitised
business loans to Partners are ring-fenced from the other assets of the Group, which means that the cash flows associated with these
business loans to Partners can only be used to purchase new loans into the structure or repay the note holders, plus associated issuance
fees and costs. Holders of the loan notes have no recourse to the Group’s other assets.
The securitised business loans to Partners remain recognised on the Group Statement of Financial Position as the Group controls SJP
Partner Loans No.1 Limited: refer to the Consolidation judgement in Note 2 for further information.
Reconciliation of the business loans to Partners opening and closing gross loan balances
Gross balance at 1 January 2019
Business loans to Partners classification changes:
– Transfer to underperforming
– Transfer to non-performing
– Transfer to performing
New lending activity during the year
Interest charged during the year
Repayments activity during the year
Write-off for non-credit related reasons
Gross balance at 31 December 2019
Gross balance at 1 January 2018
Business loans to Partners classification changes:
– Transfer to underperforming
– Transfer to non-performing
– Transfer to performing
New lending activity during the year
Interest charged during the year1
Repayments activity during the year1
Gross balance at 31 December 2018
Stage 1
performing
£’Million
383.0
Stage 2
under-
performing
£’Million
7.6
Stage 3
non-
performing
£’Million
7.0
(9.5)
(3.4)
4.7
230.9
18.2
(164.1)
(0.1)
459.7
9.5
(0.1)
(3.8)
–
0.4
(0.7)
–
12.9
–
3.5
(0.9)
–
0.3
(2.4)
–
7.5
Stage 1
performing
£’Million
252.0
Stage 2
under-
performing
£’Million
8.3
Stage 3
non-
performing
£’Million
8.1
(5.0)
(0.2)
5.0
296.5
11.3
(176.6)
383.0
5.0
(0.1)
(5.0)
–
0.5
(1.1)
7.6
–
0.3
–
–
0.3
(1.7)
7.0
Total
£’Million
397.6
–
–
–
230.9
18.9
(167.2)
(0.1)
480.1
Total
£’Million
268.4
–
–
–
296.5
12.1
(179.4)
397.6
1 In 2018, interest charged was netted against repayments, hence the total repayments for the year were given as £167.3 million. For 2019, interest has been presented
separately, and so the 2018 table has been represented accordingly.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 166
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
12. Other receivables continued
Business loans to Partners: provision
The expected loss impairment model for business loans to Partners is based on the levels of loss experienced in the portfolio, with due
consideration given to forward-looking information.
The provision held against business loans to Partners is immaterial: at 31 December 2019, the provision was £3.6 million (31 December 2018:
£3.1 million). During the year, £0.2 million of the provision was released (2018: £0.6 million) whilst new provisions and adjustments to existing
provisions increased the total by £0.7 million (2018: £1.4 million).
There is no provision held against any other receivables held at amortised cost.
Business loans to Partners as recognised on the Statement of Financial Position
Gross business loans to Partners
Provision
Net business loans to Partners
Movement in renewal income assets
At 1 January
Additions
Disposals
Revaluation
Total renewal income assets at 31 December
The key assumptions used for the assessment of the fair value of the renewal income are as follows:
Lapse rate – SJP Partner renewal income1
Lapse rate – non-SJP renewal income1
Discount rate
31 December
2019
31 December
2018
£’Million
480.1
(3.6)
476.5
2019
£’Million
72.1
17.1
–
(3.5)
85.7
£’Million
397.6
(3.1)
394.5
2018
£’Million
71.6
9.7
(0.2)
(9.0)
72.1
31 December
2019
5.0%–15.0%
15.0%–25.0%
5.8%–7.5%
31 December
2018
5.0%–15.0%
15.0%–25.0%
5.0%–7.5%
1 Future income streams are projected making use of retention assumptions derived from the Group’s experience of the business or, where insufficient data exists, from
external industry experience. These assumptions are reviewed on an annual basis.
These assumptions have been used for the analysis of each business combination classified within renewal income.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 13. Other payables
Payables in relation to unit liabilities excluding policyholder interests
Other payables in relation to insurance and unit trust business
Accrual for ongoing advice fees
Other accruals1
Contract payment2
Lease liabilities
Miscellaneous1,2
Total other payables on the Solvency II Net Assets Balance Sheet2
Policyholder interests in other payables (see Note 11)
Miscellaneous (see adjustment 2 on page 52)
Total other payables
Current
Non-current
167
31 December
2019
31 December
2018
£’Million
106.8
411.0
118.1
72.1
77.9
118.6
129.2
1,033.7
745.4
3.6
1,782.7
1,605.7
177.0
1,782.7
£’Million
282.6
336.9
107.3
90.1
85.3
–
54.7
956.9
277.7
56.2
1,290.8
1,213.7
77.1
1,290.8
1 Following a review of accruals during 2019, a balance of £61.1 million relating to payables to Partners at 31 December 2018 has been reclassified from other accruals
to miscellaneous.
2 This note has been represented in 2019 to include a sub-total for total other payables on the Solvency II Net Assets Balance Sheet and to separate the contract payment
from miscellaneous.
Payables in relation to unit liabilities and policyholder interests in other payables primarily relate to outstanding market trade settlements
(purchases) in the life unit-linked funds and the consolidated unit trusts. Other payables in relation to insurance and unit trust business
primarily relate to outstanding policy-related settlement timings. Both of these categories of payables are short-term, typically settled
within three days.
The contract payment of £77.9 million (2018: £85.3 million) is non-interest bearing and repayable on a straight-line basis over the life of a
12-year service agreement. The repayment period commenced on 1 January 2017.
Lease liabilities represent the present value of future cash flows associated with the Group’s portfolio of property leases. They were initially
recognised on 1 January 2019, upon adoption of IFRS 16 Leases. Further information about the adoption of this new accounting standard
can be found on in Note 1.
The fair value of financial instruments held at amortised cost within other payables is not materially different from amortised cost.
14. Insurance contract liabilities and reinsurance assets
Risk
Insurance risk arises from inherent uncertainties as to the occurrence, amount and timing of insurance liabilities. The Group assumes
insurance risk by issuing insurance contracts under which the Group agrees to compensate the client (or other beneficiary) if a specified
future event (the insured event) occurs. The Group insures mortality and morbidity risks but has no longevity risk as we have never written
any annuity business. The Group has a medium appetite for insurance risk, only actively pursuing it where financially beneficial, or in support
of strategic objectives.
Risk
Underwriting
Description
Failure to price appropriately for a risk, or the impact
of anti-selection.
Epidemic/disaster
Expense
An unusually large number of claims arising from
a single incident or event.
Administration costs exceed expense allowance.
Retention
Unexpected movement in future profit due to
more (or less) clients than anticipated withdrawing
their funds.
Management
The Group ceased writing new protection business
in April 2011. Experience is monitored regularly.
For most business the premium or deduction rates
can be re-set. The Group has fully reinsured the UK
insurance risk.
Protection is provided through reinsurance. The Group
has fully reinsured the UK insurance risk.
Administration is outsourced and a tariff of costs
is agreed. The contract is monitored regularly to
rationalise costs incurred. Internal overhead expenses
are monitored and closely managed.
Retention of insurance contracts is closely monitored
and unexpected experience is investigated. Retention
experience has continued in line with assumptions.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 168
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
14. Insurance contract liabilities and reinsurance assets continued
Insurance contract liabilities
Balance at 1 January
Movement in unit-linked liabilities
Movement in liabilities
– New business
– Existing business
– Other assumption changes
– Experience variance
Total movement in liabilities
Balance at 31 December
Unit-linked
Non-unit-linked
Current
Non-current
2019
£’Million
508.1
42.9
0.2
(1.8)
4.1
3.1
5.6
556.6
464.2
92.4
556.6
98.8
457.8
556.6
2018
£’Million
544.6
(37.7)
0.1
(1.2)
(1.2)
3.5
1.2
508.1
421.2
86.9
508.1
83.2
424.9
508.1
See accounting policy (ag) for further information on the current and non-current disclosure.
As the Group closed to new insurance business in 2011, the movement in insurance contract liabilities in relation to new business represents
the change in insurance contract liabilities for incremental business written during the year for existing policies.
Reinsurance assets
Reconciliation of the movement in the net reinsurance balance:
Reinsurance assets at 1 January
Reinsurance component of change in insurance liabilities
Reinsurance assets at 31 December
Current
Non-current
2019
£’Million
2018
£’Million
82.8
5.8
88.6
15.7
72.9
88.6
82.8
–
82.8
13.6
69.2
82.8
The overall impact of reinsurance on the profit for the year was net income of £1.5 million (2018: net charge of £10.0 million).
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 169
Assumptions used in the calculation of insurance liabilities and reinsurance assets
The principal assumptions used in the calculation of the liabilities are:
Assumption
Interest rate
Mortality
Morbidity – Critical Illness
Morbidity – Permanent
Health Insurance
Expenses
Persistency
Description
The valuation interest rate is calculated by reference to the long-term gilt yield at 31 December 2019.
The specific rates used are between 0.6% and 0.9% depending on the tax regime (0.9% and 1.3% at
31 December 2018).
Mortality is based on Group experience and is set at 72% of the TM/F92 tables with an additional loading
for smokers. There has been no change since 2006.
Morbidity is based on Group experience. There has been no change during 2019. Sample annual rates
per £ for a male non-smoker are:
Age
25
35
45
Morbidity is based on Group experience. There has been no change during 2019. Sample annual rates
per £ income benefit p.a. for a male non-smoker are:
Rate – 2018 and 2019
0.000760
0.001334
0.003189
Age
25
35
45
Contract liabilities are calculated allowing for the actual costs of administration of the business.
The assumption has been amended to allow for changes to the underlying administration costs.
Rate – 2018 and 2019
0.00366
0.00965
0.02092
Annual cost
Product
Protection business
Allowance is made for a prudent level of lapses within the calculation of the liabilities. The rates have not
changed in 2019. Sample annual lapse rates are:
2019
£39.26
2018
£37.97
2018 and 2019
Protection business
Year 1
7%
Year 5
9%
Lapses
Year 10
8%
Sensitivity analysis
The table below sets out the sensitivity of the profit on insurance business and net assets to changes in key assumptions. The levels
of sensitivity tested are consistent with those proposed in the EEV principles and reflect reasonably possible levels of change in the
assumptions. The analysis reflects the change in the variable/assumption shown while all other variables/assumptions are left unchanged.
In practice variables/assumptions may change at the same time, as some may be correlated (for example, an increase in interest rates may
also result in an increase in expenses if the increase reflects higher inflation). It should also be noted that in some instances sensitivities are
non-linear. The sensitivity percentage has been applied in proportion to the assumption: for example, application of a 10% sensitivity to
a withdrawal assumption of 8% will reduce it to 7.2%.
Sensitivity analysis
Withdrawal rates
Expense assumptions
Mortality/morbidity
Change in
assumption
Percentage
10%
10%
5%
Change in
profit/(loss)
before tax
2019
Change in
profit/(loss)
before tax
2018
£’Million
0.9
(0.2)
0.0
£’Million
0.9
(0.2)
0.0
Change in
net assets
2019
£’Million
0.9
(0.2)
0.0
Change in
net assets
2018
£’Million
0.9
(0.2)
0.0
A change in interest rates will have no material impact on insurance profit or net assets.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 170
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
15. Other provisions and contingent liabilities
At 1 January 2018
Additional provisions
Utilised during the year
Release of provision
At 31 December 2018
Additional provisions
Utilised during the year
Release of provision
At 31 December 2019
Current
Non-current
Total provisions
£’Million
20.0
18.9
(16.1)
(0.1)
22.7
34.6
(15.3)
(1.4)
40.6
17.3
23.3
40.6
Total provisions relate to the cost of redress for complaints, the cost to restore properties to their original state at the end of their lease term
(known as the lease provision) and clawback of indemnity commission. The provision for the cost of redress for complaints is based on
estimates of the total number of complaints expected to be upheld, the estimated cost of redress and the expected timing of settlement.
The lease provision is based on the square footage of leased properties and typical costs per square foot of restoring similar buildings to
their original state. The clawback provision is based on estimates of the indemnity commission that may be repaid.
Of the £34.6 million additional provisions recognised during the year (2018: £18.9 million), £11.2 million relates to the lease provision
(2018: nil).
As more fully set out in the summary of principal risks and uncertainties on pages 62 and 63, the Group could in the course of its business
be subject to legal proceedings and/or regulatory activity. Should such an event arise, the Board would consider its best estimate of the
amount required to settle the obligation and, where appropriate and material, establish a provision. While there can be no assurances that
circumstances will not change, based upon information currently available to them, the Directors do not believe there is any possible activity
or event that could have a material adverse effect on the Group’s financial position.
During the normal course of business, the Group may from time to time provide guarantees to Partners, clients or other third parties.
However, based upon the information currently available to them the Directors do not believe there are any guarantees which would have
a material adverse effect on the Group’s financial position, and so the fair value of any guarantees has been assessed as nil (2018: £nil).
16. Borrowings and financial commitments
Borrowings
Borrowings are a liability arising from financing activities. The Group has two different types of borrowings:
• senior unsecured corporate borrowings which are used to manage working capital, bridge intra-Group cash flows and to fund investment
in the business; and
• securitisation loan notes which are secured only on a legally segregated pool of the Group’s business loans to Partners, and hence are
non-recourse to the Group’s other assets. Further information about business loans to Partners is provided in Note 12 Other receivables.
Senior unsecured corporate borrowings
Corporate borrowings: bank loans
Corporate borrowings: loan notes
Senior unsecured corporate borrowings
The primary senior unsecured corporate borrowings are:
31 December
2019
31 December
2018
£’Million
173.3
113.8
287.1
£’Million
164.8
113.8
278.6
• a £340 million revolving credit facility which is repayable at maturity in 2022 with a variable interest rate. At 31 December 2019 the undrawn
credit available under this facility was £170 million (31 December 2018: £179 million); and
• a US Dollar $160 million private shelf facility, under which the Group has issued two tranches of loan notes: one for £50 million and another
for £64 million. The note issues were denominated in Sterling, eliminating any Group currency risk. The notes are repayable over ten years,
ending in 2025 and 2027 respectively, with variable interest rates.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Senior tranche of non-recourse securitisation loan notes
Senior unsecured corporate borrowings
Senior tranche of non-recourse securitisation loan notes
Total borrowings
Current
Non-current
171
31 December
2019
31 December
2018
£’Million
287.1
116.6
403.7
–
403.7
403.7
£’Million
278.6
70.0
348.6
0.3
348.3
348.6
The senior tranche of securitisation loan notes are AAA-rated and repayable over the expected life of the securitisation (estimated to be five
years) with a variable interest rate. £70.0 million of these loan notes were issued during 2018 with a further £50.0 million issued during 2019:
a movement schedule has been set out below. They are held by third-party investors and are secured on a legally segregated portfolio of
£160.5 million business loans to Partners, and the other net assets of the securitisation entity SJP Partner Loans No.1 Limited. For further
information on business loans to Partners, including those that have been securitised, refer to Note 12 Other receivables. Holders of the
securitisation loan notes have no recourse to the assets held by any other entity within the Group.
In addition to the senior tranche of securitisation loan notes, a junior tranche has been issued to another entity within the Group. The junior
notes are eliminated on consolidation in the preparation of the Group Financial Statements and so do not form part of Group borrowings.
Junior tranche of non-recourse securitisation loan notes
Senior tranche of non-recourse securitisation loan notes
Total non-recourse securitisation loan notes
Backed by:
Securitised business loans to Partners (see Note 12)
Other net assets of SJP Partner Loans No.1 Limited
Total net assets held by SJP Partner Loans No.1 Limited
31 December
2019
31 December
2018
£’Million
49.9
116.6
166.5
160.5
6.0
166.5
£’Million
32.8
70.0
102.8
99.0
3.8
102.8
Movement in borrowings
Borrowings are liabilities arising from financing activities. The cash and non-cash movement in borrowings over the year are set out below,
with the cash movements also set out in the Consolidated Statement of Cash Flows on page 141.
Borrowings at 1 January
Additional borrowing during the year
Repayment of borrowings during the year
Costs on additional borrowings during the year
Unwind of borrowing costs (non-cash movement)
Borrowings at 31 December
Senior
unsecured
corporate
borrowings
Senior
tranche of
securitisation
loan notes
2019
£’Million
278.6
340.0
(332.0)
–
0.5
287.1
2019
£’Million
70.0
50.0
(2.8)
(1.0)
0.4
116.6
Total
borrowings
2019
£’Million
348.6
390.0
(334.8)
(1.0)
0.9
403.7
Senior
unsecured
corporate
borrowings
Senior
tranche of
securitisation
loan notes
2018
£’Million
279.9
161.0
(162.2)
(0.5)
0.4
278.6
2018
£’Million
–
71.5
–
(1.5)
–
70.0
Total
borrowings
2018
£’Million
279.9
232.5
(162.2)
(2.0)
0.4
348.6
The fair value of the outstanding borrowings is not materially different from amortised cost. Interest expense on borrowings is recognised
within expenses in the Consolidated Statement of Comprehensive Income.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 172
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
16. Borrowings and financial commitments continued
Financial commitments
Guarantees
The Group guarantees loans provided by third parties to Partners. In the event of default of any individual Partner loan, the Group guarantees
to repay the full amount of the loan, with the exception of Metro Bank. For this third party the Group guarantees to cover losses up to 50% of
the value to the total loans drawn. These loans are secured against the future income streams of the Partner. The value of the loans
guaranteed is as follows:
Bank of Scotland
Investec
Metro Bank
Royal Bank of Scotland
Santander
Total loans
Loans drawn
Facility
31 December
2019
31 December
2018
31 December
2019
31 December
2018
£’Million
57.7
18.5
45.7
15.1
44.5
181.5
£’Million
61.7
–
52.5
–
49.5
163.7
£’Million
70.0
25.0
61.0
25.0
50.0
231.0
£’Million
80.0
–
61.0
–
50.0
191.0
The fair value of these guarantees has been assessed as nil (2018: £nil).
Operating lease commitments
The Group leases a portfolio of office properties, equipment and vehicles with varying lease end dates ranging from 2020 to 2042. Prior
to the adoption of IFRS 16 Leases on 1 January 2019, these were classified as operating leases. The following table represents the future
minimum lease payments under non-cancellable operating leases, including VAT, service charges and buildings insurance. No disclosure
is provided for 2019 as from 1 January 2019, the distinction between finance and operating leases disappeared for lessees and the Group
recognised right-of-use assets for these leases, except where they are short-term or low-value.
Further information on leases for which the Group is the lessee is provided in Note 10 Leases.
Not later than one year
Later than one year and not later than five years
Later than five years
Total financial commitments
17. Financial risk
Risk management objectives and risk policies
The Group’s financial risk can usefully be considered in two categories of assets:
1. assets backing unit liabilities (see Note 11); and
2. shareholder assets.
31 December
2019
31 December
2018
£’Million
–
–
–
–
£’Million
18.0
53.7
69.6
141.3
In general, the policyholder bears the financial risk on assets backing the unitised business, and risk from shareholder assets is minimised
through investment in liquid assets with a strong credit rating.
Exposure to the following risks for the two categories of assets is analysed separately in the following sections, in line with the requirements
of IFRS 7:
• credit risk;
• liquidity risk;
• market risk; and
• currency risk.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 173
Credit risk is the risk of loss due to a debtor’s non-payment of a loan or other line of credit. Credit risk also arises from holdings of cash and
cash equivalents, deposits and formal loans with banks and financial institutions. The Group has adopted a risk averse approach to such risk
and has a stated policy of not actively pursuing or accepting credit risk except when necessary to support other objectives.
Risk
Shareholders’ assets
Description
Loss of assets or reduction in value.
Reinsurance
Failure of counterparty or counterparty unable to
meet liabilities.
Business loans to Partners
Inability of Partners to repay loans or advances
from the Group.
Management
Shareholder funds are predominantly invested in
AAA-rated unitised money market funds, which are
classified as investments in Collective Investment
Schemes (CIS), and deposits with approved banks, but
may be invested in sovereign fixed interest securities
such as UK gilts where regulatory constraints on other
assets apply. Maximum counterparty limits are set for
each company within the Group and aggregate limits
are also set at a Group level.
Credit ratings of potential reinsurers must meet or
exceed AA-. Consideration is also given to size, risk
concentrations/exposures and ownership in the
selection of reinsurers. The Group also seeks to
diversify its reinsurance credit risk through the use
of a spread of reinsurers.
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 business appropriately.
Expected credit losses are recognised as provisions
against the loans.
Liquidity risk is the risk that the Group, although solvent, either does not have available sufficient financial resources to enable it to meet its
obligations as they fall due, or can secure such resources only at excessive cost. The Group is averse to liquidity risk and seeks to minimise
this risk by not actively pursuing it except where necessary to support other objectives.
Risk
Cash or expense requirement A significant cash or expense requirement needs to be
Description
met at short notice.
Management
The majority of free assets are invested in cash or
cash equivalents and the cash position and forecast
are monitored on a monthly basis. The Group also
maintains a margin of free assets in excess of the
minimum required solvency capital within its regulated
entities. Further, the Group has established committed
borrowing facilities (see Note 16) intended to further
mitigate liquidity risk.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 174
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
17. Financial risk continued
Market risk is the impact a fall in the value of equity or other asset markets may have on the business. The Group adopts a risk-averse
approach to market risk, with a stated solvency policy of not actively pursuing or accepting market risk except where necessary to support
other objectives. However, the Group accepts the risk that a fall in equity or other asset markets will reduce the level of annual management
charge income derived from policyholder assets and the risk of lower future profits.
The table below summarises the main market risks that the business is exposed to and the methods by which the Group seeks to mitigate
them.
Risk
Client liabilities
Retention
New business
Description
As a result of a reduction in equity values, the
Group may be unable to meet client liabilities.
Loss of future profit on investment contracts due
to more clients than anticipated withdrawing
their funds, particularly as a result of poor
investment performance.
Poor performance in the financial markets in
absolute terms, and relative to inflation, leads to
existing and future clients rejecting investment in
longer-term assets.
Management
This risk is substantially mitigated by the Group’s
strategic focus on unitised business, by not providing
guarantees to clients on policy values and by the
matching of assets and liabilities.
Retention of investment contracts is closely monitored
and unexpected experience variances are investigated.
Retention has remained consistently strong
throughout 2019, despite volatile market conditions.
The benefit to clients of longer-term equity
investment as part of a diversified portfolio of
assets is fundamental to our philosophy. Advice and
marketing become even more important when market
values fall, and greater attention is required to support
and give confidence to existing and future clients in
such circumstances. This is taken account of by the
Group in its activities.
The Group is not subject to any significant direct currency risk, since all material shareholder financial assets and financial liabilities are
denominated in Sterling. However, since future profits are dependent on charges based on FUM, changes in FUM as a result of currency
movements will impact future profits.
Shareholder assets
Categories of financial assets and financial liabilities
The categories and carrying values of the shareholder financial assets and financial liabilities held in the Group’s Statement of Financial
Position are summarised in the table below:
31 December 2019
Financial assets
Fixed income securities
Investment in Collective Investment Schemes 1
Other receivables 2
– Business loans to Partners
– Renewal income assets
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities
Financial
assets at fair
value through
profit and loss
Financial
assets
measured at
amortised cost
Financial
liabilities
measured at
amortised cost
£’Million
£’Million
£’Million
5.2
1,131.8
–
85.7
–
85.7
–
1,222.7
–
–
–
–
–
476.5
–
405.3
881.8
292.8
1,174.6
–
–
–
–
–
–
–
–
–
–
–
403.7
1,037.6
1,441.3
Total
£’Million
5.2
1,131.8
476.5
85.7
405.3
967.5
292.8
2,397.3
403.7
1,037.6
1,441.3
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 175
Total
£’Million
5.4
1,297.0
394.5
72.1
75.1
541.7
248.5
2,092.6
348.6
1,013.1
1,361.7
Financial
assets at fair
value through
profit and loss
Financial
assets
measured at
amortised cost
Financial
liabilities
measured at
amortised cost
£’Million
£’Million
£’Million
5.4
1,297.0
–
72.1
–
72.1
–
1,374.5
–
–
–
–
–
394.5
–
75.1
469.6
248.5
718.1
–
–
–
–
–
–
–
–
–
–
–
348.6
1,013.1
1,361.7
31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes 1
Other receivables 2
– Business loans to Partners
– Renewal income assets
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities
1 All assets included as shareholder investment in Collective Investment Schemes are holdings of high-quality, highly liquid money market funds, containing assets which are
cash and cash equivalents.
2 Other receivables exclude prepayments and unearned commission, which are not considered financial assets.
Income, expense, gains and losses arising from financial assets and financial liabilities
The income, expense, gains and losses arising from shareholder financial assets and financial liabilities are summarised in the table below:
Year ended 31 December 2019
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income assets
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
– Lease liabilities
– Other
Total other payables
Total financial liabilities
Financial
assets at fair
value through
profit and loss
Financial
assets
measured at
amortised cost
Financial
liabilities
measured at
amortised cost
£’Million
£’Million
£’Million
0.7
8.0
–
(3.5)
(3.5)
–
5.2
–
–
–
–
–
–
–
13.6
–
13.6
1.8
15.4
–
–
–
–
–
Total
£’Million
0.7
8.0
13.6
(3.5)
10.1
1.8
20.6
–
–
–
–
–
–
–
(9.7)
(9.7)
(2.9)
(1.0)
(3.9)
(13.6)
(2.9)
(1.0)
(3.9)
(13.6)
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 176
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
17. Financial risk continued
Year ended 31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income assets
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Total financial liabilities
Financial
assets at fair
value through
profit and loss
Financial
assets
measured at
amortised cost
Financial
liabilities
measured at
amortised cost
£’Million
£’Million
£’Million
Total
£’Million
0.6
6.2
–
(9.0)
(9.0)
–
(2.2)
–
–
–
–
9.0
–
9.0
1.2
10.2
–
–
–
–
–
–
–
–
–
(6.1)
(6.1)
0.6
6.2
9.0
(9.0)
–
1.2
8.0
(6.1)
(6.1)
Losses on renewal income assets have been recognised within the investment return line in the Statement of Comprehensive Income.
Fair value estimation
Financial assets and liabilities which are held at fair value in the Financial Statements are required to have disclosed their fair value
measurements by level of the following fair value measurement hierarchy:
• quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
• inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices) (Level 2); and
• inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).
The following table presents the Group’s shareholder assets measured at fair value. There are no shareholder liabilities measured at
fair value:
31 December 2019
Financial assets
Fixed income securities
Investment in Collective Investment Schemes 1
Renewal income assets
Total financial assets
31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes 1
Renewal incomes assets
Total financial assets
Level 1
£’Million
5.2
1,131.8
–
1,137.0
Level 1
£’Million
5.4
1,297.0
–
1,302.4
Level 2
£’Million
Level 3
Total balance
£’Million
£’Million
–
–
–
–
–
–
85.7
85.7
5.2
1,131.8
85.7
1,222.7
Level 2
£’Million
Level 3
Total balance
£’Million
£’Million
–
–
–
–
–
–
72.1
72.1
5.4
1,297.0
72.1
1,374.5
1 All assets included as shareholder investment in Collective Investment Schemes are holdings of high-quality, highly liquid unitised money market funds, containing assets
which are cash and cash equivalents.
The fair value of financial instruments traded in active markets is based on quoted bid prices at the reporting date. These instruments are
included in Level 1. Level 2 financial assets and liabilities are valued using observable prices for identical current arm’s length transactions.
The renewal income assets are Level 3 and are valued using a discounted cash flow technique and the assumptions outlined in Note 12. The
effect of applying reasonably possible alternative assumptions of a movement of 100bps on the discount rate and a 10% movement in the
lapse rate would result in an unfavourable change in valuation of £7.9 million and a favourable change in valuation of £9.0 million, respectively.
There were no transfers between Level 1 and Level 2 during the year, nor into or out of Level 3.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Movement in Level 3 portfolios
Renewal income assets
Opening balance
Additions during the year
Disposals during the year
Unrealised losses recognised in the Statement of Comprehensive Income
Closing balance
177
2019
£’Million
72.1
17.1
–
(3.5)
85.7
2018
£’Million
71.6
9.7
(0.2)
(9.0)
72.1
Credit risk
The following table sets out the maximum credit risk exposure and ratings of shareholder financial and other assets which are susceptible
to credit risk:
31 December 2019
Fixed income securities
Investment in Collective Investment Schemes 1
Reinsurance assets
Other receivables
Cash and cash equivalents
Total
31 December 2018
Fixed income securities
Investment in Collective Investment Schemes 1
Reinsurance assets
Other receivables
Cash and cash equivalents
Total
AAA
£’Million
4.1
1,131.8
–
–
–
1,135.9
AAA
£’Million
4.1
1,297.0
–
–
–
1,301.1
AA
£’Million
1.1
–
88.6
4.7
–
94.4
AA
£’Million
1.3
–
82.8
6.2
63.6
153.9
A
£’Million
–
–
–
–
292.7
292.7
A
£’Million
–
–
–
–
161.7
161.7
BB
£’Million
–
–
–
–
0.1
0.1
BBB
£’Million
–
–
–
–
0.3
0.3
Unrated
£’Million
–
–
–
962.8
–
962.8
Unrated
£’Million
–
–
–
535.5
22.9
558.4
Total
£’Million
5.2
1,131.8
88.6
967.5
292.8
2,485.9
Total
£’Million
5.4
1,297.0
82.8
541.7
248.5
2,175.4
1 Investment of shareholder assets in Collective Investment Schemes refers to investment in unitised money market funds, containing assets which are cash and
cash equivalents.
Other receivables includes £476.5 million (2018: £394.5 million) of business loans to Partners, which are interest-bearing (linked to Bank
of England base rate plus a margin), repayable on demand and secured against the future renewal income streams of the Partner.
Impairment of these loans is determined using the expected loss model set out in IFRS 9. Expected credit losses are based on the historic
levels of loss experienced on business loans to Partners, with due consideration given to forward-looking information. A range of factors,
including the nature or type of the loan and the security held, are taken into account in calculating the provision.
The loan balance is presented net of a £3.6 million provision (2018: £3.1 million); see also Note 12. The movement in the impairment
provision will reflect utilisation of the existing provision during the year, but the overall cost of business loans to Partners (including
new provisions) recognised within administration expenses in the Statement of Comprehensive Income during the year was a charge
of £5.4 million (2018: £3.0 million).
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 178
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
17. Financial risk continued
Contractual maturity and liquidity analysis
The following table sets out the contractual maturity analysis of the Group’s financial assets and financial liabilities. All balances
are undiscounted:
31 December 2019
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
– Lease liabilities
– Other
Total other payables
Total financial liabilities
31 December 2018
Financial assets
Fixed income securities
Investment in Collective Investment Schemes
Other receivables
– Business loans to Partners
– Renewal income
– Other
Total other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Borrowings
Other payables
Total financial liabilities
Up to
1 year
1–5
years
£’Million
£’Million
Over
5 years
£’Million
5.2
1,131.8
42.7
17.0
405.3
465.0
292.8
1,894.8
–
–
135.5
39.9
–
175.4
–
175.4
–
–
298.3
28.8
–
327.1
–
327.1
Total
£’Million
5.2
1,131.8
476.5
85.7
405.3
967.5
292.8
2,397.3
2.1
356.6
48.4
407.1
11.9
812.3
824.2
826.3
Up to
1 year
46.5
42.3
88.8
445.4
1–5
years
£’Million
£’Million
5.4
1,297.0
47.4
13.3
75.1
135.8
248.5
1,686.7
1.0
816.7
817.7
–
–
123.4
28.5
–
151.9
–
151.9
279.7
41.8
321.5
84.5
40.0
124.5
172.9
Over
5 years
£’Million
–
–
223.7
30.3
–
254.0
–
254.0
71.2
50.0
121.2
142.9
894.6
1,037.5
1,444.6
Total
£’Million
5.4
1,297.0
394.5
72.1
75.1
541.7
248.5
2,092.6
351.9
908.5
1,260.4
Sensitivity analysis to market risks
Financial assets and liabilities held outside unitised funds primarily consist of fixed interest securities, units in money market funds, cash
and cash equivalents, and other accounting assets and liabilities. The fixed interest securities are short-term and are held as an alternative to
cash. Similarly, cash held in unitised money market funds and at bank is valued at par and is unaffected by movement in interest rates. Other
assets and liabilities are similarly unaffected by market movements.
As a result of these combined factors, the Group’s financial assets and liabilities held outside unitised funds are not materially subject to
market risk, and movements at the reporting date in interest rates and equity values have an immaterial impact on the Group’s profit after
tax and equity. Future profits from annual management charges may be affected by movements in interest rates and equity values.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 179
Unit liabilities and associated assets
Categories of financial assets and financial liabilities
Assets held to cover unit liabilities are summarised in Note 11, and all are held at fair value through profit or loss. Equities, investments in
unit trusts which sit within investment in Collective Investment Schemes and derivative financial assets are required to be held at fair value
through profit or loss by IFRS 9, as they are equity instruments or derivatives. All other assets held to cover unit liabilities are elected to be
held at fair value through profit or loss to match the fair value through profit or loss classification which is required for unit liabilities. They
are designated as such upon initial recognition.
Income, expense, gains and losses arising from financial assets, investment properties and financial liabilities
The income, expense, gains and losses arising from financial assets, investment properties and financial liabilities are summarised in the
table below:
Financial assets and investment properties
Investment properties
Other assets backing unit liabilities
Total financial assets and investment properties
Financial liabilities 1
Unit liabilities
Total financial liabilities
31 December
2019
31 December
2018
£’Million
£’Million
11.8
10,741.6
10,753.4
60.5
(3,046.0)
(2,985.5)
9,558.9
9,558.9
(3,357.1)
(3,357.1)
1 None of the change in the fair value of financial liabilities at fair value through profit or loss is attributable to changes in their credit risk.
Losses have been recognised within the investment return line in the Statement of Comprehensive Income.
Fair value estimation
As set out on page 176, financial assets and liabilities which are held at fair value in the Financial Statements are required to have disclosed
their fair value measurements, split by level in the fair value measurement hierarchy. The following table presents the Group’s unit liabilities
and associated assets measured at fair value:
31 December 2019
Financial assets and investment properties
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Cash and cash equivalents
Total financial assets and investment properties
Financial liabilities
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Total financial liabilities
Level 1
£’Million
Level 2
£’Million
Level 3
Total balance
£’Million
£’Million
–
72,524.8
7,297.4
4,033.1
–
6,720.8
90,576.1
–
–
27,830.0
27,830.0
–
–
18,891.3
–
1,342.9
–
20,234.2
83,558.5
948.8
–
84,507.3
1,750.9
169.4
81.7
1.5
–
–
2,003.5
–
–
–
–
1,750.9
72,694.2
26,270.4
4,034.6
1,342.9
6,720.8
112,813.8
83,558.5
948.8
27,830.0
112,337.3
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 180
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
17. Financial risk continued
31 December 2018
Financial assets and investment properties
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Cash and cash equivalents
Total financial assets and investment properties
Financial liabilities
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Total financial liabilities
Level 1
£’Million
Level 2
£’Million
Level 3
Total balance
£’Million
£’Million
–
56,077.9
6,322.3
3,457.3
–
6,629.1
72,486.6
–
–
22,502.9
22,502.9
–
–
15,638.3
–
508.8
–
16,147.1
67,796.1
517.4
–
68,313.5
1,820.7
–
–
1.8
–
–
1,822.5
–
–
–
–
1,820.7
56,077.9
21,960.6
3,459.1
508.8
6,629.1
90,456.2
67,796.1
517.4
22,502.9
90,816.4
In respect of the derivative financial liabilities, £226.1 million of collateral has been posted at 31 December 2019 (31 December 2018:
£387.5 million), comprising cash and treasury bills, in accordance with the terms and conditions of the derivative contracts.
The fair value of financial instruments traded in active markets is based on quoted bid prices at the reporting date. These instruments are
included in Level 1.
The Group closely monitors the valuation of assets in markets that have become less liquid. Determining whether a market is active requires
the exercise of judgement and is determined based upon the facts and circumstances of the market for the instrument being measured.
Where it is determined that there is no active market, fair value is established using a valuation technique. The techniques applied incorporate
relevant information available and reflect appropriate adjustments for credit and liquidity risks. These valuation techniques maximise the
use of observable market data where it is available and rely as little as possible on entity specific estimates. The relative weightings given
to differing sources of information and the determination of non-observable inputs to valuation models can require the exercise of
significant judgement.
If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2. If one or more of the
significant inputs is not based on observable market data, the instrument is included in Level 3.
Note that all of the resulting fair value estimates are included in Level 2, except for certain equities, fixed income securities, investments in CIS
and investment properties as detailed below.
Specific valuation techniques used to value Level 2 financial assets and liabilities include:
• the use of observable prices for identical current arm’s length transactions, specifically:
– the fair value of unit-linked liabilities is assessed by reference to the value of the underlying net asset value of the Group’s unitised
investment funds, determined on a bid value basis, at the reporting date; and
– the Group’s derivative financial instruments are valued using valuation techniques commonly used by market participants. These consist
of discounted cash flow and option pricing models, which typically incorporate observable market data, principally interest rates, basis
spreads, foreign exchange rates, equity prices and counterparty credit.
Specific valuation techniques used to value Level 3 financial assets and liabilities include:
• the use of unobservable inputs, such as expected rental values and equivalent yields; and
• other techniques, such as discounted cash flow and historic lapse rates, which are used to determine fair value for the remaining
financial instruments.
There were no transfers between Level 1 and Level 2 during the year.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 181
Transfers into and out of Level 3 portfolios
Transfers out of Level 3 portfolios arise when inputs that could have a significant impact on the instrument’s valuation become
market-observable; conversely, transfers into the portfolios arise when consistent sources of data cease to be available.
Transfers in of certain investments in CIS occur when asset valuations can no longer be obtained from an observable market price;
i.e. where they have become illiquid, in liquidation, suspended etc. The converse is true if an observable market price becomes available.
The following table presents the changes in Level 3 financial assets and liabilities at fair value through the profit and loss:
2019
Opening balance
Transfer into Level 3
Additions during the year
Disposed during the year
(Losses)/gains recognised in the income statement
Closing balance
Unrealised (losses)/gains
Realised gains
(Losses)/gains recognised in the income statement
2018
Opening balance
Transfer into Level 3
Additions during the year
Disposed during the year
Gains recognised in the income statement
Closing balance
Realised losses
Unrealised gains
Losses recognised in the income statement
Investment
property
Fixed income
securities
£’Million
1,820.7
–
56.9
(52.5)
(74.2)
1,750.9
(89.9)
15.7
(74.2)
£’Million
–
–
78.7
–
3.0
81.7
3.0
–
3.0
Equities
£’Million
–
–
162.7
–
6.7
169.4
6.7
–
6.7
Investment
property
£’Million
1,630.9
–
277.3
(64.7)
(22.8)
1,820.7
(36.3)
13.5
(22.8)
CIS
£’Million
1.8
(0.1)
–
(0.2)
–
1.5
–
–
–
CIS
£’Million
2.9
0.5
–
(1.6)
–
1.8
–
–
–
No 2018 movement schedule is provided for fixed income securities or equities, as the Group held no Level 3 assets in these categories at
any point during that year.
Unrealised and realised gains/(losses) for all Level 3 assets are recognised within investment return in the Statement of Comprehensive Income.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 182
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
17. Financial risk continued
Level 3 valuations
Investment property
At 31 December 2019 the Group held £1,750.9 million (2018: £1,820.7 million) of investment property, all of which is classified as Level 3 in
the fair value hierarchy. It is initially measured at cost including related acquisition costs and subsequently valued monthly by professional
external valuers at their respective fair values at each reporting date. The fair values derived are based on anticipated market values for
the properties in accordance with the guidance issued by The Royal Institution of Chartered Surveyors, being the estimated amount that
would be received from a sale of the assets in an orderly transaction between market participants. The valuation of investment property is
inherently subjective as it requires, among other factors, assumptions to be made regarding the ability of existing tenants to meet their rental
obligations over the entire life of their leases, the estimation of the expected rental income into the future, an assessment of a property’s
potential to remain as an attractive technical configuration to existing and prospective tenants in a changing market and a judgement to
be reached on the attractiveness of a building, its location and the surrounding environment.
31 December 2019
Gross ERV (per sq ft)1
Range
Weighted average
True equivalent yield
Range
Weighted average
31 December 2018
Gross ERV (per sq ft)1
Range
Weighted average
True equivalent yield
Range
Weighted average
Investment property classification
Office
Industrial
Retail and leisure
All
£14.66–£97.55
£36.02
£4.13–£17.50
£8.28
£2.50–£159.96
£15.47
£2.50–£159.96
£15.12
4.1%–8.5%
5.3%
4.1%–6.3%
4.6%
4.7%–13.9%
6.7%
4.1%–13.9%
5.5%
Investment property classification
Office
Industrial
Retail and leisure
All
£14.66–£99.97
£34.03
£4.00–£29.39
£8.17
£4.50–£159.96
£15.92
£4.00–£159.96
£14.89
4.1%–8.6%
5.2%
4.1%–6.7%
4.9%
4.6%–13.7%
6.2%
4.1%–13.7%
5.5%
1 Equivalent rental value (per square foot).
Fixed income securities and equities
At 31 December 2019 the Group held £169.4 million (2018: nil) in private credit investments, and £81.7 million (2018: nil) in private equity
investments through the St. James’s Place Diversified Assets (FAIF) Unit Trust. These are recognised within fixed income securities and
equities on the Consolidated Statement of Financial Position respectively. They are initially measured at cost and are subsequently
remeasured to fair value following a monthly valuation process which includes verification by suitably qualified professional external
valuers, who are members of various industry bodies including the British Private Equity and Venture Capital Association (BVCA).
The fair values of the private credit investments are principally determined using two valuation methods:
1.
2.
the shadow rating method, which assigns a shadow credit rating to the debt issuing entity and determines an expected yield with
reference to observable yields for comparable companies with public credit rating in the loan market; and
the weighted average cost of capital (WACC) method, which determines the debt issuing entity’s WACC with reference to observable
market comparatives.
The expected yield and WACC are used as the discount rates to calculate the present value of the expected future cash flows under the
shadow rating and WACC methods respectively, which is taken to be the fair value.
The fair values of the private equity investments are principally determined using two valuation methods:
1. a market approach with reference to suitable market comparatives; and
2.
an income approach using discounted cash flow analysis which assesses the fair value of each asset based on its expected future
cash flows.
The output of each method for both the private credit and private equity investments is a range of values, from which the mid-point
is selected to be the fair value in the majority of cases. The mid-point would not be selected if further information is known about an
investment which cannot be factored into the valuation method used. A weighting is assigned to the values determined following each
method to determine the final valuation.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 183
The valuations are inherently subjective as they require a number of assumptions to be made, such as determining which entities provide
suitable market comparatives and their relevant performance metrics (for example earnings before interest, tax, depreciation and
amortisation), determining appropriate discount rates and cash flow forecasts to use in models, the weighting to apply to each valuation
methodologies and the point in the range of valuations to select as the fair value.
Sensitivity of Level 3 valuations
Investment in Collective Investment Schemes
The valuation of certain investments in CIS are based on the latest observable price available. Whilst such valuations are sensitive to
estimates, it is believed that changing the price applied to a reasonably possible alternative would not change the fair value significantly.
Investment property
As set out on the previous page, investment property is initially measured at cost including related acquisition costs and subsequently
valued monthly by professional external valuers at their respective fair values at each reporting date. The following table sets out the effect
of applying reasonably possible alternative assumptions, being a 5% movement in estimated rental value and a 25 bps movement in relative
yield, to the valuation of the investment properties. Any change in the value of investment property is matched by an associated movement
in the policyholder liability, and therefore would not impact on the shareholder net assets.
31 December 2019
31 December 2018
Investment property significant unobservable inputs
Expected rental value/Relative yield
Expected rental value/Relative yield
Effect of reasonable possible
alternative assumptions
Favourable
changes
Unfavourable
changes
£’Million
1,917.0
1,994.9
£’Million
1,602.3
1,665.2
Carrying value
£’Million
1,750.9
1,820.7
Fixed income securities and equities
As set out on the previous page, the fair values of the Level 3 fixed income securities and equities are selected from the valuation range
determined through the monthly valuation process. The following table sets out the effect of valuing each of the assets at the high and low
point of the range. As for investment property, any change in the value of these fixed income securities or equities is matched by an
associated movement in the policyholder liability, and therefore would not impact on the shareholder net assets. No sensitivity is provided for
31 December 2018 as each of the Group’s investments into these assets were made during 2019.
31 December 2019
Fixed income securities
Equities
Credit risk
Credit risk relating to unit liabilities is borne by the unit holders.
Effect of reasonable possible
alternative assumptions
Favourable
changes
Unfavourable
changes
£’Million
82.9
191.3
£’Million
80.2
147.9
Carrying value
£’Million
81.7
169.4
Contractual maturity and liquidity analysis
Unit liabilities (and the associated assets) are deemed to have a maturity of up to one year since they are repayable and transferable on
demand. In practice the contractual maturities of the assets may be longer than one year, but the majority of assets held within the unit-
linked and unit trust funds are highly liquid and the Group also actively monitors fund liquidity.
Sensitivity analysis to market risks
The majority of the Group’s business is unitised and the direct associated market risk is therefore borne by unit holders. For completeness,
we note that there is an indirect risk associated with market performance as future shareholder income is dependent upon markets; however,
the direct risk has been mitigated through the Group’s approach to matching assets and liabilities.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 184
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
18. Capital management and allocation
The Group’s Capital Management policy, set by the Board, is to maintain a strong capital base in order to:
• protect clients’ interests;
• meet regulatory requirements;
• protect creditors’ interests; and
• create shareholder value through support for business development.
The policy requires that each subsidiary manages its own capital, in particular to maintain regulatory solvency, in the context of a Group
capital plan. Any capital in excess of planned requirements is returned to the Group’s Parent Company, St. James’s Place plc, normally by
way of dividends. The Group capital position is monitored by the Audit Committee on behalf of the St. James’s Place plc Board.
Regulatory capital
The Group’s capital management policy is, for each subsidiary, to hold the higher of:
• the capital required by any relevant supervisory body uplifted by a specified margin to absorb changes; or
• the capital required based on the Company’s internal assessment.
For our insurance companies, we hold capital based on our own internal assessment, recognising the regulatory requirement. For other
regulated companies we generally hold capital based on the regulatory requirement uplifted by a specified margin.
The following entities are subject to regulatory supervision and have to maintain a minimum level of regulatory capital:
Entity
St. James’s Place UK plc
St. James’s Place International plc
St. James’s Place Unit Trust Group Limited
St. James’s Place Investment Administration Limited
St. James’s Place Wealth Management plc
St. James’s Place Partnership Services Limited
BFS Financial Services Limited
Linden House Financial Services Limited
St. James’s Place (Hong Kong) Limited
St. James’s Place International (Hong Kong) Limited
St. James’s Place (Singapore) Private Limited
Rowan Dartington & Co Limited
Regulatory body and jurisdiction
PRA and FCA: Long-term insurance business
Central Bank of Ireland: Life insurance business
FCA: UCITS Management Company
FCA: Investment Firm
FCA: Personal Investment Firm
FCA: Consumer Credit Firm
FCA: Personal Investment Firm
FCA: Personal Investment Firm
Securities and Futures Commission (Hong Kong): A Member of
The Hong Kong Confederation of Insurance Brokers
Insurance Authority (Hong Kong)
Monetary Authority Singapore: A Member of the Association
of Financial Advisers
FCA: Investment Firm
In addition, the St. James’s Place Group is regulated as an insurance group under Solvency II, with the PRA as the lead regulator.
As an insurance group, St. James’s Place is subject to the Solvency II regulations, which were implemented on 1 January 2016. More
information about capital position of the Group under Solvency II regulations is set out in the separate Solvency and Financial Condition
Report document. The overall capital position for the Group at 31 December 2019, assessed on the standard formula basis, is presented
in the following table:
IFRS total assets
Less Solvency II valuation adjustments and unit-linked liabilities
Solvency II net assets
Solvency II VIF
Risk margin
Own funds (A)
Standard formula SCR (B)
Solvency II free assets (A-B)
Solvency II ratio (A/B)
31 December
2019
31 December
2018
£’Million
117,292.0
(116,235.2)
1,056.8
4,303.5
(1,213.3)
4,147.0
3,148.0
999.0
132%
£’Million
94,827.0
(93,719.0)
1,108.0
3,388.8
(989.4)
3,507.4
2,447.3
1,060.1
143%
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Solvency II net assets
Less: management solvency buffer (MSB)
Excess of free assets over MSB
185
31 December
2019
31 December
2018
£’Million
1,056.8
(476.2)
580.6
£’Million
1,108.0
(491.0)
617.0
An overall internal capital assessment is required for insurance groups. This is known as an ORSA (Own Risk and Solvency Assessment) and
is described in more detail in the ORSA section of the Risk and Risk Management report; refer to page 61.
The regulatory capital requirements of companies within the Group, and the associated solvency of the Group, are assessed and monitored
by the Finance Executive Committee, a Committee of the Executive Board, with oversight by the Audit Committee on behalf of the Group
Board. Ultimate responsibility for individual companies’ regulatory capital lies with the relevant subsidiary boards.
There has been no material change in the level of capital requirements of individual companies during the year, nor in the Group’s
management of capital. All regulated entities exceeded the minimum solvency requirements at the reporting date and during the year.
IFRS capital composition
The principal forms of capital are included in the following balances on the Consolidated Statement of Financial Position:
Share capital
Share premium
Shares in trust reserve
Miscellaneous reserves
Retained earnings
Shareholders’ equity
Non-controlling interests
Total equity
31 December
2019
31 December
2018
£’Million
80.2
182.4
(16.4)
2.5
699.4
948.1
(0.9)
947.2
£’Million
79.4
174.5
(23.7)
2.5
787.3
1,020.0
(0.9)
1,019.1
The above assets do not all qualify as regulatory capital. The required minimum regulatory capital and analysis of the assets that qualify as
regulatory capital are outlined in Section 3 of the Financial Review on page 58, which demonstrates that the Group has met its internal capital
objectives. The Group and its individually regulated operations have complied with all externally and internally imposed capital requirements
throughout the year.
19. Share capital, earnings per share and dividends
Share capital
At 1 January 2018
– Exercise of options
At 31 December 2018
– Issue of shares
– Exercise of options
At 31 December 2019
Number of
ordinary shares
Called-up
share capital
529,077,896
375,501
529,453,397
388,783
4,958,446
534,800,626
£’Million
79.4
–
79.4
0.1
0.7
80.2
Ordinary shares have a par value of 15 pence per share (2018: 15 pence per share) and are fully paid.
Included in the issued share capital are 2,894,530 (2018: 3,505,217) shares held in the shares in trust reserve with a nominal value of
£0.4 million (2018: £0.5 million). The shares are held by the SJP Employee Share Trust and the St. James’s Place 2010 SIP Trust to satisfy
certain share-based payment schemes. The trustees of the SJP Employee Share Trust retain the right to dividends on the shares held
by the Trust but have chosen to waive their entitlement to the dividends on 438,105 shares at 31 December 2019 and 845,897 shares at
31 December 2018. No dividends have been waived on shares held in the St. James’s Place 2010 SIP Trust in 2019 or 2018.
Share capital increases are included within the ‘exercise of options’ row of the table above where they relate to the Group’s share-based
payment schemes. Other share capital increases are included within the ‘issue of shares’ row.
The number of shares reserved for issue under options and contracts for sale of shares, including terms and conditions, is included within
Note 20.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 186
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
19. Share capital, earnings per share and dividends continued
Earnings per share
Earnings
Profit after tax attributable to equity shareholders (for both basic and diluted EPS)
Weighted average number of shares
Weighted average number of ordinary shares in issue (for basic EPS)
Adjustments for outstanding share options
Weighted average number of ordinary shares (for diluted EPS)
Earnings per share (EPS)
Basic earnings per share
Diluted earnings per share
Dividends
The following dividends have been paid by the Group:
Final dividend in respect of previous financial year
Interim dividend in respect of current financial year
Total dividends
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
£’Million
146.6
173.5
Million
Million
531.3
2.7
534.0
526.0
8.7
534.7
Pence
Pence
27.6
27.5
33.0
32.4
Year ended
31 December
2019
Year ended
31 December
2018
Year ended
31 December
2019
Year ended
31 December
2018
Pence per share Pence per share
27.45
18.49
45.94
29.73
18.49
48.22
£’Million
157.5
98.5
256.0
£’Million
145.0
97.7
242.7
The Directors have recommended a final dividend of 31.22 pence per share (2018: 29.73 pence). This amounts to £167.0 million (2018:
£157.4 million) and will, subject to shareholder approval at the Annual General Meeting, be paid on 22 May 2020 to those shareholders
on the register as at 17 April 2020.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 187
20. Share-based payments
During the year ended 31 December 2019, the Group operated a number of different equity and cash-settled share-based payment
arrangements, which are aggregated as follows:
Share option schemes
• Save As You Earn (SAYE) Plan – this is an equity-settled scheme that is available to all employees where individuals may contribute up to
£250 per month over the three-year vesting period to purchase shares at a price not less than 80% of the market price at the date of the
invitation to participate. 684,968 (2018: 563,553) SAYE options were granted on 22 March 2019 (2018: 23 March 2018 and 21 September
2018). There are no other vesting conditions.
• Partner Performance Share Plan – under this plan Partners are entitled to purchase shares in the future at nominal value (15 pence). The
number of shares the Partners are entitled to purchase will depend on their personal business volumes in a specified 12-month period
and validation over the following three years. The first award under the scheme was made on 29 July 2016, when 3,456,281 shares were
granted. Due to the performance of the Partners over the vesting period, a further 2,618,574 shares were granted in 2019 (2018: nil) in
relation to the original grants made in 2016.
• Partner and Adviser Chartered Plan – the scheme was launched during 2015 as part of the Partner Performance Share Plan whereby
Partners and advisers are entitled to purchase shares in the future at nominal value (15 pence). The number of shares the Partners are
entitled to purchase will depend upon achieving specific professional qualifications and a threshold new business level in a specified
12-month period and validation over the following three years. The first award under the scheme was made on 29 July 2016, when
2,019,000 shares were granted. No grants were made in 2019 (2018: nil).
• Associate Partner Plan – an equity-settled scheme was launched during 2017 whereby Partners and advisers are entitled to purchase
a set number of shares in the future at the market price at the date of the invitation if they meet the required business volumes over the
following three years. No grants were made in 2019 (2018: 1,422,500 shares granted on 19 March 2018).
Share awards
• Share Incentive Plan (SIP) – this is an equity-settled scheme, available to all employees, where individuals may invest up to an annual limit
of £1,800 of pre-tax salary in St. James’s Place plc shares, to which the Group will add a further 10%. The vesting period is three years,
however if the shares are held for five years they may be sold free of income tax or capital gains tax. There are no other vesting conditions.
7,346 (2018: 8,166) shares were granted under the SIP on 25 March 2019 (2018: 29 March 2018).
• Executive Deferred Bonus Schemes – under these plans the deferred element of the annual bonus is used to purchase shares at market
value in the Company. The shares are held in trust over the three-year vesting period and may be subject to further non-market-based
performance conditions. The plans are predominantly equity-settled. 578,709 (2018: 794,750) shares were granted under the deferred
bonus schemes on 25 March 2019 (2018: 26 March 2018).
• Executive Performance Share Plan – the Remuneration Committee of the Group Board may make awards of performance shares to the
Executive Directors and other senior managers. Two-thirds of shares awarded to Directors are subject to an earnings growth condition
of the Group and one-third of shares awarded to Directors are subject to a comparative total shareholder return condition, both measured
over a three-year vesting period. Further information regarding the vesting conditions of the earnings growth and total shareholder return
dependent portions of the award is given in the Directors’ Remuneration Report on page 108. Awards made to senior managers are largely
only subject to the earnings growth condition of the Group. This is predominantly an equity-settled scheme. 3,129,039 (2018: 1,101,308)
shares were granted under the Executive Performance Share Plan across 3 grants made on 27 February 2019, 25 March 2019 and 23
September 2019 (2018: two grants made on 26 March 2018 and 21 September 2018).
• Restricted Share Plan – upon acquisition of the Rowan Dartington Group a new scheme was launched for eligible employees. Employees
were granted shares, 50% of which vest after 18 months, and the remaining 50% vest after three years providing the individual remains in
employment within the Group and maintains any applicable professional qualifications. The plan is predominantly equity-settled. 323,300
shares were granted under the Restricted Share Plan on 29 July 2016. No grants were made in 2019 (2018: nil).
Share options and awards outstanding under the various share-based payment schemes set out above at 31 December 2019 amount
to 17.5 million shares (2018: 18.2 million). Of these, 8.5 million (2018: 11.2 million) are under option to advisers of the St. James’s Place
Partnership, 7.7 million (2018: 5.4 million) are under option to executives and senior management (including 1.1 million (2018: 1.1 million)
under option to Directors as disclosed in the Directors’ Remuneration Report on page 108 to 111), nil (2018: 0.2 million) are under option
to employees who became employees of the Group on acquisition of the Rowan Dartington Group and 1.3 million (2018: 1.4 million) are
under option through the SAYE and SIP schemes. These are exercisable on a range of future dates.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 188
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
20. Share-based payments continued
Financial assumptions underlying the calculation of fair value
The fair value expense has been based on the fair value of the instruments granted, as calculated using appropriate derivative pricing models.
The table below shows the weighted average assumptions and models used to calculate the grant-date fair value of each award:
Valuation model
Awards in 2019
Fair value (pence)
Share price (pence)
Exercise price (pence)
Expected volatility (% pa)1
Expected dividends (% pa)2
Risk-free interest rate (% pa)
Expected life (years)
Volatility of competitors (% pa)
Correlation with competitors (%)
Awards in 2018
Fair value (pence)
Share price (pence)
Exercise price (pence)
Expected volatility (% pa)1
Expected dividends (% pa)2
Risk-free interest rate (% pa)
Expected life (years)
Volatility of competitors (% pa)
Correlation with competitors (%)
SAYE
Plan
Share
Incentive Plan
Executive
Deferred Bonus
Executive
Performance
Share Plan5
Associate
Partner Plan6
Black-Scholes
Black-Scholes
Black-Scholes
Monte Carlo
Black-Scholes
201.4
1,007.0
771.0
24
4.6
0.7
3.5
N/A
N/A
230.7/235.63
1,109.0/1,138.53
911.0/906.03
27/253
3.9/4.03
0.95/0.943
3.5
N/A
N/A
992.4
992.4
0.0
N/A
0.0
N/A
3
N/A
N/A
1,090.0
1,090.0
0.0
N/A
0.0
N/A
3
N/A
N/A
992.4
992.4
0.0
N/A
0.0
N/A
3
N/A
N/A
1,092.0
1,092.0
0.0
N/A
0.0
N/A
3
N/A
N/A
498.2/992.44
992.4
0.0
24
4.8
N/A
3
13–47
20.0
565.7/1,092.04
1,092.0
0.0
27
0.0
N/A
3
14–57
20.0
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
227.3
1,142.0
1,135.0
27.0
0.0
0.9
3
N/A
N/A
1 Expected volatility is based on an analysis of the Company’s historic share price volatility over a period which is commensurate with the expected term of the options
or the awards.
2 For schemes where dividends are payable on the shares during the vesting period, the dividend yield assumption in the Black-Scholes option pricing model is set at zero.
3 Two SAYE awards were made during 2018 on 23 March and 21 September, the assumptions for which are shown in the table above as the first and second figures, respectively.
4 The awards made under the Executive Performance Share Plan are dependent upon earnings growth in the Company (two-thirds of the award) and a total shareholder return
of a comparator group of companies (one-third of the award). This results in having two fair values for each of the awards made in the table above, the first being in relation
to the comparator total shareholder return which is a market-based performance condition and so valued using a Monte-Carlo simulation, and the second relating to the
Company’s earnings growth, which is a non-market-based performance condition and so valued using the Black-Scholes model.
5 The awards made under the Executive Performance Share Plan for members of the Executive Board Committee (ExBo) are subject to a two-year holding period once the
award has vested. This results in discounted fair values for the ExBo population of 462.8/921.9 (2018: 519.8/1,002.5) to reflect the reduced marketability of the awards.
6 The fair value of the grants made under the Associate Partner Plan has been determined using the Black-Scholes valuation model. This is the most appropriate valuation
method because the value of the services that the Partners and advisers are providing, for which they are being remunerated via the plan, cannot be readily separated from
the overall value of the services provided by the Partners and advisers.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 189
Year ended
31 December
2019
Number of
options
Year ended
31 December
2019
Weighted
average
exercise price
Year ended
31 December
2018
Number of
options
Year ended
31 December
2018
Weighted
average
exercise price
1,342,066
684,968
(308,670)
(437,765)
1,280,599
3,116
3,327,396
2,618,574
(744,264)
(3,075,341)
2,126,365
2,126,365
1,888,000
–
(745,650)
(642,961)
499,389
499,389
5,980,000
–
(182,500)
–
5,797,500
–
£8.27
£8.06
£8.89
£6.93
£8.33
£6.87
£0.15
£0.15
£0.15
£0.15
£0.15
£0.15
£0.15
–
£0.15
£0.15
£0.15
£0.15
£10.95
–
£10.95
–
£10.95
–
1,148,540
563,553
(89,718)
(280,309)
1,342,066
66,005
3,380,289
–
(52,893)
–
3,327,396
–
1,947,000
–
(59,000)
–
1,888,000
–
4,725,000
1,422,500
(167,500)
–
5,980,000
–
£7.73
£8.97
£8.30
£7.34
£8.27
£7.24
£0.15
–
£0.15
–
£0.15
–
£0.15
–
£0.15
–
£0.15
–
£10.83
£11.35
£10.92
–
£10.95
–
Share option schemes
SAYE Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Partner Performance Share Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Partner and Adviser Chartered Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Associate Partner Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
The average share price during the year was 1,032.8 pence (2018: 1,121.9 pence).
The SAYE Plan options outstanding at 31 December 2019 had exercise prices of 687 pence (3,116 options), 844 pence (293,368 options),
771 pence (683,471 options), 906 pence (114,842 options), 911 pence (185,802 options), and a weighted average remaining contractual life
of 1.7 years.
The options outstanding under the Partner Performance Share Plan and the Partner and Adviser Chartered Plan at 31 December 2019 were
all exercisable with an exercise price of 15 pence, hence their weighted average remaining contractual life was nil.
The options outstanding under the Associate Partner Plan at 31 December 2019 had an exercise price of 1,083 pence (4,455,000 options)
and 1,135 pence (1,342,500 options) and a weighted average remaining contractual life of 0.4 years.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
190
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
20. Share-based payments continued
Share awards
All shares awards under the below schemes have exercise prices of nil.
Share Incentive Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Executive Deferred Bonus Scheme
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Executive Performance Share Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Restricted Share Plan
Outstanding at start of year
Granted
Forfeited
Exercised
Outstanding at end of year
Exercisable at end of year
Year ended
31 December
2019
Number of
options
Year ended
31 December
2018
Number of
options
35,009
7,346
(1,079)
(4,203)
37,073
8,990
2,132,414
578,709
(5,320)
(684,101)
2,021,702
–
3,250,646
3,129,039
(178,643)
(509,288)
5,691,754
521,006
155,316
–
(6,912)
(148,404)
–
–
30,283
8,166
(716)
(2,724)
35,009
8,858
2,034,801
794,750
(33,063)
(664,074)
2,132,414
–
2,973,806
1,101,308
(137,997)
(686,471)
3,250,646
349,380
158,916
–
(3,600)
–
155,316
–
Early exercise assumptions
An allowance has been made for the impact of early exercise once options have vested in the SAYE Plan where all option holders are
assumed to exercise half-way through the six-month exercise window.
Allowance for performance conditions
The Executive Performance Share Plan includes a market-based performance condition based on the Company’s total shareholder return
relative to an index of comparator companies. The impact of this performance condition has been modelled using Monte Carlo simulation
techniques, which involve running many thousands of simulations of future share price movements for both the Company and the comparator
index. For the purpose of these simulations it is assumed that the share price of the Company and the comparator index are 20% (2018: 20%)
correlated and that the comparator index has volatilities ranging between 13% p.a. and 47% p.a. (2018: 14% p.a. and 57% p.a.).
The performance condition is based on the Company’s performance relative to the comparator index over a three-year period commencing
on 1 January each year. The fair value calculations for the awards that were made in 2019 therefore include an allowance for the actual
performance of the Company’s share price relative to the index over the period between 1 January 2019 and the various award dates.
Charge to the Consolidated Statement of Comprehensive Income
The table below sets out the charge to the Consolidated Statement of Comprehensive Income in respect of the share-based payment awards:
Equity-settled share-based payment expense
Cash-settled share-based payment expense
Total share-based payment expense
Year ended
31 December
2019
£’Million
28.7
0.5
29.2
Year ended
31 December
2018
£’Million
33.4
0.7
34.1
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 191
Liabilities recognised in the Statement of Financial Position
The liabilities recognised in the Statement of Financial Position in respect of the cash-settled share-based payment awards, and national
insurance obligations arising from share-based payment awards, are as follows. These liabilities are included within other payables on the
face of the Statement of Financial Position. None of the liability in respect of cash-settled share-based payment awards at 31 December
2019 or 31 December 2018 is in respect of vested cash-settled share-based payments.
Liability for cash-settled share-based payments
Liability for employer national insurance contributions on cash-settled and equity-settled share-based payments
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
1.3
5.3
£’Million
1.3
4.8
21. Interests in unconsolidated entities
Unconsolidated structured entities
The Group operates investment vehicles, such as unit trusts. Clients are able to invest in these directly, but also indirectly through products
offered by SJPUK and SJPI. As a result, the Group’s insurance companies can be significant investors in the unit trusts. Note 2 sets out the
judgements inherent in determining when the Group controls, and therefore consolidates, the relevant investment vehicles.
The majority of the risk from a change in the value of the Group’s investment in unconsolidated unit trusts is matched by a change in unit
holder liabilities. The maximum exposure to loss, prior to considering unit holder liabilities, is equal to the carrying value of the investment.
This is recognised within investments in Collective Investment Schemes.
The following unit trusts are not consolidated within the Group Financial Statements; however, the Group does act as the fund manager
of these unit trusts.
Name of entity
St. James’s Place Property
Unit Trust
St. James’s Place UK High Income
Unit Trust
Percentage of ownership interest
2019
2018
Nature of
relationship
Measurement
method
0.00%
0.00%
11.24%
10.91%
Manager of
unit trust
Manager of
unit trust
N/A
Fair value through
profit or loss
Net asset value as at 31 December
2019
£’Million
1,303.8
2018
£’Million
1,325.5
1,244.9
1,312.5
2,548.7
2,638.0
As at 31 December 2019 the value of the Group’s interests in the individual unconsolidated unit trusts were nil (2018: nil) in St. James’s Place
Property Unit Trust and £139.9 million (2018: £143.2 million) in St. James’s Place UK High Income Unit Trust.
Associates
The St. James’s Place UK High Income Unit Trust, registered in England and Wales, is not consolidated within the Group Financial Statements;
however, it does meet the criteria of an associate. Details are provided in the table above. The registered address of the unit trust manager,
St. James’s Place Unit Trust Group Limited, is St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire GL7 1FP.
22. Subsidiary undertakings
Principal subsidiaries:
Investment Holding Companies
Life Assurance
Unit Trust Management
Unit Trust Administration and ISA Management
Distribution
Management Services
Treasury Company
IFA Acquisitions
Asia Distribution
Discretionary Fund Management
1 Directly held by St. James’s Place plc.
2 The Company also operates a branch in Singapore.
3 The Company also operates a branch in the Republic of Ireland.
St. James’s Place Wealth Management Group Limited1
St. James’s Place DFM Holdings Limited1
St. James’s Place UK plc
St. James’s Place International plc (incorporated in Ireland)2
St. James’s Place Unit Trust Group Limited
St. James’s Place Investment Administration Limited
St. James’s Place Wealth Management plc
St. James’s Place Management Services Limited3
St. James’s Place Partnership Services Limited
St. James’s Place Acquisition Services Limited
St. James’s Place International Distribution Limited
Rowan Dartington & Co. Limited
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 192
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
22. Subsidiary undertakings continued
The Company owns either directly or indirectly 100% of the voting ordinary equity share capital of the subsidiaries listed on the previous page;
as such they have been appropriately consolidated. Ongoing solvency requirements within the life assurance, unit trust and financial services
companies of the Group restrict their ability to distribute all their distributable reserves.
Included below is a full list of the entities within the St. James’s Place plc Group at 31 December 2019:
Entity
Arbor Wealth Management Limited (name
changed from SJP Interim Services Limited
on 7 May 2019)
Company
number
10735786
Registered office
*
Country of incorporation Principal activity
England and Wales
Non-trading
Audit
exemption
Yes
Baxter Holding Company Limited
09805128
Baxter & Lindley Financial Services Limited
02307706
BFS Financial Services Limited
(name changed to Perennial Financial
Management Limited on 13 January 2020)
04609753
Cabot Portfolio Nominees Limited
03636010
CGA Financial & Investment Services
Limited
Cirenco Limited
Dartington Portfolio Nominees Limited
Future Proof Limited
Hale Financial Solutions Limited
Lansdown Place Group Holdings
Limited
Lansdown Place Wealth Management
Limited
02666180
01773177
01489542
07608319
04373946
06390547
05458948
Lifestyle Financial Solutions Limited
05411977
Linden House Financial Services
Limited
Linden House Group Limited
LP Auto Enrolment Solutions Limited
02990295
08464570
08257531
LP Financial Management Limited
02195886
LP Holdco Limited
M.H.S. (Holdings) Limited
08323278
00559995
M.S. Estates and Financial Services Limited 02224813
Rowan Dartington & Co. Limited
02752304
Rowan Dartington Holdings Limited
SJP AESOP Trustees Limited
07470226
04089795
*
*
*
England and Wales
Financial Advice
England and Wales
Financial Advice
England and Wales
Financial Advice
Temple Point, Redcliffe Way, Bristol,
BS1 6NL, United Kingdom
England and Wales
Nominee
Company
Yes
Yes
Yes
Yes
England and Wales
Financial Advice
Yes
Temple Point, Redcliffe Way, Bristol,
BS1 6NL, United Kingdom
England and Wales
Nominee
Company
England and Wales
Holding Company
*
*
*
*
2 Oakfield Road, Clifton, Bristol, BS8
2AL, United Kingdom
2 Oakfield Road, Clifton, Bristol, BS8
2AL, United Kingdom
2 Oakfield Road, Clifton, Bristol, BS8
2AL, United Kingdom
*
*
2 Oakfield Road, Clifton, Bristol, BS8
2AL, United Kingdom
2 Oakfield Road, Clifton, Bristol, BS8
2AL, United Kingdom
*
*
*
*
*
*
Yes
Yes
Yes
Yes
Yes
England and Wales
Financial Advice
England and Wales
Financial Advice
England and Wales
Holding Company
England and Wales
Financial Advice
Yes
England and Wales
Financial Advice
Yes
England and Wales
Financial Advice
Yes
England and Wales
Holding Company
England and Wales
Pension
Auto-enrolment
Yes
Yes
England and Wales
Financial Advice
Yes
England and Wales
Holding Company No
England and Wales
Non-trading
England and Wales
Financial Advice
England and Wales
Stockbroker and
Investment
Manager
England and Wales
Holding Company
England and Wales
Nominee
Company
Yes
Yes
No
Yes
Yes
England and Wales
Securitisation
No
SJP Partner Loans No.1 Limited
11390901
Level 37, 25 Canada Square, Canary
Wharf, London, E14 5LQ, United
Kingdom
St. James’s Place (Hong Kong) Limited
275275
1st Floor, Henley Building, 5 Queen’s
Road Central, Hong Kong
Hong Kong
St. James’s Place (PCP) Limited
02706684
*
England and Wales
Overseas
Distribution
Transacts and
Services SJP
Income Streams
No
Yes
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS Entity
St. James’s Place (Shanghai) Limited
Company
number
913100005
66573326L
Registered office
Country of incorporation Principal activity
Suite 2006-2007, 20th Floor, Tower
1 (North), Jing An Kerry Centre,
1515 West Nanjing Road, Shanghai,
China 200040
China
Overseas
Distribution
193
Audit
exemption
No
St. James’s Place (Singapore) Private
Limited
200406398R 1 Raffles Place, #15-61 One Raffles
Place, Singapore 048616, Singapore
Singapore
Financial Advice
No
St. James’s Place Acquisition Services
Limited
07730835
St. James’s Place Client Solutions Limited
05487108
St. James’s Place Corporate Secretary
Limited
St. James’s Place DFM Holdings
Limited
St. James’s Place International
(Hong Kong) Limited
St. James’s Place International Assurance
Group Limited
09131866
09687687
2207694
02727326
St. James’s Place International Distribution
Limited
08798683
St. James’s Place International plc
185345
St. James’s Place Investment
Administration Limited
St. James’s Place Management
Services Limited
08764231
02661044
St. James’s Place Nominees Limited
08764214
St. James’s Place Partnership Services
Limited
St. James’s Place UK plc
08201211
02628062
St. James’s Place Unit Trust Group Limited
00947644
St. James’s Place Wealth Management
(PCIS) Limited 1
St. James’s Place Wealth Management
(Shanghai) Limited
06604824
1511517
*
*
*
*
*
*
*
*
*
*
*
England and Wales
IFA Acquisitions
Yes
England and Wales
England and Wales
Policy
Administration
Corporate
Secretary
England and Wales
Non-trading
Yes
Yes
Yes
Unit 201, 2nd Floor Henley Building,
5 Queen’s Road Central, Hong Kong
Hong Kong
Life Assurance
No
*
*
England and Wales
Holding Company No
England and Wales
Holding Company
Yes
Fleming Court, Flemings Place,
Dublin 4, Ireland
Ireland
Life Assurance
England and Wales
England and Wales
England and Wales
Unit Trust
Administration and
ISA Manager
Management
Services
Nominee
Company
England and Wales
Treasury Company No
England and Wales
Life Assurance
England and Wales
England and Wales
Unit Trust
Management
Securities and
Futures Firm
Overseas
Distribution
No
No
No
Yes
No
No
No
No
1st Floor, Henley Building, 5 Queen’s
Road Central, Hong Kong
Hong Kong
St. James’s Place Wealth
Management Group Limited
02627518
*
England and Wales
Holding Company No
St. James’s Place Wealth
Management International Pte. Ltd
201323453N 1 Raffles Place, #15-61 One Raffles
Place, Singapore 048616, Singapore
Singapore
Holding Company No
St. James’s Place Wealth
Management plc
Stafford House Investments Limited
Technical Connection Limited
04113955
03866935
03178474
*
*
*
England and Wales
UK Distribution
No
England and Wales
Financial Advice
England and Wales
Tax and Advisory
Services
Yes
Yes
* Indicates that the registered office is St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire GL7 1FP, United Kingdom.
1 St. James’s Place Wealth Management (PCIS) Limited was dissolved on 18 February 2020.
Baxter Holding Company Limited (09805128) and Baxter & Lindley Financial Services Limited (02307706) were acquired by the Group on
28 February 2019. Lifestyle Financial Solutions Limited (05411977) was acquired by the Group on 4 November 2019. CGA Financial &
Investment Services Limited (02666180) was acquired by the Group on 23 December 2019.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 194
Notes to the Consolidated Financial Statements
under International Financial Reporting Standards continued
22. Subsidiary undertakings continued
The following wholly-owned subsidiary company was dissolved during the year:
• SJPC Corporate Investments Limited (on 6 August 2019).
Where indicated on the previous page, subsidiaries of St. James’s Place plc have taken advantage, or are expected to take advantage, of the
exemption from statutory audit granted by section 479A of the Companies Act 2006. In accordance with section 479C, St. James’s Place plc
has guaranteed all the outstanding liabilities as at 31 December 2019 of these companies, with the exception of Lansdown Place Group
Holdings Limited, LP Financial Management Limited, Lansdown Place Wealth Management Limited, Lifestyle Financial Solutions Limited and
LP Auto Enrolment Solutions Limited where LP Holdco Limited has guaranteed all the outstanding liabilities as at 31 December 2019.
All Group companies have an accounting reference date of 31 December. Unless otherwise stated, the tax residency of each subsidiary is the
same as the country of incorporation.
100% of the equity share capital is held for the subsidiaries listed on the previous page with the exception of:
a)
b)
c)
LP Holdco Limited (08323278), where 43.14% of equity share capital is held (comprising 100% of the nominal value of the Class A
ordinary shares, which confer 52.83% of voting rights along with a 75.62% holding of the nominal value of the Class C ordinary shares,
which carry voting rights but are not defined as equity);
All subsidiaries of LP Holdco Limited (being Lansdown Place Group Holdings Limited (06390547), Lansdown Place Wealth Management
Limited (05458948), Lifestyle Financial Solutions Limited (05411977), LP Auto Enrolment Solutions Limited (08257531) and LP Financial
Management Limited (02195886)), where 100% of the equity share capital is owned by LP Holdco Limited. As detailed above, the Group
holds 43.14% of the equity share capital for this entity. Note that during the year, LP Holdco Limited purchased the remaining 7.6%
shareholding in Lansdown Place Group Holdings Limited, increasing its shareholding from 92.4% to 100%; and
SJP Partner Loans No.1 Limited (11390901), where 100% of the equity share capital is held by a third-party entity outside of the Group.
Despite this, following an assessment of control in accordance with IFRS 10 it was determined that SJP Partner Loans No.1 Limited is
controlled by the Group and thus is consolidated. For further information, refer to Note 2. Note that all assets and liabilities of SJP Partner
Loans No.1 Limited are restricted and ring-fenced from the other assets and liabilities of the Group.
In addition, the Group Financial Statements consolidate the following unit trusts, all of which are registered in England and Wales.
The registered address of the unit trust manager, St. James’s Place Unit Trust Group Limited, is St. James’s Place House, 1 Tetbury Road,
Cirencester, Gloucestershire GL7 1FP:
St. James’s Place Adventurous Growth Unit Trust
St. James’s Place Index Linked Gilts Unit Trust
St. James’s Place Adventurous International Growth Unit Trust
St. James’s Place International Corporate Bond Unit Trust
St. James’s Place Allshare Income Unit Trust
St. James’s Place International Equity Unit Trust
St. James’s Place Alternative Assets Unit Trust
St. James’s Place Investment Grade Corporate Bond Unit Trust
St. James’s Place Asia Pacific Unit Trust
St. James’s Place Japan Unit Trust
St. James’s Place Balanced Growth Unit Trust
St. James’s Place Managed Growth Unit Trust
St. James’s Place Balanced International Growth Unit Trust
St. James’s Place Money Market Unit Trust
St. James’s Place Balanced Managed Unit Trust
St. James’s Place Multi Asset Unit Trust
St. James’s Place Conservative Growth Unit Trust
St. James’s Place North American Unit Trust
St. James’s Place Conservative International Growth Unit Trust
St. James’s Place Strategic Income Unit Trust
St. James’s Place Continental European Unit Trust
St. James’s Place Strategic Managed Unit Trust
St. James’s Place Corporate Bond Unit Trust
St. James’s Place Sustainable & Responsible Equity Unit Trust
St. James’s Place Diversified Assets (FAIF) Unit Trust
St. James’s Place UK & General Progressive Unit Trust
St. James’s Place Diversified Bond Unit Trust
St. James’s Place UK & International Income Unit Trust
St. James’s Place Emerging Markets Equity Unit Trust
St. James’s Place UK Absolute Return Unit Trust
St. James’s Place UK Growth Unit Trust
St. James’s Place UK Income Unit Trust
St. James’s Place Worldwide Income Unit Trust
St. James’s Place Worldwide Opportunities Unit Trust
St. James’s Place Equity Income Unit Trust
St. James’s Place Equity A Unit Trust
St. James’s Place Equity B Unit Trust
St. James’s Place Equity C Unit Trust
St. James’s Place Gilts Unit Trust
St. James’s Place Global Emerging Markets Unit Trust
St. James’s Place Global Equity Income Unit Trust
St. James’s Place Global Equity Unit Trust
St. James’s Place Global Growth Unit Trust
St. James’s Place Global Smaller Companies Unit Trust
St. James’s Place Global Unit Trust
St. James’s Place Greater European Progressive Unit Trust
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 195
23. Related party transactions
Transactions with St. James’s Place unit trusts
In respect of the non-consolidated St. James’s Place managed unit trusts that are held as investments in the St. James’s Place life and
pension funds, there were gains recognised of £12.3 million (2018: losses of £36.2 million) and the total value of transactions with those
non-consolidated unit trusts was £28.0 million (2018: £26.1 million). Net management fees receivable from these unit trusts amounted to
£11.3 million (2018: £12.2 million). The value of the investment into the non-consolidated unit trusts at 31 December 2019 was £139.9 million
(2018: £143.2 million). These transactions are all with the Group’s associate, as set out in Note 21.
Transactions with key management personnel
Key management personnel have been defined as the Board of Directors and members of the Executive Board. The remuneration paid
to the Board of Directors of St. James’s Place plc is set out in the Directors’ Remuneration Report on pages 104 to 118, in addition to the
disclosure below.
The Remuneration Report also sets out transactions with the Directors under the Group’s share-based payment schemes, together with
details of the Directors’ interests in the share capital of the Company.
Compensation of key management personnel is as follows:
Short-term employee benefits
Post-employment benefits
Share-based payment
Total
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
4.6
0.4
2.3
7.3
£’Million
5.9
0.5
4.5
10.9
The total value of Group FUM held by related parties of the Group as at 31 December 2019 was £27.1 million (2018: £24.7 million). The total
value of St. James’s Place plc dividends paid to related parties of the Group during the year was £0.9 million (2018: £1.2 million).
Commission, advice fees and remuneration of £4.2 million (2018: £3.6 million) was paid, under normal commercial terms, to
St. James’s Place advisers and employees who were related parties by virtue of being connected persons with key management personnel.
The outstanding amount payable at 31 December 2019 was £0.3 million (2018: £0.5 million).
Outstanding at the year-end were Partner loans of £4.9 million (2018: £4.2 million) due from St. James’s Place advisers who were
related parties by virtue of being connected persons with key management personnel. The Group either advanced, or guaranteed, these
loans. During the year £1.2 million (2018: £3.2 million) was advanced and £0.6 million (2018: £0.5 million) was repaid by advisers who
were related parties.
Business loans to Partners are interest-bearing (linked to Bank of England base rate plus a margin), repayable on demand and secured
against the future renewal income streams of that adviser. Interest of £0.2 million was received during 2019 (2018: £0.1 million).
At the start of the year, related parties of key management personnel held 33,517 (2018: 31,017) shares and options under various
St. James’s Place plc share option schemes. During the year 35,988 (2018: 2,500) shares and options were granted, 3,142 (2018: nil)
options lapsed and 2,500 (2018: nil) options were exercised.
Following his appointment to the Executive Board in May 2019, Robert Gardner became a member of the Group’s key management
personnel and hence a related party. As a result Redington Limited, a company under his joint control which provides the Group with
investment consultancy services, also became a related party. During 2019, £6.0 million was expensed for these services, of which
£0.5 million remains outstanding as a payable at 31 December 2019.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 196
Parent Company
Financial
Statements
under Financial
Reporting
Standard 101
Parent Company Statement
of Financial Position ........................... 197
Parent Company Statement
of Changes in Equity ........................... 198
Notes to the Parent
Company Financial Statements ...... 199
S T. J A M E S ’ S P L A C E P L C
FINANCIAL STATEMENTS Parent Company Statement of Financial Position
Registered number: 03183415
Investment in subsidiaries
Current assets
Amounts owed by Group undertakings
Cash and cash equivalents
Current liabilities
Corporation tax liabilities
Amounts owed to Group undertakings
Other payables
Net current assets
Net assets
Equity
Share capital
Share premium
Share option reserve
Miscellaneous reserves
Retained earnings
Total shareholders’ funds
197
Note
2
6
6
3
As at
31 December
2019
As at
31 December
2018
£’Million
384.8
846.0
0.1
(2.9)
–
(0.1)
843.1
1,227.9
80.2
182.4
222.6
0.1
742.6
1,227.9
£’Million
508.0
793.7
0.1
(2.0)
(189.4)
(0.1)
602.3
1,110.3
79.4
174.5
193.9
0.1
662.4
1,110.3
In publishing the Parent Company Financial Statements, the Company has taken advantage of the exemption in Section 408 of the
Companies Act 2006 not to present its individual income statement and related notes that form part of these Parent Company Financial
Statements. The Company is not required to present a Statement of Comprehensive Income. The Company’s profit after tax for the financial
year was £336.2 million (2018: £495.5 million) which can be seen in the Statement of Changes in Equity on page 198.
The Parent Company Financial Statements on pages 197 to 202 were approved by the Board of Directors on 26 February 2020 and signed
on its behalf by:
ANDREW CROFT
Chief Executive
CRAIG GENTLE
Chief Financial Officer
The Notes and information on pages 199 to 202 form part of these Parent Company Financial Statements.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 198
Parent Company Statement of Changes in Equity
At 1 January 2018
Profit and total comprehensive income
for the year
Dividends
Exercise of options
Cost of share options expensed
in subsidiaries
At 31 December 2018
Profit and total comprehensive income
for the year
Dividends
Issue of share capital
Exercise of options
Cost of share options expensed
in subsidiaries
At 31 December 2019
Note
Share
capital
£’Million
79.4
Share
premium
£’Million
171.7
Share option
reserve
Miscellaneous
reserves
£’Million
160.5
£’Million
0.1
Retained
earnings
£’Million
409.6
Total
shareholders’
funds
£’Million
821.3
5
3
5
3
3
–
–
–
–
79.4
–
–
0.1
0.7
–
80.2
–
–
2.8
–
–
–
–
174.5
33.4
193.9
–
–
3.9
4.0
–
–
–
–
–
182.4
28.7
222.6
–
–
–
–
0.1
–
–
–
–
–
0.1
495.5
(242.7)
–
–
662.4
336.2
(256.0)
–
–
–
742.6
495.5
(242.7)
2.8
33.4
1,110.3
336.2
(256.0)
4.0
4.7
28.7
1,227.9
As at 31 December 2019 the total distributable reserves of the Company were £742.6 million (2018: £662.4 million). Information on the
Company’s dividend policy can be found within Note 5 on page 201.
The Notes and information on pages 199 to 202 form part of these Parent Company Financial Statements.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 199
Notes to the Parent Company Financial Statements
1. Accounting policies
Basis of preparation
St. James’s Place plc (the Company) is a limited liability company incorporated in England and Wales, domiciled in the United Kingdom and
whose shares are publicly traded. The Company offers a range of insurance, investment and other wealth management services through its
subsidiaries, which are incorporated in the UK, Ireland and Asia.
The Financial Statements have been prepared under the historical cost convention, on a going concern basis and in accordance with
Financial Reporting Standard 101 (FRS 101) ‘Reduced Disclosure Framework’ and the Companies Act 2006 as applicable to companies
using FRS 101.
The preparation of Financial Statements in compliance with FRS 101 requires the use of certain critical accounting estimates. It also requires
management to exercise judgement in applying the Company’s accounting policies. No significant accounting judgements have been made.
Adoption of amended accounting standards
The Annual Improvements 2015-2017 cycle were adopted by the Company as of 1 January 2019. This has not had any material impact on
the Company’s Financial Statements.
Adoption of new accounting standards
There were no relevant new accounting standards adopted during the year.
FRS 101 – Reduced disclosure exemptions
The Company has taken advantage of the following disclosure exemptions under FRS 101:
• the requirements of paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment;
• the requirements of IFRS 7 Financial Instruments: Disclosures;
• the requirements of paragraphs 91 to 99 of IFRS 13 Fair Value Measurement;
• the requirement in paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information in respect of
paragraph 79(a)(iv) of IAS 1;
• the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 Presentation of
Financial Statements;
• the requirements of IAS 7 Statement of Cash Flows;
• the requirements of paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors;
• the requirements of paragraph 17 and 18A of IAS 24 Related Party Disclosures;
• the requirements in IAS 24 Related Party Disclosures to disclose related party transactions entered into between two or more members
of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member; and
• the requirements of paragraphs 130(f)(ii), 130(f)(iii), 134(d) to 134(f) and 135(c) to 135(e) of IAS 36 Impairment of Assets, provided that
equivalent disclosures are included in the Consolidated Financial Statements of the group in which the entity is consolidated.
Going concern
The Company is a non-trading investment holding company which has positive net assets. The Board believes the Company will continue
to be in business, with neither the intention nor the necessity of liquidation, ceasing trading or seeking protection from creditors pursuant
to laws or regulations for a period of at least 12 months from the date of approval of the Company Financial Statements. As a result, the
Company continues to adopt the going concern basis in preparing these Financial Statements.
Significant accounting policies
The following principal accounting policies have been applied consistently to all the years presented.
(a) Investment return
Investment return comprises dividends from subsidiaries, which are accounted for when received.
(b) Taxation
Taxation is based on profits and income for the year as determined in accordance with the relevant tax legislation, together with adjustments
to provisions for prior years.
(c) Investment in subsidiaries
Investments in subsidiaries are carried at cost stated after any impairment losses, plus the cost of equity-settled share awards granted by
the Company of its own shares.
(d) Receivables
Receivables are initially recognised at fair value and subsequently held at amortised cost less impairment losses.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 200
Notes to the Parent Company Financial Statements continued
1. Accounting policies continued
(e) Amounts owed to Group undertakings
Amounts owed to Group undertakings initially are recognised at fair value and subsequently held at amortised cost, as the business model
for these assets is hold to collect contractual cash flows, which consistent solely of payments of principal and interest.
2. Investment in subsidiaries
At 1 January 2018
Share awards granted
Share capital injection
At 31 December 2018
Share awards granted
Share capital injection
Impairment expense
At 31 December 2019
Cost
Share awards
provision Net book value
Impairment
£’Million
269.4
–
68.6
338.0
–
6.0
–
344.0
£’Million
160.5
33.4
–
193.9
28.7
–
–
222.6
£’Million
(23.9)
–
–
(23.9)
–
–
(157.9)
(181.8)
£’Million
406.0
33.4
68.6
508.0
28.7
6.0
(157.9)
384.8
The carrying value of the investments has been tested for impairment. The investments are supported by the value in use of the subsidiaries.
The investment in subsidiaries net book value is broken down as follows:
St. James’s Place Wealth Management Group Limited
Cirenco Limited
St. James’s Place DFM Holdings Limited
Directly held investments
St. James’s Place Management Services Limited
St. James’s Place Wealth Management plc
St. James’s Place International plc
Rowan Dartington & Co Limited
Stafford House Investments Limited
Investments held due to share awards granted
Total
3. Share capital
At 1 January 2018
– Exercise of options
At 31 December 2018
– Issue of shares
– Exercise of options
At 31 December 2019
31 December
2019
31 December
2018
£’Million
87.6
–
74.6
162.2
156.8
61.8
0.2
3.6
0.2
222.6
384.8
£’Million
87.6
157.9
68.6
314.1
145.3
45.0
0.1
3.3
0.2
193.9
508.0
Number of
ordinary shares
Called-up
share capital
529,077,896
375,501
529,453,397
388,783
4,958,446
534,800,626
£’Million
79.4
–
79.4
0.1
0.7
80.2
The total authorised number of ordinary shares is 605 million (2018: 605 million), with a par value of 15 pence per share (2018: 15 pence
per share). All issued shares are fully paid.
The Company received consideration of £4.7 million (2018: £2.8 million) for the shares issued during the year, including those issued to
satisfy the exercise of options.
4. Auditors’ remuneration
The total audit fee in respect of the Group is set out in Note 5 to the Consolidated Financial Statements on page 154. The audit fee charged
to the Company for the year ended 31 December 2019 is £22,400 (2018: £1,120), which is borne by another entity within the Group.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 201
5. Dividends
The following dividends have been paid by the Company:
Final dividend in respect of previous financial year
Interim dividend in respect of current financial year
Total dividends
Year ended
31 December
2019
Year ended
31 December
2018
Year ended
31 December
2019
Year ended
31 December
2018
Pence per share Pence per share
27.45
18.49
45.94
29.73
18.49
48.22
£’Million
157.5
98.5
256.0
£’Million
145.0
97.7
242.7
The Directors have recommended a final dividend of 31.22 pence per share (2018: 29.73 pence). This amounts to £167.0 million (2018:
£157.5 million) and will, subject to shareholder approval at the Annual General Meeting, be paid on 22 May 2020 to those shareholders on
the register as at 17 April 2020.
Dividend resources
The Company’s expected dividend policy over the medium term is based on a pay-out ratio to Underlying cash of 80%. The capacity of the
Company to make dividend payments to shareholders is determined by the availability of distributable reserves and cash resources. The
actual pay-out ratio for 2019 is 97% based on the total proposed dividend of £265.5 million.
Distributable reserves
The Company is a non-trading investment holding company which derives its distributable reserves from dividends paid by its subsidiaries.
The primary subsidiary which pays dividends to the Company is St. James’s Place Wealth Management Group Limited, an intermediate
holding company which in turn receives dividends primarily from St. James’s Place UK plc, St. James’s Place Unit Trust Group Limited and
St. James’s Place Investment Administration Limited. Ongoing solvency requirements within the life assurance, unit trust and financial
services companies of the Group limit their ability to distribute all their distributable reserves. Analysis of solvency requirements is included
in the Solvency section of the Financial Review on page 58 and further information about regulation and capital requirements is included
in Note 18 to the Consolidated Financial Statements on pages 184 and 185.
The Directors review the distributable reserves of the Company ahead of each interim and final dividend being proposed to ensure the
Company has sufficient distributable reserves to allow a lawful dividend to be paid. As at 31 December 2019, the total distributable reserves
of the Company were £742.6 million (2018: £662.4 million). The Directors are satisfied that this is sufficient to support the proposed final
dividend of £167.0 million.
Cash resources
The shareholder cash resources within the Group at 31 December 2019 were £292.8 million (2018: £248.5 million) as set out in Note 11
to the Consolidated Financial Statements. These cash resources are held by the operating entities within the Group. The cash generated by
the Group during the year was £273.1 million on an Underlying cash basis (2018: £309.0 million) and £229.4 million on a Cash basis (2018:
£268.7 million) as set out in the Financial Review on page 48. The total proposed dividend for 2019 of £265.5 million represents 97% of the
Underlying cash result.
The Cash and Underlying cash bases should not be confused with the IFRS Statement of Cash Flows, which is presented in accordance with
IAS 7 on page 141.
6. Related party transactions and balances
At the year end the following related party balances existed, in addition to the investments in subsidiaries which are set out in Note 2 to the
Parent Company Financial Statements.
Amounts owed by Group undertakings
St. James’s Place Partnership Services Limited
Total
Amounts owed to Group undertakings
Cirenco Limited
Total
31 December
2019
31 December
2018
£’Million
£’Million
846.0
846.0
793.7
793.7
31 December
2019
31 December
2018
£’Million
£’Million
–
–
189.4
189.4
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 202
Notes to the Parent Company Financial Statements continued
6. Related party transactions and balances continued
The amounts owed by Group undertakings are loans granted by the Company which are unsecured and repayable on demand. The loans
incur interest at an agreed rate above the Bank of England’s base rate, as stated in the loan agreements.
During the year, the Company received £480.0 million (2018: £483.8 million) of dividends from subsidiary undertakings. The total value of
St. James’s Place FUM held by related parties of the Company as at 31 December 2019 was £27.1 million (2018: £24.7 million). The total
value of dividends paid to related parties of the Company during the year was £0.9 million (2018: £1.2 million).
The following wholly-owned subsidiaries of St. James’s Place plc have taken advantage of the exemption from statutory audit granted by
section 479A of the Companies Act 2006. In accordance with section 479C, St. James’s Place plc has therefore guaranteed all the
outstanding liabilities as at 31 December 2019 of:
Arbor Wealth Management Limited (name changed from SJP Interim Services Limited on 7 May 2019)
Baxter Holding Company Limited
Baxter & Lindley Financial Services Limited
10735786
09805128
02307706
BFS Financial Services Limited (name changed to Perennial Financial Management Limited on 13 January 2020)
04609753
Cabot Portfolio Nominees Limited
CGA Financial & Investment Services Limited
Cirenco Limited
Dartington Portfolio Nominees Limited
Future Proof Limited
Hale Financial Solutions Limited
Linden House Financial Services Limited
Linden House Group Limited
M.H.S. (Holdings) Limited
M.S. Estates and Financial Services Limited
Rowan Dartington Holdings Limited
SJP AESOP Trustees Limited
St. James’s Place (PCP) Limited
St. James’s Place Acquisition Services Limited
St. James’s Place Client Solutions Limited
St. James’s Place Corporate Secretary Limited
St. James’s Place DFM Holdings Limited
St. James’s Place International Distribution Limited
St. James’s Place Nominees Limited
Stafford House Investments Limited
Technical Connection Limited
7. Directors’ emoluments
03636010
02666180
01773177
01489542
07608319
04373946
02990295
08464570
00559995
02224813
07470226
04089795
02706684
07730835
05487108
09131866
09687687
08798683
08764214
03866935
03178474
The Directors’ responsibilities relate primarily to the trading companies of the Group and accordingly their costs are charged to those
companies and none are met by the Parent Company. Disclosure of the Directors’ emoluments is made within the Directors’ Remuneration
Report on pages 104 to 118.
8. Company information
In the opinion of the Directors there is not considered to be any ultimate controlling party. Copies of the Consolidated Financial Statements
of St. James’s Place plc may be obtained from the Company Secretary, St. James’s Place plc, St. James’s Place House, 1 Tetbury Road,
Cirencester, Gloucestershire, GL7 1FP.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 203
Supplementary
Information:
Consolidated
Financial
Statements
on a Cash
Result Basis
(unaudited)
Consolidated Statement of
Comprehensive Income on a
Cash Result Basis (unaudited) ......... 204
Consolidated Statement of
Changes in Equity on a Cash
Result Basis (unaudited) .................... 205
Consolidated Statement of
Financial Position on a Cash
Result Basis (unaudited) .................... 206
Notes to the Consolidated
Financial Statements on a
Cash Result Basis (unaudited) ......... 207
A N N U A L R E P O R T A N D A C C O U N T S 2 0 19
www.sjp.co.ukSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 204
Consolidated Statement of Comprehensive Income
on a Cash Result Basis (unaudited)
Fee and commission income
Investment return
Net income
Expenses
Profit/(loss) before tax
Tax attributable to policyholders’ returns
Tax attributable to shareholders’ returns
Total Cash result for the year
Cash result basic earnings per share
Cash result diluted earnings per share
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
2,355.4
37.6
2,393.0
(1,600.8)
792.2
(521.8)
(41.0)
229.4
Pence
43.2
43.0
£’Million
1,523.6
7.6
1,531.2
(1,540.5)
(9.3)
296.5
(18.5)
268.7
Pence
51.1
50.2
Note
6
III
III
The Note references above cross refer to the Notes to the Consolidated Financial Statements under IFRS on pages 142 to 195, except where
denoted in Roman numerals.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 205
Consolidated Statement of Changes in Equity
on a Cash Result Basis (unaudited)
Note
19
19
19
19
19
At 1 January 2018
Cash result for the year
Dividends
Exercise of options
Consideration paid for own shares
Shares sold during the year
Change in deferred tax
Change in tax discounting
Change in goodwill and intangibles
At 31 December 2018
Cash result for the year
Dividends
Issue of share capital
Exercise of options
Consideration paid for own shares
Shares sold during the year
Proceeds from exercise of shares
held in trust
Change in deferred tax
Change in tax discounting
Change in goodwill and intangibles
At 31 December 2019
Equity attributable owners of the Parent Company
Share
capital
£’Million
79.4
–
–
–
–
–
–
–
–
79.4
–
–
0.1
0.7
–
–
–
–
–
–
80.2
Share
premium
Shares in
trust reserve
Retained
earnings
£’Million
171.7
–
–
2.8
–
–
–
–
–
174.5
–
–
3.9
4.0
–
–
–
–
–
–
182.4
£’Million
(26.7)
–
–
–
(6.0)
9.0
–
–
–
(23.7)
–
–
–
–
(0.1)
7.4
–
–
–
–
(16.4)
£’Million
869.1
268.7
(242.7)
–
–
(9.0)
(31.8)
23.4
(1.5)
876.2
229.4
(256.0)
–
–
–
(7.4)
0.2
(10.4)
(10.0)
(13.0)
809.0
Misc.
reserves
£’Million
2.5
–
–
–
–
–
–
–
–
2.5
–
–
–
–
–
–
–
–
–
–
2.5
Non-
controlling
interests
£’Million
(0.9)
–
–
–
–
–
–
–
–
(0.9)
–
–
–
–
–
–
Total
equity
£’Million
1,095.1
268.7
(242.7)
2.8
(6.0)
–
(31.8)
23.4
(1.5)
1,108.0
229.4
(256.0)
4.0
4.7
(0.1)
–
–
–
–
–
(0.9)
0.2
(10.4)
(10.0)
(13.0)
1,056.8
Total
£’Million
1,096.0
268.7
(242.7)
2.8
(6.0)
–
(31.8)
23.4
(1.5)
1,108.9
229.4
(256.0)
4.0
4.7
(0.1)
–
0.2
(10.4)
(10.0)
(13.0)
1,057.7
The Note references above cross refer to the Notes to the Consolidated Financial Statements under IFRS on pages 142 to 195, except where
denoted in Roman numerals.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 206
Consolidated Statement of Financial Position
on a Cash Result Basis (unaudited)
Assets
Property and equipment
Fixed income securities
Investment in Collective Investment Schemes
Cash and cash equivalents
Other receivables
Income tax assets
Deferred tax assets
Total assets
Liabilities
Borrowings
Other provisions
Other payables
Income tax liabilities
Deferred tax liabilities
Preference shares
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Shares in trust reserve
Miscellaneous reserves
Retained earnings
Shareholders’ equity
Non-controlling interests
Total shareholders’ equity on a Cash Result Basis
Net assets per share
31 December
2019
31 December
2018
Note
£’Million
£’Million
9
17
17
17
16
15
19
166.3
5.2
1,131.8
292.8
1,391.9
–
98.5
3,086.5
403.7
40.6
1,033.7
115.4
436.2
0.1
2,029.7
1,056.8
80.2
182.4
(16.4)
2.5
809.0
1,057.7
(0.9)
1,056.8
Pence
197.6
28.5
5.4
1,297.0
248.5
890.1
9.7
111.6
2,590.8
348.6
22.7
956.9
–
154.5
0.1
1,482.8
1,108.0
79.4
174.5
(23.7)
2.5
876.2
1,108.9
(0.9)
1,108.0
Pence
209.3
The Note references above cross refer to the Notes to the Consolidated Financial Statements under IFRS on pages 142 to 195, except where
denoted in Roman numerals.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS 207
Notes to the Consolidated Financial Statements
on a Cash Result Basis (unaudited)
I. Basis of preparation
The Consolidated Financial Statements on a Cash Result Basis have been prepared by adjusting the Financial Statements prepared in
accordance with International Financial Reporting Standards as adopted by the EU (adopted IFRSs) and interpretations issued by the IFRS
Interpretations Committee (IFRS IC) for items which do not reflect the cash emerging from the business. The adjustments are as follows:
1.
2.
3.
4.
5.
6.
Unit liabilities and net assets held to cover unit liabilities, as set out in Note 11 to the Consolidated Financial Statements, are policyholder
balances which are removed in the Statement of Financial Position on a Cash Result Basis. No adjustment for payments in or out is
required in the Statement of Comprehensive Income as this business is subject to deposit accounting, which means that policyholder
deposits and withdrawals are recognised in the Statement of Financial Position under IFRS, with only marginal cash flows attributable
to shareholders recognised in the Statement of Comprehensive Income. However, adjustment is required for the investment return and
the movement in investment contract liabilities, which are offsetting and are both zero-ised.
Deferred acquisition costs, the purchased value of in-force business and deferred income assets and liabilities are removed from
the Statement of Financial Position on a Cash Result Basis, and the amortisation of these balances is removed in the Statement of
Comprehensive Income on a Cash Result Basis. The assets, liabilities and amortisation are set out in Note 8 to the Consolidated
Financial Statements.
Share-based payment expense is removed from the Statement of Comprehensive Income on a Cash Result Basis, and the equity and
liability balances for equity-settled and cash-settled share-based payment schemes respectively are removed from the Statement of
Financial Position on a Cash Result Basis. Share-based payment balances are set out in Note 20 to the Consolidated Financial Statements.
Non-unit-linked insurance contract liabilities and reinsurance assets, as set out in Note 14 to the Consolidated Financial Statements, are
removed in the Statement of Financial Position on a Cash Result Basis. The movement in these balances is removed from the Statement
of Comprehensive Income on a Cash Result Basis.
Goodwill, computer software intangible assets and some other assets and liabilities which are inadmissible under the Solvency II regime
are removed from the Statement of Financial Position on a Cash Result Basis, however the movement in these figures are included in the
Statement of Comprehensive Income on a Cash Result Basis.
Deferred tax assets and liabilities are adjusted in the Statement of Financial Position on a Cash Result Basis to reflect the adjustments
noted above and other discounting differences between tax charges and IFRS accounting. However, the impact of movements in
deferred tax assets and liabilities are not included in the Statement of Comprehensive Income on a Cash Result Basis.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 208
Notes to the Consolidated Financial Statements
on a Cash Result Basis (unaudited) continued
II. Reconciliation of the IFRS Balance Sheet to the Cash Balance Sheet
The Solvency II Net Assets (or Cash) balance sheet is based on the IFRS Consolidated Statement of Financial Position (on page 140),
with adjustments made to accounting assets and liabilities to reflect the Solvency II regulations and the provision for insurance liabilities
set equal to the associated unit liabilities.
The reconciliation between the IFRS and Solvency II Net Assets Balance Sheet as at 31 December 2019 is set out on page 52.
The reconciliation as at 31 December 2018 is set out below.
31 December 2018
Assets
Goodwill
Deferred acquisition costs
Purchased value of in-force business
Computer software
Property and equipment
Deferred tax assets
Reinsurance assets
Other receivables
Income tax assets
Investment property
Equities
Fixed income securities
Investment in Collective Investment Schemes
Derivative financial instruments
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Deferred tax liabilities
Insurance contract liabilities
Deferred income
Other provisions
Other payables
Investment contract benefits
Derivative financial instruments
Net asset value attributable to unit holders
Income tax liabilities
Preference shares
Total liabilities
Net Assets
IFRS
Balance Sheet
Adjustment 1
Adjustment 2
Solvency II
Net Assets
Balance Sheet
£’Million
£’Million
£’Million
£’Million
15.6
558.5
24.0
1.4
28.5
147.1
82.8
1,952.3
9.7
1,820.7
56,077.9
21,966.0
4,756.1
508.8
6,877.6
94,827.0
348.6
172.9
508.1
648.3
22.7
1,290.8
67,796.1
517.4
22,502.9
–
0.1
93,807.9
1,019.1
–
–
–
–
–
–
–
(1,059.1)
–
(1,820.7)
(56,077.9)
(21,960.6)
(3,459.1)
(508.8)
(6,629.1)
(91,515.3)
–
–
(421.2)
–
–
(277.7)
(67,796.1)
(517.4)
(22,502.9)
–
–
(91,515.3)
–
(15.6)
(558.5)
(24.0)
(1.4)
–
(35.5)
(82.8)
(3.1)
–
–
–
–
–
–
–
(720.9)
–
(18.4)
(86.9)
(648.3)
–
(56.2)
–
–
–
–
–
(809.8)
88.9
–
–
–
–
28.5
111.6
–
890.1
9.7
–
–
5.4
1,297.0
–
248.5
2,590.8
348.6
154.5
–
–
22.7
956.9
–
–
–
–
0.1
1,482.8
1,108.0
Adjustment 1 nets out the policyholder interest in unit-linked assets and liabilities.
Adjustment 2 comprises adjustment to the IFRS Statement of Financial Position in line with Solvency II requirements, including removal
of DAC, DIR, PVIF and their associated deferred tax balances, goodwill and other intangibles.
ST. JAMES’S PLACE PLCFINANCIAL STATEMENTS
III. Earnings per share
Earnings
Cash result after tax attributable to equity shareholders (for both basic and diluted EPS)
Weighted average number of shares
Weighted average number of ordinary shares in issue (for basic EPS)
Adjustments for outstanding share options
Weighted average number of ordinary shares (for diluted EPS)
Earnings per share (EPS)
Basic earnings per share
Diluted earnings per share
209
Year ended
31 December
2019
Year ended
31 December
2018
£’Million
£’Million
229.4
268.7
Million
Million
531.3
2.7
534.0
526.0
8.7
534.7
Pence
Pence
43.2
43.0
51.1
50.2
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
210
04
Other
Information
Shareholder Information .................... 212
How to Contact us and Advisers ..... 213
St. James’s Place
Partnership Locations ........................ 214
Glossary of Alternative
Performance Measures ..................... 216
Glossary of Terms ............................... 219
We listen and respond
The business has a broad range of stakeholders,
and its duties to them are reflected in our strategy
which has a fundamental and clear focus on each
stakeholder, including our workforce, the
Partnership, our clients, shareholders, third-party
suppliers, regulators and wider society. This
section provides information of particular interest
to shareholders, such as the financial calendar,
information about our locations and how
stakeholders can contact us, and two glossaries
which provide further information on our alternative
performance measures and key terms to assist
stakeholders in understanding the Annual Report
and Accounts.
S T. J A M E S ’ S P L A C E P L C
OTHER INFORMATION 211
A N N U A L R E P O R T A N D A C C O U N T S 2 0 19
w w w. s j p . c o . u k
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 212
Shareholder Information
Analysis of number of shareholders
Analysis by number of shares
1–999
1,000–9,999
10,000–99,999
100,000 and above
Holders
2,326
1,868
548
325
5,067
Shares held
Percentage
831,899
45.90%
36.87%
5,545,395
10.82% 18,498,648
6.41% 509,924,684
100.00% 534,800,626
Percentage
0.15%
1.04%
3.46%
95.35%
100.00%
2020 financial calendar
Ex-dividend date for final dividend
Record date for final dividend
Announcement of first-quarter new business
Annual General Meeting
Payment date for final dividend
Announcement of Interim Results and second-quarter new business
Ex-dividend date for interim dividend
Record date for interim dividend
Payment date for interim dividend
Announcement of third-quarter new business
16 April 2020
17 April 2020
30 April 2020
7 May 2020
22 May 2020
28 July 2020
27 August 2020
28 August 2020
25 September 2020
27 October 2020
The above dates are subject to change and further information on the 2020 financial calendar can be found on the Company’s website,
www.sjp.co.uk.
Dividend Reinvestment Plan
If you would prefer to receive new shares instead of cash dividends, please complete a Dividend Reinvestment Plan (DRIP) form, which
is available from our Registrars, Computershare Investor Services PLC. Their contact details are on page 213.
Dividend mandate
Shareholders can arrange to have their dividends paid directly into their bank or building society account by completing a bank mandate
form. The advantages to using this service are: the payment is more secure than sending a cheque through the post; it avoids the
inconvenience of paying in a cheque and reduces the risk of lost, stolen or out-of-date cheques. A mandate form can be obtained from
Computershare or you will find one on the reverse of your last dividend confirmation.
Share dealing
A telephone share dealing service has been established with the Registrars, Computershare Investor Services PLC, which provides
shareholders with a simple way of buying or selling St. James’s Place plc shares on the London Stock Exchange. If you are interested
in this service, telephone 0370 703 0084.
An internet share dealing service is also available. Further information about share dealing services can be obtained by logging on to:
www.computershare.trade.
Electronic communications
If you would like to have access to shareholder communications such as the Annual Report and the Notice of General Meeting through
the internet rather than receiving them by post, please register at www.investorcentre.co.uk/ecomms.
ST. JAMES’S PLACE PLCOTHER INFORMATION How to Contact us and Advisers
How to Contact us
Advisers
213
Registrars and transfer office
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ
Email: webqueries@computershare.co.uk
Tel: 0370 702 0197
www.investorcentre.co.uk/contactus
Independent auditors
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
7 More London Riverside
London
SE1 2RT
Brokers
JPMorgan Cazenove Limited
25 Bank Street
London
E14 5JP
Bank of America Securities Incorporated
2 King Edward Street
London
EC1A 1HQ
Registered office
St. James’s Place House
1 Tetbury Road
Cirencester
Gloucestershire
GL7 1FP
Tel: 01285 640302
www.sjp.co.uk
Chair
Iain Cornish
Email: chair@sjp.co.uk
Chief Executive
Andrew Croft
Email: andrew.croft@sjp.co.uk
Chief Financial Officer
Craig Gentle
Email: craig.gentle@sjp.co.uk
Company Secretary
Elizabeth Kelly
Email: liz.kelly@sjp.co.uk
Customer service
Jared Whitehouse
Tel: 01285 717006
Email: jared.whitehouse@sjp.co.uk
Analyst enquiries
Hugh Taylor
Tel: 020 7514 1963
Email: hugh.taylor@sjp.co.uk
Media enquiries
Jamie Dunkley
Tel: 020 7514 1963
Email: jamie.dunkley@sjp.co.uk
Brunswick Group
Tom Burns/Eilis Murphy
Tel: 020 7404 5959
Email: sjp@brunswickgroup.com
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 214
St. James’s Place Partnership Locations
United Kingdom
1 Aberdeen
St. James’s Place House
3 Queens Gate
Aberdeen
AB15 5YL
Mark Wyllie
Tel: 01224 202400
2 Belfast
St. James’s Place House
14 Cromac Place
Belfast
BT7 2JB
Keith Willett
Tel: 028 9072 6500
3 Bristol
Beech House
Brotherswood Court
Great Park Road
Bradley Stoke
Bristol
BS32 4QW
Sean Aldom
Tel: 01454 618700
4 Cambridge
8200 Cambridge Research Park
Beach Drive
Waterbeach
Cambridge
CB25 9TL
Paolo Payne
Tel: 01223 607700
8
6
2
1
14
9
10 12
15
17
4
5
3
7
13
11
18
16
5 Cardiff
3rd Floor
2 Kingsway
Cardiff
CF10 3FD
Matthew Nelms
Tel: 02921 056000
6 Edinburgh
Melville House
18–22 Melville Street
Edinburgh
EH3 7NS
Steve Herkes
Tel: 0131 459 9200
7 Exeter
1st Floor
Vantage Point
Woodwater Park
Pynes Hill
Exeter
EX2 5FD
Jon Parker
Tel: 01392 549200
8 Glasgow
St. James’s Place House
168 West George Street
Glasgow
G2 2NR
Ross Cameron
Tel: 0141 304 1700
9 Leeds
2nd Floor
Chancellor Court
21 The Calls
Leeds
LS2 7EH
Richard Balmforth
Tel: 0113 244 4054
10 Liverpool
5th Floor
Walker House
Exchange Flags
Liverpool
L2 3YL
Mark Brereton
Tel: 0151 224 8700
ST. JAMES’S PLACE PLCOTHER INFORMATION 215
3 Singapore
St. James’s Place
(Singapore) Private Limited
#15–61
1 Raffles Place
Tower 2
Singapore 048616
Gary Harvey
Tel: +65 6536 0121
Asia
1 Hong Kong
St. James’s Place
(Hong Kong) Limited
1/F Henley Building
5 Queen’s Road Central
Hong Kong
Matthew Deeprose
Tel: +852 2824 1083
2 Shanghai
St. James’s Place
(Shanghai) Limited
Suite 2006-2007
20/F, Tower 1 Jing
An Kerry Centre
1515 Nanjing Road West
Shanghai
China 200040
Spiros Christoforatos
Tel: +86 21 8028 5300
2
1
3
11 London
Canary Wharf
4th Floor
40 Bank Street
Canary Wharf
London
E14 5NR
Mark Rogers
Tel: 0207 516 5700
City
30 Lombard Street
London
EC3V 9BQ
Nick Bayley
Tel: 0208 042 0000
Elstree
St. James’s Place House
5 Oaks Court
Warwick Road
Borehamwood
Hertfordshire
WD6 1GS
Carol Giles
Tel: 0208 207 4000
Hamilton Place
11 Hamilton Place
Mayfair
London
W1J 7DR
Nigel Harwood
Tel: 0207 495 1771
Kingsway
1st Floor
York House
23 Kingsway
London
WC2B 6UJ
Jamie McNish
Tel: 0207 744 1600
12 Manchester
7th Floor
Sunlight House
Quay Street
Manchester
M3 3JZ
Tim Willis
Tel: 0161 834 9480
13 Newbury
Montague Court
21–25 London Road
Newbury
Berkshire
RG14 1JL
Sarah Alder
Tel: 01635 582424
14 Newcastle
One Trinity Gardens
Broad Chare
Newcastle upon Tyne
NE1 2HF
Jon Ellis
Tel: 0191 260 5373
15 Nottingham
Embankment House
Electric Avenue
Nottingham
NG2 1AS
Andy Marks
Tel: 0115 924 2899
16 Solent
St. James’s Place House
1480 Parkway
Solent Business Park
Whitley
Fareham
Hampshire
PO15 7AF
Sarah Ellis
Tel: 01489 881400
17 Solihull
St. James’s Place House
Central Boulevard
Blythe Valley Business Park
Shirley
Solihull
B90 8AR
Sam Porter
Tel: 0121 733 6733
18 Westerham
1st Floor
The Crown
London Road
Westerham
Kent
TN16 1DJ
Robert Theobald
Tel: 01959 561 606
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 216
Glossary of Alternative Performance Measures
Within the Annual Report and Accounts various alternative performance measures (APMs)
are disclosed.
An APM is a measure of financial performance, financial position or cash flows which is not defined by the relevant financial reporting
framework, which for the Group is International Financial Reporting Standards (IFRS) as adopted by the European Union. APMs are used
to provide greater insight into the performance of the Group and the way it is managed by the Directors. The table below defines each APM,
explains why it is used and, if applicable, where the APM has been reconciled to IFRS:
Financial position related APMs
APM
Definition
Why is this measure used?
Our ability to satisfy our liabilities to clients,
and consequently our solvency, is central to our
business. By removing the liabilities which are fully
matched by assets, this presentation allows the reader
to focus on the business operation. It also provides a
simpler comparison with other wealth management
companies.
Solvency II net
assets
Based on IFRS Net Assets, but with the
following adjustments:
1.
Reflection of the recognition requirements of the
Solvency II regulations for assets and liabilities. In
particular this removes deferred acquisition costs
(DAC), deferred income (DIR), purchased value of
in-force (PVIF) and their associated deferred tax
balances, other intangibles and some other small
items which are treated as inadmissible from a
regulatory perspective; and
2.
Adjustment to remove the matching client assets
and the liabilities as these do not represent
shareholder assets.
No adjustment is made to deferred tax, except for that
arising on DAC, DIR and PVIF, as this is treated as an
allowable asset in the Solvency II regulation.
Reconciliation to the
Financial Statements
Refer to page 52.
Total embedded
value
A discounted cash flow valuation methodology,
assessing the long-term economic value of
the business.
Our embedded value is determined in line with the
EEV principles, originally set out by the Chief Financial
Officers (CFO) Forum in 2004, and amended for
subsequent changes to the principles, including those
published in April 2016, following the implementation
of Solvency II.
EEV net asset
value (NAV) per
share
EEV net asset value per share is calculated as the EEV
net assets divided by the year end number of ordinary
shares.
Life business and wealth management business differ
from most other businesses, in that the expected
shareholder income from the sale of a product
emerges over a long period in the future. We therefore
supplement the IFRS and Cash results by providing
additional disclosure on an embedded value basis,
which brings into account the net present value of
expected future cash flows, as we believe that a
measure of total economic value of the Group is useful
to investors.
Total embedded value provides a measure of total
economic value of the Group, and assessing the NAV
per share allows analysis of the overall value of the
Group by share.
Not applicable.
Not applicable.
IFRS NAV
per share
IFRS net asset value per share is calculated as the
IFRS net assets divided by the year-end number of
ordinary shares.
Total IFRS net assets provides a measure of value of
the Group, and assessing the NAV per share allows
analysis of the overall value of the Group by share.
Not applicable.
ST. JAMES’S PLACE PLCOTHER INFORMATION Financial performance related APMs
APM
Definition
Why is this measure used?
217
Reconciliation to the
Financial Statements
Refer to pages 47,
48 and also see
Note 3 – Segment
Profit to the
Consolidated
Financial
Statements
IFRS income statement methodology recognises
non-cash items such as deferred tax and non-cash-
settled share options. By contrast, dividends can only
be paid to shareholders from appropriately fungible
assets. The Board therefore uses the Cash results to
monitor the level of cash generated by the business.
While the Cash result gives an absolute measure
of the cash generated in the year, the Underlying
and Operating cash results are particularly useful
for monitoring the expected long-term rate of
cash emergence, which supports dividends
and sustainable dividend growth.
Not applicable.
See Note 3 –
Segment Profit to
the Consolidated
Financial
Statements
See Note 3 –
Segment Profit to
the Consolidated
Financial
Statements
As Underlying cash is the best reflection of the cash
generated by the business, Underlying cash EPS
measures allow analysis of the shareholder cash
generated by the business by share.
Both the IFRS and Cash results reflect only the cash
flows in the year. However our business is long-term,
and activity in the year can generate business with a
long-term value. We therefore believe it is helpful to
understand the full economic impact of activity in the
year, which is the aim of the EEV methodology.
Both the IFRS and Cash results reflect only the cash
flows in the year. However, our business is long-term,
and activity in the year can generate business with a
long-term value. We therefore believe it is helpful to
understand the full economic impact of activity in
the year, which is the aim of the EEV methodology.
Within the EEV, many of the future cash flows derive
from fund charges, which change with movements in
stock markets. Since the impact of these changes is
typically unrelated to the performance of the business,
we believe that the EEV operating profit (reflecting
the EEV profit, adjusted to reflect only the expected
investment performance and no change in economic
basis) provides the most useful measure of embedded
value performance in the year.
As EEV operating profit is the best reflection
of the EEV generated by the business, EEV
operating profit EPS measures allow analysis of the
long-term value generated by the business by share.
Not applicable.
Operating cash
result, Underlying
cash result and
Cash result
Underlying cash
basic and diluted
earnings per share
(EPS)
EEV profit
EEV operating
profit
EEV operating
profit basic and
diluted earnings
per share (EPS)
The Cash result is defined as the movement between
the opening and closing Solvency II net assets
adjusted for the following items:
1.
2.
3.
The movement in deferred tax is removed
to reflect just the cash realisation from the
deferred tax position;
The movements in goodwill and other intangibles
are included; and
Other changes in equity, such as dividends paid in
the year and non-cash-settled share option costs,
are excluded.
The Operating cash result reflects the regular
emergence of cash from the business operations. The
Underlying cash results additionally reflects the cash
impact of the strategic investments we are making.
Finally, the Cash result reflects all other cash items,
including those whose emergence is volatile, varying
over time and often influenced by markets, together
with the short-term costs associated with the
back-office infrastructure project.
Neither the Cash result nor the underlying
cash result should be confused with the IFRS
Consolidated Statement of Cash Flows which
is prepared in accordance with IAS 7.
These EPS measures are calculated as Underlying
cash divided by the number of shares used in the
calculation of IFRS basic and diluted EPS.
Derived as the movement in the total EEV during
the year.
A discounted cash flow valuation methodology,
assessing the long-term economic value of
the business.
Our embedded value is determined in line with
the EEV principles, originally set out by the
Chief Financial Officers (CFO) Forum in 2004,
and amended for subsequent changes to the
principles, including those published in April 2016,
following the implementation of Solvency II.
The EEV operating profit reflects the total EEV result
with an adjustment to strip out the impact of stock
market and other economic effects during the year.
Within EEV operating profit is new business
contribution, which is the change in embedded value
arising from writing new business during the year.
These EPS measures are calculated as EEV operating
profit after tax divided by the number of shares used
in the calculation of IFRS basic and diluted EPS.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 218
Glossary of Alternative Performance Measures continued
Financial performance related APMs continued
APM
Definition
Why is this measure used?
Policyholder and
shareholder tax
Shareholder tax is estimated by making an
assessment of the effective rate of tax that is
applicable to the shareholders on the profits
attributable to the shareholders. This is calculated by
applying the appropriate effective corporate tax rates
to the shareholder profits.
The UK tax regime facilitates the collection of tax from
life insurance policyholders by making an equivalent
charge within the corporate tax of the Company. The
total tax charge for the insurance companies therefore
comprises both this element and an element more
closely related to normal corporation tax.
Reconciliation to the
Financial Statements
Disclosed as
separate line items
in the Statement
of Comprehensive
Income on page
138.
The remainder of the tax charge represents tax
on policyholders’ investment returns.
This calculation method is consistent with the
legislation relating to the calculation of the tax
on shareholders’ profits.
Profit before
shareholder tax
A profit measure which reflects the IFRS result
adjusted for policyholder tax, but before deduction of
shareholder tax. Within the Consolidated Statement of
Comprehensive Income the full title of this measure is
‘Profit before tax attributable to shareholders' returns’.
Underlying profit A profit measure which reflects the IFRS
result adjusted to remove the DAC, DIR and
PVIF adjustments.
Life insurance business impacted by this tax typically
includes policy charges which align with the tax
liability, to mitigate the impact on the corporate. As a
result, when policyholder tax increases, the charges
also increase. Given these offsetting items can be
large, and typically do not perform in line with the
business, it is beneficial to be able to identify the two
elements separately. We therefore refer to that part of
the overall tax charge, which is deemed attributable to
policyholders, as policyholder tax, and the
rest as shareholder tax.
The IFRS methodology requires that the tax
recognised in the Financial Statements should include
the tax incurred on behalf of policyholders in our UK
life assurance company. Since the policyholder tax
charge is unrelated to the performance of the
business, we believe it is also useful to separately
identify the profit before shareholder tax, which
reflects the IFRS profit before tax, adjusted only for tax
paid on behalf of policyholders.
The IFRS methodology promotes recognition of profits
in line with the provision of services and so, for
long-term business, some of the initial cash flows are
spread over the life of the contract through the use of
intangible assets and liabilities (DAC and DIR). Due to
the Retail Distribution Review (RDR) regulation change
in 2013, there was a step change in the progression of
these items in our accounts, which resulted in
significant accounting presentation changes despite
the fundamentals of our vertically-integrated business
remaining unchanged. We therefore believe it is useful
to consider the IFRS result having removed the impact
of movements in these intangibles as it better reflects
the underlying performance of the business.
Disclosed as a
separate line item
in the Statement
of Comprehensive
Income on page
138.
Refer to page 46.
ST. JAMES’S PLACE PLCOTHER INFORMATION
Glossary of Terms
Adviser or financial adviser
An individual who is authorised by an appropriate regulatory
authority to provide financial advice. In the UK our advisers
are authorised by the FCA.
Administration platform, also Bluedoor
A new client-centric administration system, which has been
developed in conjunction with our third-party outsourced
administration provider, SS&C. The system is owned by SS&C.
Capita
A provider of business process outsourcing and integrated
professional support service solutions, which is our third-party
outsourced provider, responsible for the administration of our
Dublin-based life insurance company, SJPI.
Chief Operating Decision Maker (CODM)
The Executive Committee of the Board (Executive Board), which is
responsible for allocating resources and assessing the performance
of the operating segments.
Client advocacy
The Company requests feedback from clients biennially through
a survey distributed alongside the Wealth Account. Advocacy is
measured by the response to the question ‘Would you recommend
SJP services to others?’. The potential responses distinguish
between ‘Yes, and have done so already’, ‘Yes, but have yet to do so’
and ‘No’.
Client numbers
The number of individuals who have received advice from a
St. James’s Place Partner and own a St. James’s Place wrapper.
Client retention
Client retention is assessed by calculating the proportion of clients
at 1 January in the year who remain as a client throughout the year
and are still a client on 31 December of the same year.
Company
The Company refers to St. James’s Place plc, which is also referred
to as ‘St. James’s Place’, ‘St. James’s Place plc’ and ‘SJP’
throughout the Annual Report and Accounts.
Deferred acquisition costs (DAC)
An intangible asset required to be established through the
application of IFRS to our long-term business. The value of the
asset is equal to the amount of all costs which accrue in line with
new business volumes. The asset is amortised over the expected
lifetime of the business.
Deferred income (DIR)
Deferred income, which arises from the requirement in IFRS that
initial charges on long-term financial instruments, should only be
recognised over the lifetime of the business. The initial amount of
the balance is equal to the charge taken.
219
Discretionary Fund Management (DFM)
A generic term for a form of investment management in which buy
and sell decisions are made (or assisted) by a portfolio manager for
a client’s account. Within St. James’s Place, the services provided
by Rowan Dartington (including investment management, advisory
stockbroking and wealth planning) are collectively referred to as
Discretionary Fund Management, distinguishing them from the
services provided by our Partners and from the Investment
Management Approach (IMA).
European Embedded Value (EEV)
EEV reflects the fact that the expected shareholder income from the
sale of wealth management products emerges over a long period of
time by bringing into account the net present value of the expected
future cash flows. EEV is calculated in accordance with the EEV
principles originally issued in May 2004 by the Chief Financial
Officers Forum (CFO Forum), supplemented in both October 2005
and, following the introduction of Solvency II, in April 2016.
Field management team (FMT)
The team of managers within St. James’s Place with day-to-day
responsibility for support and supervision of the Partnership.
Financial Conduct Authority (FCA)
The FCA is a company limited by guarantee and is independent of
the Bank of England. It is responsible for the conduct of business
regulation of all firms (including those firms subject to prudential
regulation by the Prudential Regulation Authority (PRA)) and the
prudential regulation of all firms not regulated by the PRA. The FCA
has three statutory objectives: securing an appropriate degree of
protection for consumers, protecting and enhancing the integrity of
the UK financial system, and promoting effective competition in the
interests of consumers.
Financial Services Compensation Scheme (FSCS)
The FSCS is the UK’s statutory compensation scheme for
customers of authorised financial services firms. This means that
the FSCS can pay compensation if a firm is unable, or is likely to be
unable, to pay claims against it. The FSCS is an independent body,
set up under the Financial Services and Markets Act 2000 (FSMA),
and funded by a levy on ‘authorised financial services firms’. The
scheme covers deposits, insurance policies, insurance brokering,
investments, mortgages and mortgage arrangement.
Funds under management (FUM)
Represents all assets actively managed or administered by or on
behalf of the Group, including all life insurance and unit trust assets,
but not assets managed by third parties where we have only
introduced or advised on the business. Assets managed by
Rowan Dartington count as FUM from the date of acquisition.
Gestation FUM
This represents FUM on which no annual management charges
are taken. Most of our investment and pension business enters
a six-year gestation period following initial investment. FUM which
is not gestation FUM is known as mature FUM, which is defined
overleaf.
Gross inflows
Total new funds under management accepted in the period. New
funds accepted by Rowan Dartington count for Gross inflows from
the date of acquisition.
www.sjp.co.ukANNUAL REPORT AND ACCOUNTS 2019STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION 220
Glossary of Terms continued
Group
The Group refers to the Company together with its subsidiaries
as listed in Note 22 to the Consolidated Financial Statements.
International Financial Reporting Standards (IFRS)
These are accounting regulations issued by the International
Accounting Standards Board (IASB) designed to ensure comparable
preparation and disclosure of statements of financial position, and
are the standards that all publicly listed companies in the European
Union are required to use.
Investment Management Approach (IMA)
The IMA is how St. James’s Place manages clients’ investments.
It is managed by the St. James’s Place Investment Committee,
which in turn is advised by respected independent investment
research consultancies, including Stamford Associates, Redington
and Aon Consulting. The Investment Committee is responsible
for identifying fund managers for our funds, selecting from fund
management firms all around the world. It is also responsible
for monitoring the performance of our fund managers, and, if
circumstances should change and it becomes necessary, then
it is responsible for changing the fund manager as well.
Mature FUM
This represents FUM on which annual product management
charges are taken. ISA and unit trust business flows into mature
FUM from initial investment, but most of our investment and
pension business only becomes mature FUM after the six-year
gestation period, during which time it is known as gestation FUM.
Maturities
Those sums paid out where a plan has reached the intended,
pre-selected, maturity event (e.g. retirement).
Net inflows
Net inflows are Gross inflows less the amount of FUM withdrawn
by clients during the same period. The net inflows are the growth
in FUM not attributable to investment performance.
Paraplanner
Staff in a Partner practice who support the advisers in that practice.
Policyholder and shareholder tax
The UK tax regime facilitates the collection of tax from life insurance
policyholders by making an equivalent charge within the corporate
tax of the Company. This part of the overall tax charge, which is
attributable to policyholders, is called policyholder tax. The rest is
shareholder tax.
Prudential Regulation Authority (PRA)
The PRA is a part of the Bank of England and is responsible for the
prudential regulation of deposit-taking institutions, insurers and
major investment firms. The PRA has two statutory objectives: to
promote the safety and soundness of these firms and, specifically
for insurers, to contribute to the securing of an appropriate degree
of protection for policyholders.
Purchased value of in-force (PVIF)
An intangible asset established on takeover or acquisition, reflecting
the present value of the expected emergence of profits from a
portfolio of long-term business. The asset is amortised in line with
the emergence of profits.
Registered Individuals
An individual who is registered by the FCA, particularly an individual
who is registered to provide financial advice. See also Adviser and
St. James’s Place Partner.
Regular income withdrawals
Those amounts, pre-selected by clients, which are paid out by way
of periodic income.
Responsible investment (RI)
Principles and practices that consider broader sustainability themes
and specific environmental, social and corporate governance (ESG)
factors within the investment process.
Retirement Account (RA)
A pension product, launched during 2016, which incorporates both
pre-retirement pension saving and post-retirement benefit receipts
in the same investment product.
Rowan Dartington (RD)
A wealth management business providing investment management,
advisory stockbroking and wealth planning services acquired by
St. James’s Place during 2016.
Solvency II
Insurance regulations designed to harmonise EU insurance
regulation which became effective on 1 January 2016. The key
concerns of the regulation are to ensure robust risk management
in insurance companies and to use that understanding of risk to
help determine the right amount of capital for European insurance
companies to hold to ensure their ongoing viability in all but the
most severe stressed scenarios.
SS&C Technologies Inc (SS&C)
A provider of investor and policyholder, administration and
technology services, formerly known as DST Systems. SS&C is our
third-party outsourced provider, responsible for the administration
of our UK life insurance company SJPUK, our unit trust manager
SJPUTG, and our investment administration company SJPIA.
St. James’s Place Charitable Foundation
The independent grant-making charity established at the
same time as the Company in 1992. More information about
the Charitable Foundation can be found on pages 68 to 71
or on the website www.sjpfoundation.co.uk.
St. James’s Place International plc (SJPI)
A life insurance entity in the Group which is incorporated in the
Republic of Ireland.
ST. JAMES’S PLACE PLCOTHER INFORMATION St. James’s Place Investment Administration Limited
(SJPIA)
An entity in the Group which is responsible for unit trust
administration and ISA management, which is incorporated
in England and Wales.
St. James’s Place Partner
A member of the St. James’s Place Partnership. Specifically,
the individual or business that is registered as an Appointed
Representative of St. James’s Place on the FCA website.
St. James’s Place Partner practices vary in size and structure.
Many are sole traders but there are also a growing number of
businesses employing many advisers.
St. James’s Place Partnership
The collective name for all of our advisers, who are Appointed
Representatives of St. James’s Place.
St. James’s Place UK plc (SJPUK)
A life insurance entity in the Group which is incorporated in
England and Wales.
St. James’s Place Unit Trust Group Limited
(SJPUTG)
An entity in the Group which is responsible for unit trust
management, which is incorporated in England and Wales.
St. James’s Place Wealth Management plc (SJPWM)
The UK distribution entity within the Group, which is responsible
for the St. James’s Place Partnership and the advice they provide
to clients. It is incorporated in England and Wales.
State Street
State Street is a global financial services holding company
offering custodian services, investment management services,
and investment research and trading services. State Street is
responsible for the custody of the majority of the St. James’s Place
assets, and also provides other investment management services.
Surrenders and part-surrenders
Those amounts of money which clients have chosen to withdraw
from their plan, which were not pre-selected regular income
withdrawals or maturities.
Vertically integrated
When we describe St. James’s Place as being vertically
integrated, we are referring to the fact its distribution capability
(the Partnership) and the manufacturers of the its investment
products are both part of the Group.
Designed and produced by Instinctif Partners creative.instinctif.com
ST. JA M ES’S PL ACE PL C
St. James’s Place House
1 Tetbury Road
Cirencester
Gloucestershire GL7 1FP
T: 01285 640302
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