1

David LambSt. James’s Place

8 December 2010

2

How we see the RDR opportunity benefiting

St. James’s Place

3

Agenda• Introduction to St. James’s Place – a truly

integrated wealth management business • How we see RDR playing out in our space

and in the wider market• St. James’s Place post RDR• Questions?

4

St. James’s Place: overview

• Leading UK Wealth Management Company– Established 1991– UK listed with market cap of c.£1.3bn– Over 200,000 clients and £24.8bn in FUM

• Differentiated business model– Own dedicated distribution - the Partnership– Distinct investment management approach– Manufacturer and distributor

• Well positioned to benefit from long-term market growth– Favourable demographic trends– Increasing tax burden (on individuals)

5

Our Client Proposition• We provide financial advice to mass affluent

/high net worth investors

• How do we differ from others?– Emphasis on long-term relationship-based

approach– Provision of face-to-face advice– Not just a fund platform– Both manufacturer AND distributor of investment

products– Outsource investment management

6

Our products and services

Comprehensive range• of Pension, Investment and Savings ‘wrappers’

Our focus• is on our own products and funds• but we also distribute non-core products of others

Whilst avoiding• capital intensive products• guarantees and options• overly complex, fashionable or high risk

structures

7

St. James’s Place is (or will be)Whole of market in:

• Protection (Term and Whole Life)• Annuities• Mortgage lending• Employee Benefits

Whilst selecting our investment managers from the whole market (not restricted to the UK)

8

The SJP model - Two USPs

• Dedicated distribution– The Partnership

• Investment Management– Products manufactured in-house– Investment management outsourced

9

Dedicated Distribution – the Partnership

• High quality self-employed team of c.1500 advisors– Average experience 17 years– High productivity– 90%+ per annum retention rate

• Previous backgrounds– IFA– Bank– ML, Goldman Sachs

10

The Growth ModelTarget

15 – 20% pa

New BusinessNew BusinessNew BusinessNew Business

CAPACITYCAPACITYNo of PartnersNo of Partners

CAPACITYCAPACITYNo of PartnersNo of Partners

PRODUCTIVITYPRODUCTIVITYNew BusinessNew Business

Per PartnerPer Partner

PRODUCTIVITYPRODUCTIVITYNew BusinessNew Business

Per PartnerPer Partner

11

Growing Number of Partners

1506

0

200

400

600

800

1000

1200

1400

1600

2006 2007 2008 2009 2010

Nu

mb

er

of

Part

ners

+5%+8%

+7%

+9%

30 June

+3%

7

12

Growth

25.5%

Jul 03 - Jun 08

18.8%

Jul 04 - Jun 09

22.7%

Jul 05 - Jun 10

17.4

Jul 02 - Jun 07

17.4%15%

20%

Compound APE Growth – rolling five years

13

Funds under management

0369

1215182124

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

-6%+11%

Fu

nd

s

£’b

n

+34%

+20%

+25%

+29%

+18%

18%p.a. compound growth over the last5 years and 17%p.a. over 10 years

-10%

+31%

(30 June)

+5%

14

Benefits of our own distribution

• New business and expenses are more predictable

• Spread of production• Less exposed to market pressures• Greater control over quality of new

business• Ability to build and maintain distribution

led culture• Better retention of business• Ability to build stronger client advocacy

15

Investment Management

16

Our approach to investment management

Appoint theFund Managers

Sets PerformanceObjectives

Aim for Top 25%

Risk Management& Strategy

Decisions:Change Firm?

Change Manager?No Change?

Input / advice fromStamford Associates

'Manages the Managers'

Investment Committee

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Stamford AssociatesIndependent Investment

Consultancy

• Analyse & IdentifyTalented Managers

• Gather Intelligence

Research FundManager Market

•Behavioural Psychology

Monitor Managersand Portfolios

Recommend:

• Potential changes

• New Managers

Advise InvestmentCommittee

• Number Crunching

Access to Whole Market

Qualitative & Quantitative

Focus on Future Outperformance

• Monitor Activity

• Workplace Analysis

18

The Investment Committee

Sir Mark Weinberg Michael SorkinSarah Bates Vivian Bazalgette

Peter Dunscombe David Lamb Andrew CroftChris RalphAndrew Humphries

19

Evolving our fund range• 2008 launches and managers

– Alternative Asset Fund - BlackRock– High Octane Fund - Oldfield/Thornburg– Cash Unit Trust - State Street

• 2009 launches and managers– Corporate Bond Fund - Invesco Perpetual– Gilt Unit Trust - Wellington– Income Unit Trust - Axa Framlington– New managers - Burgundy/Liberty Square/JO Hambro

• 2010 launches and managers– Global Emerging Markets - First State– International Corporate Bond - Babson Capital– UK Absolute Return - BlackRock– UK & International Income - Artemis– Global Managed Fund - Artisan– Global Unit Trust Fund - Artisan– UK Equity Income UT - RWC

20

Our fund managers

21

Relative investment performanceFunds under management – rolling 5

years

19%11% 9%

4%9% 6%

13%6%

16%

9%

9%7%

6%5% 11%

10%

12%

9%

15%

12%16%

10%8%

16%

16%17%

13%

57%67% 69%

80% 78%67%

61% 65% 62%

2009 2008 2007 2006 2005 2004 2003 2002 2001

1st Quartile

2nd Quartile

3rd Quartile

4th Quartile

22

Benefits of investment management approach

• No in-house managers so no conflict of interest

• Benefit from Investment Committee experience & expertise

• Ability to appoint the best fund managers with wholesale purchasing power

• Continuous monitoring plus quarterly reviews• Easy to change manager – reduced churn• Free switching for clients• Significantly improved retention of funds

23

How do we see RDR playing out in our space and in the wider market?

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Retail Distribution Review

• Professional standards

• Status disclosure

• Adviser remuneration

25

RDR – What do the FSA want to achieve?

• Raise the standards of all advisers• Clear disclosure of adviser status• Removal of product and provider bias

(influencing the adviser)• Information on cost of advice to explain

advice isn’t free and to show how the cost of advice relates to the cost of the product

• Any ongoing adviser charges to be supported with ongoing service

26

Status Disclosure

• Broader market test for Independence

• If not Independent, then Restricted

27

What is Independent?• Whole of market

• All retail investments, including Investment Trusts, passive funds (ETFs)

• National Savings

• Structured Products

• etc

28

Adviser Charging

• Remove provider bias – prevent product providers from paying commission

• Remove product bias – required tied offices to remove product bias

29

Adviser Charging• Adviser remuneration agreed between IFA

and client• Can take many different forms • Must be clear• Cannot be influenced by product providers• Can by paid by cheque• Or ‘bundled’ with product charges, but no

factoring

30

Life after RDR - Distribution• Fewer advisers, but better qualified• Continued demand for advice (for those

who can pay)• Client/Adviser relationship key• Fewer Independent Advisers, some

become Restricted Advisers

… access to distribution will be important

31

Small firms with less than five sales staff dominates the UK IFA market

11%0%

1%

2%

11%

75%

Source: Datamonitor, Matrix-data

32

Turnover of IFA Firms (2009)Turnover Firms %

£1m to £50k 247 2%

£50k - £100k 3,342 32%

£100k - £500k

4,714 45%

£500k - £1m 584 6%

£1m - £5m 310 3%

>£5m 77 1%

Unknown 1,097 11%

10,371 100%Source: Data Monitor

33

Life after RDR – Asset Managers

• Greater competition for distribution

• Brand important

• Price will matter– But margins intact? Price Pressure?– Rebates may disappear?

• Further consolidation?

34

Life after RDR – Insurers

• Greater competition for distribution • Can no longer buy business• Brand important• Factory Gate Pricing

– margins intact (?) but much more visible?

• More consolidation in the industry• Product commoditisation

35

Life after RDR - Platforms• Major route to market• Inevitable consolidation among Platform

providers• Transparency and unbundling will impact

margins – today fund charges can vary by 80% between platforms (Citywire 26 April 2010)

• Restrictions likely on some of the current payments (unbundling)

36

Life after RDR - Clients

• Better quality advisers (?) – but fewer advisers

• Less transparency on total costs• Cost of advice may increase• Cost of product may reduce• Impact of tax on advice costs (VAT,

Pensions Relief)

37

What about SJP?Pre RDR Post RDR

No Provider BiasNo Product BiasTied AdviceGuaranteed AdviceTrusted and ProfessionalHighly CapitalisedControl of DistributionCompetitive ChargesInvestment ApproachAdviser Remuneration

No Provider BiasNo Product BiasRestricted AdviceGuaranteed AdviceTrusted and ProfessionalHighly CapitalisedControl of DistributionCompetitive ChargesInvestment ApproachAdviser Charging

38

“… but opportunities to capitalise on market disruption – especially vertically integrated companies and companies with the right types of tied model.”

Towers Watson. April 2010