St James’s Place: More changes in mandates to come, CIO says

There will continue to be a significant shake-up in who manages some of the biggest funds at the UK’s largest wealth manager, the chief investment officer of St James’s Place has told City AM.

In December, the UK’s largest wealth manager pulled £2bn from Jacob Rees-Mogg-founded Somerset Capital Management, causing the firm to shutter almost immediately, as the mandate had represented around two-thirds of its assets.

This week, St James’s Place made a similar move, ditching Impax Asset Management and two others as managers of a struggling £9.9bn fund, causing the smaller asset manager’s stock price to fall six per cent over the last two days.

Justin Onuekwusi, who began in the chief investment officer role a year ago, said that investors should still expect “a number of changes” to which asset managers control the significant pot of money sitting in its coffers.

“But I think it’s important to take a step back as well and say the proposition always has to evolve. It’s not that I’ve come in and now it’s a big bang,” Onuekwusi added.

The move could have serious implications for the shape of the entire UK financial industry, as asset managers compete to manage money for the wealth behemoth.

St James’s Place has been forced to evolve more than most asset managers over the past year, as accusations that it was ‘stuck in the past’ came to a head with the introduction of consumer duty.

The Consumer Duty was implemented by the Financial Conduct Authority last year to force all financial services to “put their customers’ needs first”.

However, high charges, exit costs, and the opaque bundling of its fees left St James’s Place scrambling to reform and prove to clients that it deserved its place as the largest wealth manager in the industry.

One key problem for savers attempting to understand whether St James’s Place has been providing value for money has been that the bundling of fees has left it impossible to compare its performance to other similar funds.

“From an investment perspective, we obviously really welcome disaggregation, because it means that we can be compared like-for-like with other managers,” Onuekwusi told City AM.

When asked whether St James’s Place will backdate the separated fees so analysts can finally judge the performance of their funds, the CIO said that it was “still in conversation”.

“I think it would make sense to backdate for people to understand the journey they would have been on from a fund perspective,” he added.

Changing what St James’s Place is offering

Since beginning a year ago, Onuekwusi said that he had found part of his role was to innovate what the firm was offering to clients.

“This does mean a focus on more cost effective investments, but it doesn’t just meaning piling into index funds,” he explained.

“As the market has innovated, now we have different types of index strategies, different types of low cost strategies, whether quant, fully indexed, or others.”

Newer asset classes are also a focus for the CIO, as he said: “In 2035, you can’t guarantee much in investment, but you will have new asset classes.”

This meant looking towards crypto, digital assets, tokenisation and private equity, areas that a company with its ‘cultural DNA in the 1980s’ (as one City grandee claimed) would traditionally shy away from.

“As the largest wealth manager in the UK, we’ve got a responsibility, I think, to be on top of that,” said Onuekwusi

This quest for innovation, however, clashes with the wealth manager’s aim of a lower-fee St James’s Place, as asset classes like private equity traditionally have much higher costs.

“We are very conscious that the newer asset classes tend to be more expensive, so we’ve been very cautious about dipping our toe in the water there,” the CIO countered.

“The thought is, do we want them in our centralised investment proposition, or do we want them in more bespoke types of propositions? That’s something we are clearly aware of,” he added.

Another clash has been the £500m in cost-cutting measures that St James’s Place has promised in the coming years, as innovation requires resources.

However, Onuekwusi stressed that “all of the innovation that we’ve done has been utilising existing resource” and said that the areas his team would be focusing on “will be invested in”.