Comment

It’s not obvious what St James’s Place has to fear from this latest attack

This activist shareholder needs to come up with a stronger strategy if it wants to divert the course of the upmarket wealth manager

Hand attempting to steal orb from St James Place logo
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It doesn’t take much to cause a stir in the stuffy world of wealth management. So the arrival of an activist shareholder at St James’s Place is guaranteed to ruffle a few feathers.

In an industry renowned for being desperately out of touch, the upmarket fund house has long set the bar with lavish cocktail receptions and other perks for staff and customers, alongside management charges that would make your eyes water.

But while the firm’s advisers and clients have benefitted from this outdated culture, as PrimeStone points out there’s something of a snag: “it has failed to deliver value for shareholders”, so on that basis it shouldn’t be too difficult to overhaul.

Indeed, the Mayfair-based investor points out that over a five-year time-frame, shares in St James’s Place have underperformed rivals, trading at a 50pc discount. Its stock market value as a percentage of funds under management has also shrunk to less than half the level of five years ago.

As a starting point for a shake-up, it’s a solid one but it may ultimately struggle to get off the ground. For a start, it’s hard to escape the feeling that PrimeStone is a little late to the party. St James’s spent all of last year fending off criticism about the way it was managed.

And, after a series of stories in The Sunday Times about freebies for sales staff that included cruise, watches, and cufflinks, bosses eventually pledged to a series of changes to the way it conducted its business.

Some of the more generous sales rewards were scrapped and the firm’s charges became more clearly displayed on its website. That makes it easier for the company to respond with something of a “been there, done that” defence.

Yet, PrimeStone’s objections are not quite the same. It says the cost base has spiralled out of control, eroding profitability. The best evidence it provides to support this claim is that compensation and pay rises are well above the industry average.

That’s either true or it isn’t but one assumes PrimeStone has done its research before going public. And if ever there was a time to target a public company over pay and bonuses, it is when the rest of the country is feeling the pinch like never before.

Yet, that in itself may not be enough of a catalyst to force the board to take its campaign seriously. The rest of PrimeStone’s supposed rap sheet feels a little underwhelming.

There’s some evidence of the “bloated organisation structure” it complains about, such as an unusually large technology department, and an Asian arm that makes no money. But the killer question for any activist is: what action does it propose?

“Restoring cost-competitiveness, possibly with the help of a well-regarded consultancy firm” is vague. Ditto “setting and communicating to shareholders ambitious cost reduction objectives”. And a 1.2pc stake may not be enough to make the board quiver.

Perhaps then, this is merely a soft opening salvo in an attempt to cajole the other side to the table before it adopts a more aggressive stance. Otherwise, the folk at St. James’s may feel they can carry on as before.

Not a tackle, more of a sidestep

Hats off to Hut Group founder Matt Moulding for not entirely ducking governance issues at the online outfit. The creation of an independent advisory panel consisting of three outsiders shows that he’s been listening at least.

Yet, in many ways this deeply unconventional arrangement feels like a fudge rather than a genuine attempt to address concerns about the company’s set-up.

For all his talk about it being “a transformational step”, he will still hold the titles of both chairman and chief executive; it only has two independent directors, when good practice demands three; it does nothing to reduce a ludicrously generous bonus scheme under which Moulding stands to make £700m; and his 25.1pc “founder share”, a poison pill that protects from a hostile takeover, remains in tact, so too an unusual arrangement that means he is the company’s landlord too.

The appointment of three “independent special advisers”, all of whom are accountants, hardly feels like a watershed moment.

Still, when sales are up by a third and the share price has rocketed 40pc in just a few weeks, you can’t blame Moulding if he’s struggling to get too energised. If customers and shareholders don’t care, why should he?

No takers for the Buffett

An investment trust inspired by the philosophy of Warren Buffet has pulled its stock market listing due to a lack of investor interest. Not the best start for a firm wanting to emulate the world’s most successful fund manager. Still, with a name like “Buffetology” you can understand the reticence.