St James’s Place expected to drop out of FTSE 100

St James’s Place is expected to drop out of the FTSE 100 after shares in the UK’s largest wealth manager fell more than 55 per cent over the past year.

The London Stock Exchange said in its indicative quarterly review on Tuesday that SJP was poised to be demoted from the blue-chip index on June 5, with grocer Ocado, whose shares have fallen about 45 per cent so far this year, also dropping out and into the FTSE 250. Cyber security group Darktrace and housebuilder Vistry Group will be promoted to the FTSE 100.

The demotion comes after a bruising 12 months for the Gloucestershire-based wealth manager, which employs one in eight of the UK’s 38,000 financial advisers.

Shares in SJP fell as much as 16 per cent in a day last July when it cut its fees ahead of the new Consumer Duty coming into effect — rules aimed at ensuring financial services customers get a good deal.

They also fell by a fifth when the Financial Times revealed in October that SJP was pushed by the Financial Conduct Authority to go further on overhauling its charges, which have come under criticism for being complicated and opaque. This prompted the company to announce the removal of its punitive early withdrawal charge on certain products for new customers from the middle of next year.

The wealth manager also felt the heat earlier this year when it was forced to set aside £426mn for potential client refunds to those customers who felt they had not received a sufficient level of service. SJP announced on the same day as its £426mn bill that it was reducing its dividend, pointing to an expected decrease in its profit growth, sending its shares tumbling.

The group also suffered a drop in net inflows over the first quarter, with these falling to £700mn — lower than forecast and down from £2bn a year earlier. Chief executive Mark FitzPatrick said outflows were at an “elevated level”.

Some analysts believe its reducing market value could make it a takeover target. “The discounted valuation, but attractive long-term prospects, means we see elevated near-term risk of the group emerging as an M&A target,” said analysts at RBC.

However, FitzPatrick is keen to break from the past and believes SJP is well-placed to capitalise on growth opportunities stemming from the need for financial advice. “About 8 per cent of the UK population receives advice so it’s a huge opportunity,” FitzPatrick told the FT in a recent interview.

SJP declined to comment on the potential demotion from the FTSE 100.