The FTSE 100’s best performer over the past year is… a bit of a surprise to me!
Since May 2024, the St James’s Place (LSE:STJ) share price has outperformed all others on the FTSE 100. The wealth manager’s shares are now (16 May) changing hands for 120% more than they did 12 months ago.
Over this period, its nearest challenger for the top spot was Rolls-Royce Holdings, with an increase of 91%.
But then again…
However, this needs to be put into context.
In the two years to May 2024, the value of the group’s shares fell by more than 60%. They suffered on news that the Financial Conduct Authority (FCA) was investigating the charges imposed by the industry on clients.
To cover potential compensation, St James’s Place set aside £426m in its accounts. The final cost is unlikely to be known until 2026 at the earliest.
Over the summer, the group plans to implement its new fee structure, which it claims is “simple” and “comparable”. It’s also embarked on a significant cost-cutting exercise that’s expected to save a cumulative £500m by 2030.
Increased assets
Looking at the company’s share price performance, it looks as though investors believe it’s turned the corner.
Indeed, at 31 December 2024, it reported a record level of funds under management (FUM). Helped by its first-ever “national brand campaign”, FUM increased to £190.2bn.
However, it’s not immune from the current global economic uncertainty.
During the first three months of 2025, FUM fell to £188.6bn, although this was still 5.3% higher than a year earlier. But the reduction has more to do with a fall in asset values than a withdrawal of cash. In fact, during the quarter, there was a £1.69bn net inflow. And the group reported an increase – to 95% — in its retention rate of funds.
But there’s also an opportunity here. With a difficult macroeconomic environment, investors are more likely to seek out trusted financial advice from one of the group’s partners.
My opinion
To be honest, I’m surprised how well the share price has recovered following its steep decline. The FCA investigation has not yet concluded and I expected the company’s reputation to have taken more of a hit.
However, I think the recent share price rally will run out of steam soon.
The average 12-month price target of the 13 analysts covering the stock is 1,160p (range: 900p-1,400p). That’s only a 4% rise against today’s price.
And St James’s Place’s dividend is miserly. The total payout for 2024 will be 18p. Compared to 2023, that’s a 24% reduction and implies a current yield of 1.6%. For comparison, the FTSE 100’s offering 3.5%.
I also believe there are better opportunities to consider elsewhere in the financial services sector. I recently took a position in Legal & General due to its generous dividend and, in my opinion, encouraging growth prospects.
For these reasons, I don’t want to invest in St James’s Place.
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James Beard has positions in Legal & General Group Plc and Rolls-Royce Plc. The Motley Fool UK has recommended Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
