Final Results

PRESS RELEASE

27 February 2025

DELIVERING STRONG FINANCIAL PERFORMANCE

St. James's Place plc (SJP) today issues its results for the year ended 31 December 2024:

Mark FitzPatrick, Chief Executive Officer, commented:

"I am pleased to report a strong financial performance for the Group, once again demonstrating the power and quality of our advice-led model, and the value that more than one million clients place in the trusted relationships they enjoy with our advisers. Momentum in the business built as the year unfolded, with sustained net inflows and strong investment returns leading to record funds under management of £190.2 billion. This underpinned an Underlying cash result of £447.2 million, an improvement of 14% on 2023 despite the short-term costs incurred during 2024 as we progress with the implementation of our simple, comparable charging structure.

2024 was a busy year for SJP. We announced our redefined purpose and refreshed strategy, which position us for further success. We ran our first ever national brand campaign, and explored the power of financial advice through our Real Life Advice research series and our client stories. Our Polaris funds continued to be hugely popular, growing to become the UK's largest multi-asset fund range less than two years after they were launched. We also made good progress on each of our key programmes of work, in line with our plans and the financial guidance we have previously given.

As we look forward, the work we are doing to enhance our business by strengthening our core and building on our key strengths will ensure we continue to capture the compelling market opportunity in UK wealth management. The demand, and need, for financial advice is high, driven by systemic factors which means this isn't going away. We are passionate about helping more people to secure their financial futures through the power of advice, we are leveraging our scale advantage, and we are seeking to deliver better outcomes for all our stakeholders."

Financial and operating highlights

· Post-tax Underlying cash result of £447.2 million (2023: £392.4 million), up 14% year-on-year despite charge structure implementation costs headwind

· Post-tax Underlying cash result basic earnings per share 82.0 pence (2023: 71.7 pence)

· IFRS profit after tax £398.4 million (2023: loss of £9.9 million)

· EEV net asset value per share £16.25 (31 December 2023: £14.11)

· Gross inflows of £18.4 billion (2023: £15.4 billion)

· Net inflows represented 2.6% of opening funds under management (2023: 3.5%)

Shareholder returns

· Final dividend for 2024 of 12.00 pence per share (2023: 8.00 pence per share)

· Final share buy-back for 2024 of £92.6 million (2023: £nil)

· Full year shareholder distributions of £223.6 million (2023: £130.3 million), equivalent to 50% of the Underlying cash result for 2024 and in line with our shareholder return guidance

Other highlights

· We now have over 1 million clients

· Investment returns, net of all charges, represented 10.5% of opening funds under management

· Good progress made across each of our key programmes of work, in line with our plans and financial guidance

The details of the announcement are attached.

Enquiries: 

2024 Full Year Results Presentation

Date: 27 February 2025

Webcast available on-demand from: 07:00 GMT

Live Q&A: 08:00 GMT

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Chair's report

Setting the foundations for future growth

2024 has been a year of change globally and for St. James's Place. Elections in several democratic countries have led to changes in governments, and uncertainty both before and after the events.

Change at St. James's Place has included the strengthening of the Executive team, the historic ongoing service evidence review, making progress with the implementation of our simple, comparable charging structure and the commencement of a cost and efficiency programme. These projects are significant in terms of scale and complexity and the Board has closely monitored the good progress made in 2024. Notwithstanding the scale of change, which the Chief Executive Officer covers in his report, the business has performed well during the year. This demonstrates the strength of our proposition and the requirement for financial advice.

The Board and governance

As I explain in more detail in the Report of the Group Nomination and Governance Committee, succession planning remains an important focus for the Board and in 2024, we have seen the appointment of a new Senior Independent Director in Simon Fraser and a new Chief Financial Officer in Caroline Waddington. Both have been welcome additions to the Board, bringing with them a depth of experience and diversity of thought. Caroline was appointed following Craig Gentle's decision to retire. Craig had been with St. James's Place since 2016 and served as Chief Financial Officer since 1 January 2018. On behalf of the Board I would like to thank Craig for his contribution, in particular his careful stewardship of the Group's finances, whilst also wishing him the best for the future.

Emma Griffin and Lesley-Ann Nash have decided to step down from the Board following the Annual General Meeting to pursue other opportunities and I would like to express the Board's gratitude for their contributions during their time on the Board. I am delighted to welcome Rooney Anand to the Board, following his appointment as a Non-executive Director on 1 January 2025.

Succession planning is well underway and will take account of the impact of the departure of Emma and Lesley-Ann on the balance of skills, experience and diversity on the Board. Further detail on the work of the Group Nomination and Governance Committee can be found in its report in the Annual Report and Accounts 2024.

The Board's priorities and our strategy

The Board believes that St. James's Place has a significant opportunity in the UK market given the current lack of advice available to many potential clients. We will only maximise that opportunity if we serve our current clients well and position the business to be attractive to these potential new clients. The business review we conducted during the year therefore focused on improving our proposition in terms of service, technology, investment performance, culture and good governance. Client outcomes are the focus of all we do and in this regard the Chief Executive Officer and his much-strengthened Executive team have been making good progress. The Board believes all stakeholders will benefit from these changes.

In redefining our purpose and refreshing our strategy, the Board has had an opportunity to reflect on how our culture aligns with our vision of the future. Recognising the importance of tone from the top, the Board has been pleased to see how changes to the Executive team have positively reinforced the values expected across the wider workforce. The Board continues to assess and monitor culture both through the formal reporting it receives from management and via its broader engagement with the workforce and other stakeholders. Details on this are set out in the corporate governance report in the Annual Report and Accounts 2024. Where we identify areas of concern, the Board engages with management to ensure corrective action is taken.

Shareholder returns

As announced in February 2024, the Board expects that annual shareholder returns will be set at 50% of the full year Underlying cash result for 2024, 2025 and 2026. This will comprise 18.00 pence per share in annual dividends declared with the balance returned through share buy-backs. Shareholder returns proposed by the Board for 2024 are in line with this guidance. Full details can be found in the Chief Financial Officer's report.

Concluding remarks

I would like to express my thanks to my Board colleagues and management for their support and hard work during 2024, and commend employees and our Partner businesses for the strong performance achieved in a challenging year. I have provided a high-level overview of some of the key areas of the Board's activity in 2024 and would encourage you to read the corporate governance report, which provides more detail. I look forward to welcoming shareholders to this year's Annual General Meeting, which will be held on 13 May 2025.

Paul Manduca

Chair

26 February 2025

Chief Executive Officer's report

We have a clear path forward

I am pleased to report a strong year for the Group, once again demonstrating the power and quality of our advice-led model and the value that over one million clients place in the trusted relationships they enjoy with our advisers.

Operating performance

2024 presented a mixed environment for UK consumers. Positively, we saw headline inflation falling and Bank of England base rate cuts, increasing the capacity for long-term investment for some individuals. However, this was tempered by uncertainty in the UK, particularly in advance of the Autumn Budget. There was also uncertainty in the US in the run up to their elections, and subsequently in anticipation of the impact of the Trump administration. In addition, pressures on disposable income persisted, with mortgage costs rising for many households. Overall, this meant that consumer confidence remained fragile.

Against this backdrop, and in a year which in many ways was challenging for the business, we are very pleased with our business and financial performance. Gross inflows for 2024 were £18.4 billion, up 20% on 2023, with momentum building during the year. Retention of client funds under management (FUM) remained strong at 94.5%, resulting in net inflows of £4.3 billion, representing 2.6% of opening FUM.

Investment performance

Our investment management approach (IMA) continued to perform well for clients, with our portfolios delivering strong returns that compared favourably against peer groups, supporting great outcomes for our clients. Our net investment return for 2024 represented over 10% of opening FUM, and it's important to remember that is after all charges, including advice.

Our Polaris multi-asset fund range continued to be very successful. Polaris packages our most sophisticated investment thinking in a simple structure for clients looking to grow their wealth. It has been incredibly popular, and has quickly grown to be the largest retail multi-asset range in the UK less than two years after it was launched. It had over £60 billion invested across the four risk-rated solutions at 31 December 2024, and Polaris 3 is now the single largest fund in the country.

Strong investment returns in Polaris and our other funds, combined with sustained net inflows, drove our FUM to a record £190.2 billion at the end of the year, up 13% on 2023.

Financial performance

This operating and investment performance led to strong financial results. Our Underlying cash result of £447.2 million is up 14% on 2023, reflecting growth in FUM and the associated income. This increase is despite the significant short-term costs incurred during 2024 as we progress with the implementation of our simple, comparable charging structure, which I cover in more detail later on. Excluding these costs, the Underlying cash result increased by 27%.

This performance reaffirms the strength, quality and resilience of our advice-led business model.

Market opportunity

The market opportunity across all segments in UK wealth management is compelling, with UK individuals having £3.3 trillion in liquid investable assets, which is expected to grow at 7% per annum, compound, to 2030. In the advised space we expect demand to only get stronger over time, driven by systemic factors including the complexity of pension and taxation rules. Take the 2024 Autumn Budget as an example - bringing pensions into scope for inheritance tax purposes only adds to the complexity of estate planning, driving the need for financial advice.

The advice and savings gaps in the UK continue to grow. We are playing our part in closing them, using our industry leadership to champion financial advice in the media, with policymakers and regulators. As part of this we are proud to have increased our profile by running our first national brand campaign that focused on invaluable personal advice.

We have also showcased the wide-ranging benefits that advice can have through our client stories, some of which you can see throughout the Annual Report and Accounts 2024, and our Real Life Advice research series. Alongside this, we are working closely with the UK Government and the FCA on the opportunities presented within the Advice Guidance Boundary Review (AGBR).

Our redefined purpose and refreshed strategy

In July we set out the results of our comprehensive business review. Whilst our business continues to perform strongly throughout the cycle due to the high quality advice our advisers provide to clients, we are not complacent. We are evolving to position for further success, so we can capture the fantastic market opportunity and continue to drive great outcomes for clients, advisers and all stakeholders going forward.

Our strategic direction is underpinned by our redefined purpose: to empower clients with invaluable advice to realise bolder ambitions. This is what drives our 4,920 advisers across the Partnership, our employees and everyone else in the SJP community. This is why we get up in the morning. We want to be known as the home of invaluable advice.

Our refreshed strategy sees us leverage our great strengths, whilst making the changes necessary to drive sustained growth, and to capture economies of scale as we succeed. We are building a confident, high-performance culture that will see SJP thrive for the benefit of all stakeholders.

The key components of our strategy, which will take us to 2030, are set out in the Annual Report and Accounts 2024. In the near-term, we are focused on strengthening our fundamentals by safely delivering our key programmes of work: implementing our simple, comparable charging structure, completing our historic ongoing service evidence review, and executing our cost and efficiency programme.

All of this requires a period of heavy lifting, after which we will have more capacity to focus on elevating and expanding our leading offering for clients and advisers as we look to drive sustained growth over the long term.

However, where we have capacity within the business, alongside these key programmes we are progressing with our other strategic initiatives. For example, we're developing and trialling AI tools to support advisers with administrative and technical queries, which will enhance efficiency. In addition, our investment team is exploring options around a dedicated passives proposition.

Progress with our key programmes

Simple, comparable charges

We continue to make good progress with the implementation of our simple, comparable charging structure. We believe this will help to improve the perception of SJP and the value of our proposition, making us more attractive to potential clients and advisers.

We are well advanced with the IT infrastructure build necessary to deliver the programme, and we are working through an extensive testing plan. Alongside this, we are equipping our advisers with a comprehensive suite of tools and materials to ensure they understand the impact of the new charging structure, and can explain it to clients. We will shortly start to communicate the changes to clients directly.

Though we still have a lot of heavy lifting to do to complete the project over the next few months, we remain on track for it to be in place by the second half of 2025, and for delivery to be on budget.

Historic ongoing service evidence review

We have progressed our review of historic client servicing records. We have been building the infrastructure needed to collate and analyse these efficiently and accurately, and validating evidence to correctly identify servicing gaps across our client base.

We said from the outset that this is a very significant exercise that would take the best part of two to three years to complete. We anticipate making substantial headway during 2025.

We note the recent FCA statement on ongoing financial advice services and appreciate the guidance it provides. We are focused on completing our programme of work and will take into consideration the FCA's guidance as we move through that programme. We remain confident in the adequacy of our provision.

Cost and efficiency programme

As we set out in July, we are evolving how we operate to align to our refreshed strategy. To create the capacity to invest in our strategic initiatives, as well as improve the Cash result, we have commenced our cost and efficiency programme. Our ambition is to take around £100 million per annum before tax out of our addressable cost base by 2027, and we are on track to deliver this.

We are working to implement a range of operating efficiencies, including changing our organisational design to ensure we have the right people in the right places to support our strategic ambitions, simplifying our technology estate, and optimising our procurement.

Summary

2024 has been a successful year for the business, which is testament to the strength and quality of our advisers, employees and all those within the SJP community. They have remained fully committed to driving great client outcomes during a period of significant ongoing change in the business, and I thank them for their continued efforts.

As we look forward, the work we are doing to enhance our business by strengthening our core and building on our key strengths will ensure we continue to capture the compelling market opportunity in UK wealth management. The demand, and need, for financial advice is high, driven by systemic factors which means this isn't going away. We are passionate about helping more people to secure their financial futures through the power of advice, we are leveraging our scale advantage, and we are seeking to deliver better outcomes for all our stakeholders.

Mark FitzPatrick

Chief Executive Officer

26 February 2025

Chief Financial Officer's report

We are delivering strong financial results

I am delighted to present a strong set of financial results in my first report as Chief Financial Officer.

Since joining the business in September 2024, I have been struck by the power of our business model, and how it translates into fundamentally predictable income. Clients truly value the trusted, personal relationship they build with their adviser, as demonstrated by our high retention levels through what has been a challenging time for the business. The advice we provide really is invaluable in helping them navigate the ups, downs and complexities of their lives. Having been a client with the same adviser for 27 years, I know this first-hand.

Financial business model

I have also been struck by the simplicity of our financial business model. When clients choose to invest with us our stock of funds under management (FUM) grows. Our income is based on the value of FUM, and so attracting new clients to invest with us, retaining the investments made by existing clients, and positive investment performance are key to future growth in income and hence returns.

Our primary profit drivers are annual product management charges on FUM. Under our current charging structure, most of our investment bond and pension business is not subject to these charges for the first six years after an investment is made. We refer to FUM in this period as being in 'gestation'. Gestation FUM at any point in time rolls out into mature FUM and so becomes subject to annual product management charges over the following six years, which provides a high degree of visibility to our future income growth.

We will be simplifying our charging structure by the second half of 2025. This is an important change for the financial business model. From the point of implementation, we will benefit from all charges applying from the day that a new investment is made. We will not have to wait six years for new investment bond and pension business to contribute recurring income to the Cash result. In addition, we will continue to benefit from existing gestation FUM at the point of transition maturing to make a positive contribution. The dynamics of our new charging structure, together with the visibility of future income growth from maturing FUM in gestation, build a powerful picture of how our income can develop in the medium term - conscious, of course, of the expected dip in profitability in 2025 and 2026 as we transition between structures.

Combined with our focus on managing expenses, whether they are fixed in nature or vary with FUM or business levels, this supports our ambition to double the Underlying cash result over the period from 2023 to 2030.

Financial performance in 2024

As Mark has already set out in his Chief Executive Officer's report, our FUM grew by 13% over the year to a record £190.2 billion. This increase in FUM has driven an increase in the income we receive from it. Paired with continued discipline in managing our costs, this has enabled us to deliver IFRS profit after tax of £398.4 million (2023: loss of £9.9 million), and a post-tax Underlying cash result of £447.2 million, up 14% year-on-year.

This is despite the short-term costs incurred during 2024 as we progress with the implementation of our simple, comparable charging structure, which was £59.5 million for the year post-tax (2023: £7.2 million). If these costs are excluded, the Underlying cash result would be up 27% on 2023.

Simple, comparable charges

The implementation costs for 2024 were approximately £12 million post-tax lower than we originally guided to in October 2023. These costs have been deferred into 2025.

We expect the overall implementation costs for the project to be towards the upper end of our original guidance range of £140 million to £160 million pre-tax. It is important to note that this cost phasing change does not impact our planned implementation timetable, which remains by the second half of 2025.

Historic ongoing service evidence review

Mark has provided an update on this significant programme of work in his Chief Executive Officer's report. From a financial perspective there is no change in our estimate of the cost of the programme, and so we remain comfortable with our provision.

Cost and efficiency programme

A key area of focus during the year has been our cost and efficiency programme. We have an ambition to take around £100 million per annum before tax out of our addressable cost base by 2027. We'll do this by operating more effectively at scale, creating capacity to invest in our business to drive further growth, underpinning a growing Cash result over time.

We are on track to deliver the programme by 2027, and in line with the financial guidance provided in July 2024. For 2024 the cost and efficiency programme has had no material impact on our results as the costs to achieve the savings we have identified have, as expected, offset the savings achieved. We anticipate this will also be the case for 2025, as the benefits we realise, net of costs to achieve, are reinvested in the business to drive future growth.

Financial position and solvency

Our IFRS consolidated statement of financial position contains policyholder assets and liabilities. To understand the assets and liabilities that shareholders can benefit from, these policyholder balances, along with 'accounting' balances such as deferred income (DIR) and deferred acquisition costs (DAC), are removed in the Solvency II Net Assets Balance Sheet. This balance sheet is straightforward, and demonstrates we are in a strong financial position. It is analysed in section 2.2 of the financial review.

We take a prudent approach to managing the balance sheet and our capital requirements. Given the simplicity of our business model, we manage solvency by holding assets to match client unit-linked liabilities, and allow for a management solvency buffer (MSB). At 31 December 2024 we held surplus assets over the MSB of £892.2 million (31 December 2023: £603.5 million).

Capital allocation

I am fully committed to our capital allocation framework, which sets out our disciplined approach to allocating our capital resources:

1. We will maintain a strong balance sheet, ensuring the safety of client investments.

2. We will invest to drive organic growth, ensuring we have the necessary core capabilities in the business.

3. We will deliver reliable annual shareholder returns, which are in line with guidance.

4. We will return excess capital over and above what we need to invest in the business at attractive returns.

We see being deliberate and disciplined in how we manage capital allocation as critical to ensuring we have a well-invested business that drives returns and creates sustained value for shareholders.

Shareholder returns

As announced in February 2024, the Board expects that annual shareholder returns will be set at 50% of the full year Underlying cash result for 2024, 2025 and 2026. This will comprise 18.00 pence per share in annual dividends declared with the balance returned through share buy-backs. The Board intends to reassess its approach to shareholder distributions for 2027 and beyond at the appropriate time.

Following the payment of a 6.00 pence per share interim dividend and a £32.9 million share buy-back programme in September, the Board are declaring a 12.00 pence per share final dividend, subject to shareholder approval at the AGM, and a £92.6 million final share buy-back programme for 2024. This will bring the total shareholder returns to £223.6 million for the year, equivalent to 50% of the Underlying cash result.

Summary

We've had a successful year, which has translated into strong financial results. We have grown our Underlying cash result by 14% despite short-term cost headwinds as we implement our new charging structure. We have an attractive and highly visible earnings profile, a robust balance sheet, and a disciplined approach to capital allocation.

Caroline Waddington

Chief Financial Officer

26 February 2025

Summary financial information

The Cash result should not be confused with the IFRS consolidated statement of cash flows, which is prepared in accordance with IAS 7.

Financial review

This financial review provides analysis of the Group's financial position and performance.

It is split into the following sections:

Section 1

Funds under management (FUM)

1.1 FUM analysis

1.2 Gestation

Section 2

Performance measurement

2.1 International Financial Reporting Standards (IFRS)

2.2 Cash result

2.3 European Embedded Value (EEV)

Section 3

Solvency

Section 1

Funds under management

1.1 FUM analysis

During 2024 our advisers attracted £18.4 billion (2023: £15.4 billion) of new client investments and client retention rates remained strong at 94.5% (2023: 95.3%). As a result we generated £4.3 billion (2023: £5.1 billion) of net inflows, once again demonstrating the strength of our advice-led business model.

Our investment management approach has continued to work well for clients, with our portfolios delivering strong returns that compare favourably against peer groups. This, together with another year of net inflows, resulted in FUM increasing by 13% to a record £190.2 billion (2023: £168.2 billion). Growth in FUM provides our business with good visibility over future growth in income and the creation of sustainable value for shareholders over time.

The following table shows how FUM evolved during 2024 and 2023. Investment return is presented net of all charges.

Included in the table above is:

· Rowan Dartington Group FUM of £3.49 billion at 31 December 2024 (31 December 2023: £3.43 billion), gross inflows of £0.24 billion for the year (2023: £0.36 billion) and outflows of £0.24 billion (2023: £0.18 billion).

· SJP Asia FUM of £1.90 billion at 31 December 2024 (31 December 2023: £1.72 billion), gross inflows of £0.26 billion for the year (2023: £0.21 billion) and outflows of £0.22 billion (2023: £0.15 billion).

The following table shows our sustained net inflows and the progression of FUM over the past six years.

The following table provides a geographical and investment-type analysis of FUM at 31 December.

1.2 Gestation

As explained in our financial business model in the Chief Financial Officer's report, due to our current product structure for most investment bond and pension business, there is a significant amount of FUM in 'gestation'. This means it is not subject to annual product management charges, our key profit driver. FUM rolls out of gestation into 'mature' FUM six years after initial investment, at which point it becomes subject to annual product management charges for the first time.

Approximately 54% of gross inflows for 2024, after initial charges, moved into gestation FUM (2023: 54%).

The following table shows an analysis of FUM, after initial charges, split between mature FUM that is contributing net income to the Cash result and FUM in gestation which is not yet contributing. The value of both mature and gestation FUM is impacted by investment return as well as net inflows.

We will be simplifying our charging structure by the second half of 2025. Under the revised charging structure, new business will no longer enter a period of gestation and the existing gestation FUM at the point of implementation will gradually mature. After this point there will be no further concept of gestation FUM. In the meantime, gestation FUM continues to be a material store of shareholder value that will make a significant contribution to the Cash result in the future.

The following table gives an indication, for illustrative purposes, of the way in which gestation FUM could mature and start to contribute to the Cash result over the next six years and beyond. Once it has all matured, it could contribute a further £289.1 million per annum to net income from FUM and hence the Underlying cash result, at no additional cost.

For simplicity the table assumes that FUM values remain unchanged, that there are no surrenders, and that business is written at the start of the year. Allowance has been made for the reduction in ongoing charges under our new charging structure. Actual emergence in the Cash result will reflect the varying business mix of the relevant cohort and business experience.

Section 2

Performance measurement

In line with statutory reporting requirements, we report profits assessed on an IFRS basis. The presence of a significant life insurance company within the Group means that, although we are an advice-led wealth manager in substance with a simple business model, we apply IFRS accounting requirements for insurance companies. These requirements lead to financial statements which are more complex than those of a typical wealth manager and so our IFRS results may not provide the simplest presentation for users who are trying to understand our business.

Key examples of this include:

· Our IFRS consolidated statement of comprehensive income includes policyholder tax balances which we are required to recognise as part of our corporation tax arrangements. This means that our Group IFRS profit before tax includes amounts charged to clients to meet policyholder tax expenses, which are unrelated to the underlying performance of our business.

· Our IFRS consolidated statement of financial position includes policyholder liabilities and the corresponding assets held to match them, and so policyholder liabilities increase or decrease to match increases or decreases experienced on these assets. This means that shareholders are not exposed to any gains or losses on the £190.0 billion of policyholder assets and liabilities recognised in our IFRS consolidated statement of financial position, which represented over 97% of our IFRS total assets and liabilities at 31 December 2024.

We therefore present our financial performance and position on three different bases, using a range of alternative performance measures (APMs) to supplement our IFRS reporting. These APMs strip out policyholder balances, and remove items such as deferred acquisition costs (DAC) and deferred income (DIR) to reflect Solvency II recognition requirements and to better match the way in which cash emerges from the business. The three different bases, which are consistent with those presented last year, are:

· International Financial Reporting Standards (IFRS)

· Cash result

· European Embedded Value (EEV)

APMs are not defined by the relevant financial reporting framework (which for the Group is IFRS), but we use them to provide greater insight to the financial performance, financial position and cash flows of the Group and the way it is managed. The glossary of alternative performance measures (APMs) included within the Annual Report and Accounts 2024 defines each APM used in our financial review, explains why it is used and, if applicable, how the measure can be reconciled to the IFRS consolidated financial statements. It also sets out the rationale for any APM we have ceased to report during the year.

2.1 International Financial Reporting Standards (IFRS)

To address the challenge of policyholder tax being included in the IFRS results we focus on IFRS profit before shareholder tax, an APM, as our pre-tax metric.

This is a profit measure based on IFRS which aims to remove the impact of policyholder tax. The following table demonstrates the way in which IFRS profit before shareholder tax is presented in the consolidated statement of comprehensive income.

However, in both the current and prior year IFRS profit/(loss) before shareholder tax and IFRS profit/(loss) after tax have been reduced by another nuance of life insurance tax which we refer to as policyholder tax asymmetry.

External market conditions during the year drive the movement in the tax asymmetry balances. Net market gains during 2024 have resulted in a negative policyholder tax asymmetry impact of £38.9 million (2023: negative impact of £44.4 million).

Shareholder tax reflects the tax charge attributable to shareholders and is closely related to the performance of the business. However, it can vary year on year due to several factors: further detail is set out in Note 6 Income and deferred taxes.

Change in APMs

In previous years, in addition to IFRS profit before shareholder tax we also reported underlying profit as an APM in this section. This was calculated as IFRS profit before shareholder tax, adjusted for the impact of movements in DAC, DIR and the purchased value of in-force business (PVIF). We have retired underlying profit as a separate APM for 2024 as we look to simplify our reporting. The movement in DAC, DIR and PVIF is now presented as part of the reconciliation between IFRS profit and the Cash result.

2.2 Cash result

The Cash result is used by the Board to assess and monitor the level of cash profit generated by the business. It is presented net of tax, and is based on IFRS with adjustments made to exclude policyholder balances and certain non-cash items, such as DAC, DIR, deferred tax and equity-settled share-based payment costs. Further details, including the full definition of the Cash result, can be found in the glossary of APMs. Although the Cash result should not be confused with the IAS 7 consolidated statement of cash flows, it provides a helpful supplementary view of the way in which cash is generated and emerges within the Group.

The following table shows an analysis of the Cash result using two different measures:

· Underlying cash result This measure represents the regular emergence of cash from the business, excluding any items of a one-off nature and temporary timing differences.

· Cash result This measure includes items of a one-off nature and temporary timing differences.

Consolidated Cash result (presented post-tax)

The Underlying cash result of £447.2 million for 2024 (2023: £392.4 million) is 14% higher than the prior year, driven by the increase in income received from growing levels of FUM. In 2023 the Cash result was significantly impacted by the establishment of the Ongoing Service Evidence provision, which meant the result of £68.7 million was substantially lower than the Underlying cash result. There have been no items recognised outside of the Underlying cash result for 2024, meaning the Cash result and the Underlying cash result are both £447.2 million.

Notes to the Cash result

1. Net income from FUM

The net annual management fee is the net manufacturing margin that the Group retains from FUM after payment of the associated costs: for example, advice fees paid to Partners, investment management fees paid to external fund managers and the policy servicing tariff paid to our third-party administration provider. Each product has standard fees, but they vary between products. Overall post-tax margin on FUM reflects business mix but also the different tax treatments, particularly life insurance tax on onshore investment bond business.

As explained in our financial business model in the Chief Financial Officer's report, our investment bond and pension business product structure means that these products do not contribute to net Cash result, after the margin arising from new business, during the first six years. This is known as the 'gestation period' and is reflected in the reduction in fees in gestation period line.

We focus our explanatory analysis on the net income from FUM, which is the net annual management fee after the reduction in fees in the gestation period. This is the Cash result income from FUM that has reached maturity. As with net annual management fees, the average rate can vary over time with business mix and tax.

For 2024, our net income from FUM was £683.6 million (2023: £599.2 million), an increase of 14%. This outcome is within our guided margin range of 0.54% to 0.56%, and reflects an increase in average mature FUM.

Our margin range is applicable to average mature FUM, excluding discretionary fund management (DFM) and Asia FUM, in line with prior guidance. It is this mature FUM that contributes to the net income from FUM figure and, at any given time, it comprises all unit trust and ISA business, as well as investment bond and pension business written more than six years ago.

Following the introduction of our new charging structure by the second half of 2025, our margin range will reduce to 0.43% to 0.45%. However, under this charging structure new investment bond and pension business will no longer enter a period of gestation. Once the remaining gestation FUM at the point of implementation has matured over a six-year period there will be no further gestation FUM, and so the margin will apply to all FUM.

Net income from Asia and DFM FUM is not included in this line, it is included in the Asia - net investment and DFM - net investment lines.

2. Margin arising from new business

This is the net positive Cash result impact of new business in the year, as initial charges levied on gross inflows exceed new-business-related expenses. The majority of these expenses vary with new business levels, such as the incremental third-party administration costs of setting up a new policy on our back-office systems, and payments to Partners for the initial advice provided to secure clients' investment. As a result, gross inflows are a key driver of this margin.

However, the margin arising from new business also contains some fixed expenses, and elements which do not vary exactly in line with gross inflows. Therefore, whilst the margin arising from new business tends to move directionally with the scale of gross inflows generated during the year, the relationship between the two is not linear.

3. Controllable expenses

Controllable expenses are a key metric for the business. They are comprised of expenses which do not vary with business volumes, including people, property and technology expenses, and the costs associated with running our Academy. Growth in controllable expenses has been contained to 5% on a pre-tax basis, in line with guidance. This is equivalent to 3% increase on a post-tax basis as presented in the Cash result, reflecting the corporation tax rate of 25% being applicable for the whole of 2024.

Going forward we will seek to contain growth in controllable expenses to 5% per annum, balancing disciplined expense management with the need to invest in the business for the future.

This is before the positive impact of our cost and efficiency programme as set out in July 2024, which will start to benefit the Cash result from 2027 onwards. Prior to 2027, the cost savings realised from the programme will be offset by the costs to achieve those savings, and reinvestment in the business to drive future growth.

4. Asia and DFM

These lines represent the net income from Asia and DFM FUM. They include the Asia and DFM expenses set out in the reconciliation between expenses presented separately on the face of the Cash result before tax and IFRS expenses.

We have continued to invest in developing our presence in Asia, as well as in discretionary fund management via Rowan Dartington. Net investment in Asia has reduced, reflecting the restructuring undertaken during the prior year. Net investment in DFM has also reduced, due to continued focus on disciplined expense control.

5. Regulatory fees and FSCS levy

The costs of operating in a regulated sector include regulatory fees and the Financial Services Compensation Scheme (FSCS) levy. On a post-tax basis, these are as follows:

Our position as a market-leading provider of advice means we make a substantial contribution to supporting the FSCS, thereby providing protection for clients of other businesses in the sector that fail. The FSCS levy in 2024 and 2023 was below the level typically seen in recent years, as a result of prior years surpluses that had built up within the FSCS scheme. We anticipate a substantial increase in the levy for 2025.

6. Shareholder interest

This is the income accruing on investments and cash held for regulatory purposes together with the interest received on the surplus capital held by the Group. It is presented net of funding-related expenses, including interest paid on borrowings and securitisation costs.

7. Charge structure implementation costs

We announced in October 2023 that we would be implementing our simple, comparable charging structure by the second half of 2025. This will see us disaggregate our charges into their component parts, supporting clients by making it easier to compare charges for advice, investment management and other services, on a component-by-component basis.

We continue to make good progress with this complex project. The implementation costs for 2024 of £59.5 million post-tax were approximately £12 million lower than we had originally guided to in October 2023. These costs have been deferred into 2025. We expect the overall implementation costs for the project to be towards the upper end of our original guidance range of £140 million to £160 million pre-tax.

8. Miscellaneous

This category represents the net cash flow of the business not covered in any of the other categories. It includes Group contributions to the St. James's Place Charitable Foundation, movements in the fair value of renewal income assets and the remediation costs associated with client complaints.

9. Ongoing Service Evidence provision

The Ongoing Service Evidence provision was established in 2023 following the appointment of a skilled person and an assessment undertaken into the evidencing and delivery of historic ongoing servicing, reflecting the anticipated cost of refunding ongoing servicing charges, together with the interest, and the administrative costs associated with completing the work. For 2024 there is no change in our estimate of the cost of the programme, and so we remain comfortable with our provision. Consequently, there is no impact on the 2024 Cash result. More information can be found in Note 9 within the IFRS consolidated financial statements.

Reconciliation of Cash result expenses to IFRS expenses

Whilst certain expenses are recognised in separate line items on the face of the Cash result, expenses which vary with business volumes, such as payments to Partners and third-party administration expenses, and expenses which relate to investment in specific areas of the business such as DFM, are netted from the relevant income lines rather than presented separately. In order to reconcile to the IFRS expenses presented on the face of the consolidated statement of comprehensive income, the expenses netted from income lines in the Cash result need to be added in, as do certain IFRS expenses which by definition are not included in the Cash result. In addition, all expenses need to be converted from post-tax, as they are presented in the Cash result, to pre-tax, as they are presented under IFRS.

Expenses presented on the face of the Cash result before and after tax are set out below.

The total expenses presented separately on the face of the Cash result before tax then reconcile to IFRS expenses as set out below.

1 The 2023 comparatives have been represented to better reflect the nature of the expenses.

Expenses which vary with business volumes

Other performance costs vary with the level of new business and the operating profit performance of the business.

Payments to Partners, investment expenses and third-party administration costs are met through charges to clients, and so any variation in them from changes in the volumes of new business or the level of the stock markets does not impact Group profitability significantly.

Each of these items is recognised within the most relevant line of the Cash result, which is determined based on the nature of the expense. In most cases, this is either the net annual management fee or margin arising from new business lines.

Other expenses include the operating costs of acquired financial adviser businesses, donations to the St. James's Place Charitable Foundation and complaints costs. In 2023, they also included the cost of setting up the Ongoing Service Evidence provision. These costs are recognised across various lines in the Cash result.

Expenses relating to investment in specific areas of the business

Asia expenses and DFM expenses both reflect disciplined expense control during the year, and for Asia the impact of restructuring undertaken during 2023.

In the Cash result, Asia and DFM expenses are presented net of the income they generate in the Asia - net investment and DFM - net investment lines.

Reconciling items to IFRS expenses

DAC amortisation, net of additions, PVIF amortisation and equity-settled share-based payment expenses are the primary expenses which are recognised under IFRS but are excluded from the Cash result.

Expenses associated with insurance contract expenses are included in the Cash result but are shown within the Insurance service expense rather than the expenses line under IFRS 17.

Reconciliation of Cash result to IFRS profit before shareholder tax

The Cash result reconciles to IFRS profit before shareholder tax, as presented in section 2.1, as follows:

Movements in DAC, DIR and PVIF are explained and analysed as follows:

IFRS requires certain upfront expenses incurred and income received to be deferred. The deferred amounts are initially recognised on the statement of financial position as a DAC asset and DIR liability, which are subsequently amortised to the consolidated statement of comprehensive income over a future period.

The impact of accounting for DAC, DIR and PVIF in the IFRS result is that there is an accounting timing difference between the emergence of accounting profits and actual cash flows. The following table presents the impact of each of these items on profit before shareholder tax.

The simplification of our charging structure by the second half of 2025 will see the removal of initial product fees, and as a result there will be immaterial income being deferred from the point of implementation onwards. Most of the existing DIR liability at that point will amortise over a period of 6 years.

The impact of policyholder tax asymmetry is a temporary effect caused by asymmetries between fund tax deductions and the policyholder tax due to HMRC. Movement in the asymmetry can be significant in volatile markets.

Equity-settled share-based payments represent the expense associated with a number of equity-settled share schemes across the Group.

The impact of deferred tax is the recognition in the Cash result of the benefit from realising tax relief on various items including share options, capital allowances and deferred expenses. These have already been recognised under IFRS through the establishment of deferred tax assets. More information can be found in Note 6 to the IFRS consolidated financial statements.

Other represents a number of other small items, including the removal of other intangibles and the difference between the lease expense recognised under IFRS 16 Leases and lease payments made.

Derivation of the Cash result

The Cash result is derived from the IFRS consolidated statement of financial position in a two-stage process:

Stage 1: Solvency II Net Assets Balance Sheet

Firstly, the IFRS consolidated statement of financial position is adjusted for a number of material balances that reflect policyholder interests in unit-linked liabilities together with the underlying assets that are held to match them. Secondly, it is adjusted for a number of non-cash 'accounting' balances such as DIR, DAC and associated deferred tax. The result of these adjustments is the Solvency II Net Assets Balance Sheet and the following table shows the way in which it has been calculated at 31 December 2024.

Adjustment 1 strips out the policyholder interest in unit-linked assets and liabilities, to present solely shareholder-impacting balances.

Adjustment 2 removes items such as DAC, DIR, PVIF and their associated deferred tax balances from the IFRS statement of financial position to bring it in line with Solvency II recognition requirements.

Notes to the Solvency II Net Assets Balance Sheet

1. Goodwill and intangible assets

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the identifiable net assets of the acquired entity at the date of acquisition. Goodwill is not amortised, but is reviewed annually for impairment.

Intangible assets include computer software and the purchased value of in-force business. This represents the present value of future profits that are expected to emerge from insurance business acquired on business combinations, calculated at the time of acquisition using best-estimate assumptions. The balance is amortised over the anticipated lives of the related insurance contracts.

Each of these items is excluded from the Solvency II Net Assets due to their intangible nature.

2. Deferred acquisition costs and deferred income

IFRS requires certain upfront expenses incurred and income received to be deferred. The deferred amounts are initially recognised on the IFRS consolidated statement of financial position as a DAC asset and DIR liability, which are subsequently amortised to the consolidated statement of comprehensive income over a future period

They are each excluded from the Solvency II Net Assets due to their intangible nature.

3. Property and equipment, and other payables

The property and equipment balance includes the right to use leased assets of £103.9 million (2023: £118.5 million), together with fixtures, fittings and office equipment of £28.4 million (2023: £32.1 million) and computer equipment of £1.7 million (2023: £2.5 million).

The right to use leased assets has decreased year on year due to depreciation. Lease liabilities of £107.2 million are recognised within the other payables line (2023: £120.5 million).

4. Deferred tax assets and liabilities

Analysis of deferred tax assets and liabilities, including how they have moved year on year, is set out in Note 6 Income and deferred taxes within the IFRS consolidated financial statements.

5. Other receivables

Other receivables on the Solvency II Net Assets Balance Sheet have decreased from £2,147.3 million at 31 December 2023 to £1,867.4 million at 31 December 2024, principally reflecting a decrease in short-term outstanding market trade settlements in the unit-linked funds and consolidated unit trusts. Other receivables on the IFRS balance sheet have decreased from £2,997.4 million at 31 December 2023 to £2,687.4 million at 31 December 2024, additionally reflecting receivables within policyholder funds.

Detailed breakdowns of other receivables can be found in Note 7 Other receivables within the IFRS consolidated financial statements. Within other receivables there are two items which merit further analysis:

Operational readiness prepayment asset

The operational readiness prepayment asset arose from the investment made into our back-office infrastructure project, as we recognised Bluedoor development costs as a prepayment. The asset stood at £256.3 million at 31 December 2024 (31 December 2023: £283.5 million). It has been amortising through the IFRS statement of comprehensive income and the Cash result since 2017 and will continue to do so over the remaining life of the contract, which at 31 December 2024 is nine years.

Business loans to Partners

Facilitating business loans to Partners is a key way in which we are able to support growing Partner businesses. Such loans are principally used to enable Partners to take over the businesses of retiring or downsizing Partners, and this process has multi-stakeholder benefits:

· It supports the delivery of great outcomes for clients as they receive continuity of service within the SJP ecosystem.

· It makes SJP a great place for motivated, entrepreneurial advisers to build high-quality businesses over the long-term.

· It helps to support the next generation of SJP advisers

· It retains advisers and clients which leads to retention of our FUM, which in turn supports our financial results and thus shareholders.

In addition to recognising a strong business case for facilitating such lending, we recognise too the fundamental strength and credit quality of business loans to Partners. We have low impairment experience due to a number of factors that help to mitigate the inherent credit risk in lending. These include taking a cautious approach to Group credit decisions, with lending secured against prudent business valuations. Demonstrating this, loan-to-value (LTV) information is set out in the following table.

If FUM were to decrease by 10%, the net exposure to loans where LTV is over 100% at 31 December 2024 would increase to £8.3 million (31 December 2023: increase to £7.7 million).

Our credit experience also benefits from the repayment structure of business loans to Partners. The Group collects advice charges from clients. Prior to making the associated payment to Partners, we deduct loan capital and interest payments from the amount due.

During the year we have continued to facilitate business loans to Partners and have also repurchased a proportion of loans previously funded by third parties which were guaranteed by the Group. For many of these loans we have conducted an in-year onward placement of them into our non-recourse securitisation facility, which is an interim step towards placing them fully off balance sheet. Further information is provided in Note 7 Other receivables and Note 10 Borrowings and financial commitments.

6. Liquidity

Cash generated by the business is held in highly rated government securities, AAA-rated money market funds and bank accounts. Although these are all highly liquid, only the latter is classified as cash and cash equivalents on the Solvency II Net Assets Balance Sheet. The total liquid assets held are as follows.

The Group's primary source of net cash generation is product charges. In line with profit generation, as most of our investment bond and pension business enters a gestation period, there is no cash generated (apart from initial charges) for the first six years of an investment. This means that the amount of FUM that is contributing to the Cash result will increase year on year as gestation FUM becomes mature and is subject to annual product management charges. Unit trust and ISA business do not have a gestation period, and so generate cash immediately from the point of investment.

Cash is used to invest in the business and to support returns to shareholders. Our shareholder returns guidance is set such that appropriate cash is retained in the business to support the investment needed to meet our future growth aspirations.

7. Borrowings

The Group continues to pursue a strategy of diversifying and broadening its access to debt finance. We have done this successfully over time, for example via the creation and execution of our securitisation vehicle. For accounting purposes we are obliged to disclose on our consolidated statement of financial position the value of loan notes relating to the securitisation. However, as the securitisation loan notes were secured only on the securitised portfolio of business loans to Partners, they were non-recourse to the Group's other assets. This means that the senior tranche of non-recourse securitisation loan notes, whilst included within borrowing, is very different from the Group's senior unsecured corporate borrowings, which are used to manage working capital and fund investment in the business.

Senior unsecured corporate borrowing of £388.3 million at 31 December 2024 increased from £201.1 million at 31 December 2023. This principally reflects the drawing of an additional £250.0 million bridging facility, offset by a reduction in the amount drawn under our revolving credit facility. We have committed to repay the £250.0 million bridging facility after the balance sheet date. Further information is provided in Note 10 Borrowings and financial commitments and Note 14 Events after the end of the reporting period within the IFRS consolidated financial statements.

8. Other provisions

Further information on other provisions, including how the balance has moved year on year, is set out in Note 9 Other provisions and contingent liabilities within the IFRS consolidated financial statements.

9. Other payables

Other payables on the Solvency II Net Assets Balance Sheet have decreased from £1,757.0 million at 31 December 2023 to £1,445.4 million at 31 December 2024, largely due to a decrease in short-term outstanding policy-related settlements. Other payables on the IFRS balance sheet have decreased from £2,388.1 million at 31 December 2023 to £2,144.3 million at 31 December 2024, additionally reflecting payables within policyholder funds.

Detailed breakdowns of other payables can be found in Note 8 Other payables within the IFRS consolidated financial statements.

10. Income tax liabilities

The Group has an income tax liability of £22.1 million at 31 December 2024 (31 December 2023: £11.5 million). This is due to a current tax charge of £349.3 million, tax paid in the year of £326.1 million and other impacts of £12.6 million. Further detail is provided in Note 6 Income and deferred taxes.

Stage 2: Movement in Solvency II Net Assets Balance Sheet

After the Solvency II Net Assets Balance Sheet has been determined, the second stage in the derivation of the Cash result identifies a number of movements in that balance sheet which do not represent cash flows for inclusion within the Cash result. The following table explains how the overall Cash result reconciles to the total movement.

2.3 European Embedded Value (EEV)

Wealth management differs from most other businesses, in that the expected shareholder income from client investment activity emerges over a long period in the future. We therefore supplement the IFRS and Cash results by providing additional disclosure on an EEV basis, which brings into account the net present value of the expected future cash flows. We believe that a measure of the total economic value of the Group's operating performance is useful to investors.

As in previous reporting, our EEV continues to be calculated on a basis determined in accordance with the EEV principles originally issued in May 2004 by the CFO Forum and supplemented both in October 2005 and, following the introduction of Solvency II, in April 2016. Many of the principles and practices underlying EEV are similar to the requirements of Solvency II, and we have sought to align them as closely as possible.

For 2024 we have simplified the EEV information provided in this section. Additional information, previously included within this section, can now be found within the data book on our website sjp.co.uk/full-year-results-2024-databook.

The following table and accompanying notes summarise the profit/(loss) before tax of the combined business.

A reconciliation between EEV operating profit/(loss) before tax and IFRS profit before tax is provided in Note 3 Segment reporting within the IFRS consolidated financial statements.

Notes to the EEV result

1. The new business contribution for the year at £801.0 million (2023: £695.4 million) was 15% higher than the prior year, predominantly reflecting the increase in new business volumes.

2. The unwind of the discount rate for the year was higher at £580.8 million (2023: £506.0 million), primarily reflecting a higher value of in-force business.

3. The experience variance during the year was negative £136.1 million (2023: negative £11.3 million), reflecting the adverse persistency experience in the year.

4. The impact of operating assumption changes in the year was negative £20.8 million (2023: positive £13.9 million), driven by a small increase in expenses assumed for the maintenance of in-force business under our new charging structure, and minor changes to persistency assumptions. The impact in 2023 reflected a small improvement to the persistency assumptions for our offshore bond business.

5. The distribution business loss includes the positive gross margin arising from advice income less payments to advisers, offset by the costs of supporting the Partnership and building distribution capabilities in Asia. The reported loss has increased year-on-year due to an increase in expenses recognised in this part of the Group.

6. Other represents a number of miscellaneous items including development expenditure, the costs of running our Academy and implementing our new charging structure, as well as the cost of redress associated with client complaints. It has decreased due to the decrease in complaints costs during the year.

7. The exceptional item: charge structure recorded in the prior year reflected the impact on the opening position of changes to our charging structure which were announced during 2023. In 2024, the charge of £49.1 million reflects a refinement to our modelling of the impact of these changes.

8. The exceptional item: Ongoing Service Evidence provision recorded in the prior year reflected the impact of establishing a provision following a review into the evidencing of historic ongoing servicing. The provision recognised during 2023 remains appropriate.

9. The investment return variance reflects the capitalised impact on the future annual management fees resulting from the difference between the actual and assumed investment returns. Given the size of our FUM, a small difference can result in a large positive or negative variance.

The typical investment return on our funds during the year was 11.9% after charges, compared to the assumed investment return of 5.8%. This resulted in an investment return variance of £533.7 million (2023: £501.7 million).

10. The positive economic assumption changes variance of £23.5 million arising in the year (2023: £2.5 million) reflects an increase in real yields.

Analysis of the EEV result

The table below provides a summarised breakdown of the embedded value position at the reporting dates.

The EEV result above reflects the specific terms and conditions of our products. Our pension business is split between two portfolios. Our current product, the Retirement Account, was launched in 2016 and incorporates both pre-retirement and post-retirement phases of investment in the same product. Earlier business was written in our separate Retirement Plan and Drawdown Plan products, targeted at each of the two phases separately, and therefore has a slightly shorter term and lower new business margin.

Our experience is that much of our Retirement Plan business converts into Drawdown Plan business at retirement, but, in line with the EEV guidelines, we are required to defer recognition of the additional value from the Drawdown Plan until it crystallises. If instead we were to assess the future value of Retirement Plan business (beyond the immediate contract boundary) in a more holistic fashion, in line with Retirement Account business, this would result in an increase of approximately £279.0 million to our embedded value at 31 December 2024 (31 December 2023: £250.0 million).

Section 3

Solvency

St. James's Place has a business model and risk appetite that result in underlying assets being held that fully match our obligations to clients. Our clients can access their investments 'on demand' and because the encashment value is matched, movements in equity markets, currency markets, interest rates, mortality, morbidity and longevity have very little impact on our ability to meet liabilities. We also have a prudent approach to investing shareholder funds and surplus assets in cash, AAA-rated money market funds and highly rated government securities. The overall effect of the business model and risk appetite is a resilient solvency position capable of enabling liabilities to be met even during adverse market conditions.

Our Life businesses are subject to the Solvency II capital regime introduced in 2016. Given the relative simplicity of our business compared to many other organisations that fall within the scope of Solvency II, we have continued to manage the solvency of the business on the basis of holding assets to match client unit-linked liabilities plus a management solvency buffer (MSB). This has ensured that not only can we meet client liabilities at all times (beyond the Solvency II requirement of a '1-in-200-years' event), but we also have a prudent level of protection against other risks to the business. At the same time, we have ensured that the resulting capital held meets with the requirements of the Solvency II regime, to which we are ultimately accountable.

For the year ended 31 December 2024 we reviewed the level of our MSB for the Life businesses, and chose to maintain it at £355.0 million (31 December 2023: £355.0 million). The Group's overall Solvency II net assets position, MSB, and management solvency ratios are as follows:

1 After payment of year-end intra-Group dividend.

2 Before payment of the Group final dividend.

Solvency II Balance Sheet

Analysis of the Solvency II position split by regulated and non-regulated entities and Solvency II sensitivities, previously included within this section, can now be found within the data book on our website sjp.co.uk/full-year-results-2024-databook.

Risk and control management

Conscious risk management

As the leading advice-led wealth manager in the UK, the Group remains steadfast in its commitment to providing exceptional service and delivering long-term value to its clients.

Central to this commitment is embedding a strong risk culture across the organisation, underpinned by a robust approach to compliance, governance and control, and client-centricity.

A risk-aware culture across all levels of the organisation is essential to achieving the organisation's objectives. This culture, which prioritises client outcomes and safe business growth, will ensure that risk management is an integral part of the approach to delivering value for clients and maintaining SJP's reputation as a trusted adviser with the market and its regulators.

The business activities of the Group and the industry within which it operates expose it to a wide variety of inherent risks and opportunities. The Group aims to understand its risks and opportunities, and to consciously manage them. Effective risk management strategies are applied, so that material risks are identified and managed within the agreed risk appetite. When assessing risks and deciding on the appropriate responses, the potential impacts are considered for key stakeholders: clients, advisers, shareholders, regulators, employees and society.

Over the next few years SJP will further invest in and strengthen the risk management and internal control framework. This will include leveraging data and technology developments for managing risk and implementing enhanced control assurance and testing capability.

Risk appetite

The Board sets its appetite for managing risk in the context of the Group's strategic objectives. These choices are set out in the Group risk appetite statement, which is reviewed at least annually by senior risk owners, the Group Executive Committee, and the Group Risk Committee before being approved by the Board. The Group risk appetite statement also provides a mechanism to record the key individuals within the Group who are ultimately accountable for managing particular risks.

The Group risk appetite statement includes a risk appetite scale ranging from no appetite for taking risks at all, through to acceptance of risk. Risk appetite may change over time, sometimes rapidly as economic and business environment conditions change, and therefore the statement is an evolving document.

A comprehensive suite of key risk indicators (KRIs) is incorporated into regular risk reporting, alongside qualitative information, to enable the Group Risk Committee, on behalf of the Board, to monitor the Group's risk profile.

Risk management and internal control framework

The internal control environment is built upon a risk and control conscious culture and organisational assignment of responsibility. The first line business is responsible and accountable for risk management, with oversight and challenge by second line risk and compliance functions, and independent assurance from the third line internal audit function.

The risk management and internal control framework is a combination of processes and systems by which the Group identifies, assesses, measures, manages, and monitors the risks that may impact the successful delivery of its strategic objectives and its ability to meet obligations towards clients, regulators and other key stakeholders.

The Board, through the Group Risk Committee, takes an active role in overseeing the risk management and control framework, for which it is responsible. To this end the Board assesses its principal and emerging risks, which are considered in regular reporting and summarised annually in the Group's own risk and solvency assessment processes (ORSA and ICARA). Further information on this is provided opposite.

The Board has overall responsibility for ensuring that management maintains comprehensive systems of internal control for managing its principal and emerging risks. On behalf of the Board, the Group Audit Committee takes responsibility for assessing the effectiveness of the Group's risk management and internal control frameworks, covering all material financial, operational, compliance and reporting controls for the Group and its individual entities.

It does this by overseeing the review of risk and control self-assessments (RCSAs) and monitoring the effectiveness of the risk management and internal control framework throughout the year through the quarterly updates provided by management to the Committee, and annual executive-level attestations. The risk management and internal control frameworks have been in place for the year under review and up to the date of approval of the Annual Report and Accounts 2024.

The Board receives regular reports from the Group Risk Committee and Group Audit Committee and approves key aspects of the Group's risk management and internal control framework including the risk appetite statement and Group ORSA.

Own risk and solvency assessment (ORSA)

SJP Group is classified as an insurance group and a key part of the regulatory requirements include a consistent approach to risk management across the Group, supported by the production of an annual ORSA.

The ORSA process follows an annual cycle, which applies comprehensive risk assessments to the business's activity, and ensures the Group is resilient to stresses in both the short term and over a five-year period.  

The ORSA assists decision-making by bringing together the following and is particularly useful in assessing viability, as it involves a comprehensive assessment of risks and capital requirements for the business:

· Strategic planning

· Risk appetite consideration

· Risk identification and management

· Capital planning and management

The ORSA continues to evolve and further strengthen risk management processes throughout the Group.

The Solvency Capital Requirement for insurers allows for at least a '1-in-200-year' risk event over a one-year time horizon. In addition, a range of stresses and scenario testing are used to help provide insight into the ability to maintain regulatory capital in such conditions. This assists us when considering the calculations and allocation of risk capital to all major risks in the Group, and the adequacy of capital positions.

In calibrating the level of stresses and scenarios used, consideration is given to factors or events that impact on the income from funds under management such as market movements, retention of clients or ability to attract new clients. Factors which impact costs, such as inflation, non-inflationary expense increases, and operational event-related losses are also considered. A range of severities is considered, including more extreme scenarios. The scenarios are used to assess both the immediate impact of an event and the impact over the longer term (in the wake of an event). Assessments are completed based on a standard set of factors as well as more current/topical or emerging risk exposures affecting the Group or financial services more generally.

Recovery and exit planning

In view of the introduction of solvent exit planning requirements by the PRA we have continued to review and refine our approach to recovery and exit planning through the year, including alignment to our broader risk management framework and operational resilience processes.

Current risk environment

Operational risks

SJP expects to implement its simple, comparable charging structure by the second half of 2025 and in the lead up to this, SJP will be communicating and engaging with clients to ensure they understand how their charges will change. This change enhances SJP's proposition for clients and reflects the Group's commitment to improving client outcomes. SJP believes that these efforts will yield significant long-term benefits for both clients and the business. While the new charging structure is expected to be implemented by the second half of 2025, foundational systems development to support this initiative was undertaken in 2024. Recognising the risks inherent in a project of this scale, oversight and change management practices aligned with the level of change are maintained within a robust governance framework.

At half year, SJP announced a redefined purpose and refreshed strategy. As the implementation of the new organisational model is progressed to support the delivery of the strategy and take costs out of the addressable cost base, people risks will be heightened. SJP is sensitive to the risks and is focused on managing impacts to people, whilst maintaining operational and financial resilience through the implementation of the new model and delivery of the SJP strategy.

Whilst SJP consistently aims to achieve good outcomes for clients, the Group experienced higher levels of complaints than usual during 2023. These complaints were principally in connection with the delivery of historic ongoing advice. This prompted the Group's historic ongoing service evidence review, a key programme of work which kicked off in 2024 to review the historic servicing records for all clients who have been charged for ongoing advice since the start of 2018. In February 2024 the Group announced a provision, recognised in the 2023 year-end financial statements, for the estimated cost of providing refunds to clients where the evidence of ongoing advice delivery fell below an acceptable standard. There has been no change in the estimated cost of the programme during 2024, and hence the Group remains comfortable with the provision.

Changes have been implemented to ensure more consistent, centralised evidence of the activities of the Partnership with clients, which reduces the risk of clients not receiving ongoing advice of value to them. Where there is not adequate evidence of ongoing advice being provided, ongoing advice charges are switched off.

Claims management companies (CMCs) have continued to be interested in the Group. Alongside existing advice standards and checking processes, several actions have been taken to embed the Consumer Duty, enhance evidential standards for ongoing advice, switch off ongoing advice charges for clients who haven't received ongoing advice, and strengthen adviser oversight and complaint handling processes. All these help to further manage the risk, and mitigate the potential level of complaints over the medium to long term. Whilst the volume of complaints received during 2024 has been much higher than usual, there has been a significant reduction in the average number of complaints received per month in the second half of 2024 relative to the first half.

This is a positive trend which we to expect to continue. We also note that from 1 April 2025, CMCs will be required to pay a case fee for all cases brought forward to the Financial Ombudsman Service (FOS). We expect this to result in fewer spurious complaints as CMCs will have some financially exposure where complaints are referred to the FOS.

Macroeconomic/political

Inflation has reduced in 2024 from the high levels seen in recent years, although following the Autumn Budget it is expected to remain above the UK Government's target of 2% over the next few years, which could further impact on the cost of living and put pressure on expenses. The Autumn Budget made a variety of changes to taxation, and the impact of the tax changes on clients could result in reduced capacity or desire to save into certain products. SJP's advisers, through ongoing financial advice and a broad product/ investment range, can support clients in managing their financial affairs, help manage the effects of inflation on the standard of living they are aiming for in retirement, and remain tax-efficient in their savings as the tax landscape changes.

There remains potential for global geopolitical tensions to escalate, which could have relevance to the Group through impacts on financial markets and through heightened cyber risk.

The Group's business model has demonstrated resilience to macroeconomic factors through 2024. For clients, SJP's advisers are well placed to advise them on the benefits of taking a long-term view and investing or continuing to invest.

Regulatory change

SJP actively engages with the regulators and makes improvements to meet evolving and higher industry standards and expectations for financial advisers and investment intermediaries to help reduce and prevent the risks of serious harm to clients.

Regulatory change is a constant and, amongst the significant regulatory changes, the FCA reinforces the need for firms to embed the Consumer Duty regulation. Accordingly, it remains a priority to continue to embed the Duty and to improve activity to monitor and assess clients' outcomes.

Property fund closure

In line with industry peers managing property funds, SJP announced the decision to wind down the Property Unit Trust and remove the Property Life and Pension fund options. Due to low investor sentiment towards property and market-wide challenges experienced by property funds, it was not feasible to continue to offer the fund. Work is underway to focus on operational processes to implement the change and clients' money has started to be returned to them. This process is expected to take up to two years as we are prioritising delivering fair value to clients, which is less likely to be achieved over a compressed timeframe.

Sustainability and climate change

The information on the actions being taken to support the transition to a more sustainable economy can be found in the our responsible business section.

Sustainability and specifically climate-related risks are identified and assessed through the suite of Group risk policies, framework, processes and scoring methodologies as outlined throughout this section. Sustainability and climate change are cross-cutting risks that primarily drive market-related risk to investments as transition risks could threaten asset valuations; reputational risks associated with greenwashing accusations which could harm the Group's ability to attract and retain clients, reducing fee income; and regulatory risk as compliance with climate-related requirements can carry a high implementation cost. These could amplify the following principal risks to the business: client proposition, financial, strategy and change, regulatory and legislative (see our responsible business section in the Annual Report and Accounts 2024 for more detail).

The Group's approach to managing climate-driven market risk is similar to how other drivers of market-related investment risk are managed, through our investment management approach (IMA), whereby work is undertaken with fund managers to ensure they take account of climate risks whilst seeking to deliver returns for clients in line with their risk appetite.

Similarly to help mitigate reputational and regulatory risks, minimum standards are set for fund managers in relation to compliance and integration of ESG risks in decision-making.

Physical climate-related risks (acute or chronic) are assessed to ensure and enhance the Group's operational resilience. However, given the nature of SJP's operations, physical risks to the business are considered low. Climate-related opportunities, and the applicable timeframes assessed for each risk and opportunity are outlined in the our responsible business section in the Annual Report and Accounts 2024.

Principal risks and uncertainties

Whilst the risk landscape evolved over the course of the year, the inherent principal risk areas that the business faces remain largely consistent with the previous year and are set out in the tables on the following pages, together with further information on the key risk components, and examples of material controls and processes through which these are aimed to be mitigated. Reputational damage and impacts to clients, the firm, or other stakeholders and the environment are a likely consequence of any of the principal risks materialising.

Emerging risks

Emerging risks are identified through many activities: conversations and workshops with stakeholders and governance forums throughout the business, reviewing academic papers, attending industry events and other horizon scanning by the Group Risk team.

The purpose of monitoring and reporting emerging risks is to give assurance that the Group is well positioned to manage the novel developing or rapidly changing risks to its future strategy. The Group Risk Committee reviewed emerging risks during 2024. Examples of emerging risks include:

· Cyber security risk - Cyber attacks that result in loss of customer data, financial assets, and damage to reputation.

· Climate change risk - The risks associated with climate change and the need to transition to net zero by 2050 will have physical, legal, and regulatory consequences.

· Regulatory change risk - SJP is subject to conduct and prudential regulation in the UK by the PRA and FCA and in the other jurisdictions in which it operates.

· Geopolitical risk - Political instability, trade wars, and other geopolitical events can disrupt markets, reduce investment returns, and increase operating costs.

· Artificial intelligence risk - The use of artificial intelligence (AI) can improve efficiency and profitability but can also create risks associated with data privacy, algorithmic bias, and regulatory compliance.

· Demographic shift risk - Ageing population and demographic shifts can impact the demand for SJP services, requiring the need for innovative product solutions and a more advanced digital proposition.

· Energy crisis/blackout risk - Greater reliance on legacy nuclear plants and new renewable sources is highlighting a disparity between the UK's supply and demand of energy.

Viability statement

How viability is assessed

The business considers five-year financial forecasts when developing its strategy. These incorporate the budget for the next financial year and four further years of forecasts based on reasonable central assumptions around the development of business drivers.

At the core of assessing viability is understanding how different principal risks could materialise. Risks are considered which might present either in isolation or in combination and which could result in acute shocks to the business or long-term underperformance against forecast(ed) business drivers. A five-year time horizon is considered sufficiently long to assess potential impacts and aim to ensure that the business remains viable, noting that identified management actions could also be taken to restore the business's prospects.

When considering how the principal risks previously described might affect the business, impacts on the following key financial drivers are considered:

· reduction in client and Partner retention

· reduction in new business relative to forecasts

· market stresses

· increases in expenses

· direct losses through operational risk events.

Stress and scenario testing on these key financial drivers is carried out, alongside operational risk assessments. To provide comfort over viability over the next five years, the scenarios and assessments look at events which would be extreme, whilst still remaining plausible. The analysis contained in the most recent ORSA demonstrated that the Group is resilient.

As an example, a scenario considered in the most recent ORSA included a severe fall in new business volumes in year one of the projection, followed by no subsequent growth in new business; a large immediate lapse across all lines of business; and 0% investment growth over five years. Even in this extreme scenario, the Group maintained capital well above the regulatory capital requirements.

For adverse stresses and scenarios there would be impacts on profitability, and depending on the severity of the scenario the Group would review and implement recovery actions which aim to protect and/or restore the Group's finances.

Conclusion

In accordance with the UK Corporate Governance Code (Provision 31), the Directors have assessed the Group's current financial position and prospects over the next five-year period and have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due. The Directors believe that the Group's risk planning, management processes and culture allow for a robust and risk-conscious environment.

Consolidated statement of comprehensive income

The results relate to continuing operations.

Consolidated statement of changes in equity

The number of shares held in the shares in trust reserve is given in Note 12 Share capital, earnings per share and dividends.

Miscellaneous reserves represent other non-distributable reserves.

Consolidated statement of financial position