Hello everyone, and welcome to the St. James's Place 2022 Half Year Results Q&A Session. My name is Emily, and I will be facilitating the call today. You will have the opportunity to ask a question by pressing star followed by the number one on your telephone keypads. I will now hand the call over to our host, Andrew Croft, Chief Executive of St. James's Place. Please go ahead, Andrew.
Thank you, Emily. Good morning, everyone, and welcome to the live Q&A. I hope you've had the opportunity to watch the presentation before this. I'm joined here today by a number of my executive colleagues. Should we just go straight into questions? The first question please, Emily.
Thank you. As a reminder, before we take our first question, if you would like to ask a question, please press star followed by one on your telephone keypads now. We will now start our question-and-answer session with our first question from Andrew Sinclair from Bank of America. Please go ahead, Andrew.
Thank you, morning, everyone, well done. Good set of results. Three for me as usual, if that's okay. Firstly, it was on controllable expenses. I thought it was great to say you're still on track for your targets of under 5% for the year, despite inflation. I just really wondered if you can tell us what levers you've been able to pull to keep costs under control and just give me a bit of color on what the outlook would be for 2023. Secondly, it was on the academy. I think at the Investor Day in 2021 you talked about the academy delivering about 400 into the partnership from 2022.
I think we're around 350 something in the academy at the moment. I think you said in your recorded remarks about 300 should come through this year. Just really wondered if you can square the circle and kind of what's needed to ramp up to that 400 mark. Then final question was just outside the academy. Can you talk a little bit about the hiring environment? We've heard some comments that perhaps some of the PE-backed names have been quite aggressive in terms of recruiting recently. Just really wondered if you can give some context on what you're seeing. Thanks.
Okay. Thank you very much, Andrew. I think I'll just hand straight over to Craig on controllable expenses, and then we'll come back on the academy.
Hi, Andy. So 2022, you're quite right, we've recommitted to controllable overheads growing by no more than 5%. And you're quite right, the onset of that inflationary environment was probably upon us at the point which we last gave that commitment, which was at the end of February. In fact, it's probably more pronounced. I'll probably echo what I said at that point, which is that we've had very clear visibility of what our cost base was for 2022. We've got very strong disciplines within the business, and a lot of the stuff that we would have been spending our resources on was contracted at that stage.
Now, that's not to say there haven't been some areas where we've seen increases that we may not have expected, but within an overall cost base growth of GBP 300 million, we were able to tackle that and manage through. I think discipline is probably the key word there. We're in a position where we could recommit to that for the second half 2023. I'm not gonna put a number on it yet because I can't. I don't know what the environment is gonna look like as we move towards closure of the budgeting process. At some point in Q4, we'll clearly be updating when we publish our year-end accounts and giving a very clear indication of what we expect.
I think what I can say at this stage is that we're gonna do everything we possibly can to make sure that the impact on controllable overheads is less than whatever the headline rates of inflation is. You know, the discipline that we set out as part of the 2025 plan will continue, but we'll have to make decisions that are right for the business and the growth that we're seeking within that plan.
Thank you, Craig. On the partnership, I'll just sort of give a sort of backdrop and then hand over to Peter Edwards. I just wanna recap on those 2025 targets. You know, we said we're confident of doing 10% per annum in gross flows, over to 2025. Look, it was never gonna be in a straight line. We knew that.
Within that, the confidence is that we can achieve it through a combination of recruiting experienced advisors, academy graduations, technology and efficiency gains, et cetera. If you remember, we never set explicit targets for each individual one of those and don't plan to do so. We will continue to grow the partnership, but the most important thing is we've got to get the right people. We're not gonna play any numbers games here. Just on that backdrop, I'll hand over to Pete to answer the questions.
Yeah. Thank you, Andrew. Andrew, in answer to your question about, to use your phrase, the ramp-up and what's needed from our current position to training about 400 people a year, I think what we benefited from through COVID was the ability for us to slightly pivot the model away from four distinct locations in Edinburgh, Manchester, Solihull, and London to work the academy process through all our 21 regional locations as well as individual partner practices. As Andrew said, we're not in the business of playing the exact numbers games, but we do believe that with the new way that we train people through the academy and the time that we're taking to
To ensure that they are sustainable in their own right. That actually, that move from 300 to 350 to 400, and potentially beyond that in the future, is something that we will do a bit on a managed and phased basis, but something we're very confident that we can achieve.
In terms of the hiring environment for experienced advisors?
Yeah. Look, recruitment of experienced advisors has never been easy, and it will never be easy. The pool of available talent that meets our criteria, by definition, decreases as time goes forward. It's important to remember that the bar we set in terms of the criteria to join the partnership is significantly higher than the average bar out there in the independent sector, for example. We're very selective.
It's all about getting the right people in to join the partnership. I think the combination of experienced hires and the academy in the way that I've just described gives us confidence that we can achieve the growth targets that we've got. We're very confident in our ability to continue to recruit appropriate members of the partnership moving forward.
Thank you. Great. Emily, could we have the next batch of questions?
Of course. Our next question comes from David McCann with Numis. David, please go ahead.
Yeah. Morning, everyone. Echo Andrew's comment on the results. Well done on those. First one, just to follow on actually from Andrew's question there about the cost inflation number and accepting the comment you just made there. Yeah, when you set that 5% target, you know, the underlying, I guess, retail inflation expectation might have been 2% at the time. Obviously we're now higher than that. I think you just commented there, Craig, that you'd expect the future years to come in below the rate of inflation. Yeah, I guess accepting that your costs might be higher than the 5%, but now at a discount to inflation. Just wondered what the gap was there and just to kind of help us rationalize that. That's the first question.
The second question is, obviously the FCA published their Consumer Duty update recently. In the bit, obviously, mainly it is on the exit charges where these now need to be deemed reasonable. I guess what is your thought process behind how you would justify your exit charges as being reasonable to meet that definition? Any other comments you might have around that? Thank you.
Do you want to do the inflation one?
Yeah, for sure.
Thanks, David. Yeah, you're quite right that there was a level of inflation when we drew together the 2025 plan, and I guess the context for that is that was planning that happened over the course of the summer in 2020. The outlook on inflation did look somewhat different. I think the way I would see this is that we've got some costs that are very clearly prone to inflation. You know, two-thirds or so of our controllable overheads are peak related. I think it's important to think more in terms of professional wage inflation rather than just headline inflation. That can push you in different directions.
There are also some areas. We have a pretty substantial property cost annually within our books. Of course, things like rents don't necessarily move in line with inflation. There are some things we can do with our overall pool of costs to manage within. What we're not gonna do is make compromises on investments in the business. That will continue to be a priority. It's perhaps also worth me just emphasizing the fact that when we talk about controllable overheads, if you think about our total costs, think about all costs within the entire group, the bit that we flag as controllable overheads are only about 17% of that total cost base.
What we've done with the remainder is built a business model with a cost base that largely moves in line with volumes and markets. So the, you know, the potential impact of a headline rate of inflation on a cost-based rate of tax of GBP 2 billion, which would be enormous, I'll leave you to do the math. Because we've been able to build a business model that protects against that, only leaving 17%, we're then left with a subset of that 17% that isn't necessarily directly indexed to inflation. There is a lot we can do. The other thing I would also emphasize that we will continue to do regardless of the operating environment is look for opportunities to improve the way in which we run the business.
When we put 5% on the table in our plan, critical to remember that that 5% is a net figure. Within that 5%, we're always looking at ways of reducing costs that's no longer needed in order to introduce investment that's needed for the future. Hopefully, that brings a bit of color to the equation.
Thank you, Craig. On the Consumer Duty point, David, I'm gonna start by just sort of remembering the fundamentals of our business. Our business is long-term, and our clients are investing long-term. We do not see our current dual charge as unreasonable. It's also fully disclosed to clients on a regular basis. We don't see any change.
Could we have the next set of questions, please?
Of course. Our next question comes from the line of Andrew Baker with Citi. Andrew, please go ahead.
Hi. Thanks for taking my questions. Two from me, please. The first one's on net flows. You previously talked about a normalization of the surrender and withdrawal rate over time. Fees were again low in the second quarter. Just curious on your view on where you're seeing these for the rest of the year, and then when you would expect to see some type of normalization here. Secondly, just again, back on inflation, but a slightly different angle. Are you seeing any inflationary impacts on the partners business? Presumably their costs are going up. Obviously income this year, let's say flat. If we see extended inflation for a period of time, do you expect this to have any impact on advisor retention or any other impacts that you see there? Thank you.
Yes, thank you, Andrew. What I'll do, I will start with the partner business as inflation is an obvious topic, and I think I'm gonna ask Pete to answer.
Yeah. Thank you, Andrew. I guess inflationary pressure is felt by all in society. Specifically around the partner businesses, which while they're not immune from inflationary pressures, one of the benefits of being a partner at St. James's Place is that they've got us here to support them via our network of field management teams, for example. We have the flexibility to support partner businesses financially should that need arise. We haven't noticed any significant or cries for help, I should say, from the partnership. While we've not seen any requests in the short term, they do have the backstop of St. James's Place there to support them. I think one of the things to remember though, about the partnership is the businesses are well capitalized.
The partner businesses benefit from the support of their contract as well as from St. James's Place. We're not seeing anything that is causing us concern. As they are managed locally, we will know should that change.
Thanks, Pete. I'll answer the net flow, and Craig might jump in as well. I think the specific point you were talking about, Andrew, is the regular withdrawal rate. That's essentially people taking regular income from their plan. That's what we expect. What we saw even before COVID was the level of regular withdrawals was declining. Certainly during COVID, we saw sort of it decline further, partly as people weren't spending money and therefore were keeping the money invested. What we guided at the February results is that we would expect that regular withdrawal rate to return to some kind of normality once we are fully out of lockdown, et cetera. We are not seeing that yet.
I think we expect to see it at some point. It isn't gonna suddenly happen overnight. My guess as to why we're not seeing it right now is people are still using savings accumulated during the pandemic. Craig, you have anything you want to add?
I probably should, 'cause I think I was the one that said at the last meeting we had that it may normalize. I think in the longer term we may see a move in that direction. Yeah, I think Andrew's right. When we last discussed this back in February, we were very much talking about the effect that excess savings had had and lost spending opportunities and the contribution that had made to what I think we described at the time as exceptional retention.
I think there might also be a little bit of the same outcome, but slightly different reason. Because when we experience choppy markets and difficult environments, generally and uncertainty, it does have the effect of slowing down decisions. You see that in gross flows on occasion. I think it also encourages people to stay invested because it doesn't feel like a good time to not stay invested. I think it's a complicated pattern, but it is interesting to see the continuation of that pretty exceptional level of retention. I don't think I can add anything to when it'll change other than, you know, if there ever is such a thing as normal again, it might.
T hank you. Could we have the next question please, Emily?
Our next question comes from Andrew Crean with Autonomous Research. Andrew, your line is open.
Morning, all. Three questions if I can. Firstly, could you comment a little bit about the investment performance relative to, sort of normal private client, indices in the first half? Secondly, could you enumerate the property costs, which you alluded to within your, controllable expenses? And thirdly, could you tell us, how many new customers, you put on in the first half and what the customer numbers are now in total?
Okay. Thank you, Andrew. I'll ask Craig to do the property costs. Go to Rob on the investment performance, and then I'll come back on the new customer numbers.
Yeah. We don't actually disclose total property costs. If you imagine a property portfolio that pretty much spans the nation, it's a reasonably substantial one. One of the reasons why I wouldn't give a full analysis is obviously that you get rent reviews up at different stages. The real point I'm trying to make with the property, Andrew, is that inflation may move by whatever, 5 percentage points, but that's not the immediate reaction that you would see in the property portfolio. If you had in mind, something like
I don't know, 15, 16, 17% of establishment expenses, you wouldn't be a million miles away. That's property-
Mm-hmm.
Property related.
Okay, thank you. Rob, do you want to pick up the investment performance one?
Yeah. Hey, Andrew. Rob here.
Hello.
Firstly, I'd point you to our value assessment statement that got published two weeks ago, and it's on our website. I think first thing to point out is to make sure that when we look at performance, it's on an apples-to-apples basis. When we look at our investment performance, we look at net of our underlying fund manager costs, but gross of SJP fees. I'll talk about portfolios, and I'll talk about funds. All of our clients invest in a mixture of funds, eight to 10 funds. Over 70% of our clients will invest in one of our model portfolios. Let me start with our model portfolios. Seven out of eight of those are outperforming benchmarks.
Eight out of eight of those are outperforming the IA sector. When it comes to relative performance versus our fund managers, it's fair to say that we've got a portion they're outperforming. Our global value fund, which we launched two years ago, is having a fantastic performance. I think it's up 16% relative to benchmark since we launched it two years ago. Then we've got others that are doing less well. The good news is, and this is the point I brought out in the first statement, in the last three years, we've made over 30 changes on GBP 100 billion. Where we have made those changes, those funds are now outperforming on a relative basis by 1.4%.
Okay, thank you, Rob. On the clients, Andrew, we say we've got over 900,000 clients. The actual number is about 903,000. I think we disclosed 868,000 at the end of the year, so about perhaps 30-odd thousand. Then just as a bit of light relief, within that number, we've got 201 clients over the age of 100, and we have 855 clients under the age of one.
Emily, could we have the next question?
Our next question comes from Ashik Musaddi with Morgan Stanley. Please go ahead.
Yeah, thank you. Good morning, Andy. Good morning, Craig. Just a couple of questions I have is, first of all, is the new business margin was a bit lower compared to the gross flows. I think you mentioned it is to do with some expenses of last year and the growth of last year. I mean, would you mind elaborating a bit more on that? Because if I'm not wrong, historically, that has been a bit more stable. In this first half, you wrote more pension business, so I would have assumed that it should have gone up rather than gone down. Any thoughts on dynamics on that would be very helpful. Secondly, I mean, this time you've been a bit more specific on gross flows and net inflows, which I have never seen in the past.
Maybe I missed the last couple of quarters, but I've never seen you being so specific in terms of gross flows and net flows. What is driving that confidence on the specific number? I mean, and what would you say is some upside or downside risk on that specific guidance? Thank you.
That's the new business.
I'll pick up the new business. Hi, Ashik. Yeah. The first thing I should say just for emphasis is that this is not product related. You're right that product does contribute to varying margins on the net income from fund, but they tend to sort of accommodate each other as they fall into mature funds. That's all part of the construct of the basis points guidance we've given on net income from fund. What this is the point at which investments are made. For the most part, these are pretty binary. There is a charge levied that we collect, pass on to the clients in the form of initial advice, and that that's all very kind of straight line, if you like, in terms of margin.
There are one or two allowances that we have across our advisor base that for reasons of being able to run and plan a business effectively, we set a year apart based on criteria of productivity. For example, what you see, if you think about 2021, when our gross flows grew by 27%, those allowances would have been lifted. You then go into 2022, and let's assume for the sake of the example, we're flat. You're getting the same level of new business coming through, but you've got the allowances that are higher because of the productivity, and that's if you're comparing the margin 2022 - 2021.
The other way of looking at it is that when we sat down at the end of February and we were thinking about what the possibility might be for gross new business for this year, we were talking at that stage, and that was prior to a lot of developments in the operating environment, somewhere in the region of 7%. Simply, that would have been 7% of additional new business without any change in these allowances that I'm referring to. There's always a little bit of movement within the overall margin on new business. Typically, you'd expect that to come back in a great situation.
Thanks, Craig. On the outlook, what we're expecting in the second half is basically more of the same in the first half.
Therefore, if you do the math, you get to that GBP 18 billion and GBP 11 billion. We thought that was more useful than putting percentages down, you know, particularly given, you know, the comparatives. That's also within the range of consensus. I think you asked what could change that, on the upside and the downside. I think on the downside, it would be further shocks to the financial system. On the upside, as I said in the presentation, when events and markets stabilize, historically, we've seen an acceleration of flows.
Yeah, just one follow-up on that. I mean, would you say that this GBP 18 billion and GBP 11 billion includes some sort of recessionary risk, or would you say that that probably is not baked into this number?
Look, I think it's if market conditions continue is what we were essentially saying.
Okay. That's it. Thank you.
You also need to think about the World Cup as well, of course. It didn't do very well. Could we have the next question?
Our next question comes from Rhea Shah with Deutsche Bank. Please go ahead, Rhea.
Thank you. I have two questions. The first one is back to the cost center, but slightly different. Craig, you were talking about rent reviews and them coming at different points. What are the length of all of your contractual agreements, an average length? Essentially, are we going to see a lagged effect of inflation coming through over, say, many years? Secondly, around the EV results, you raised your persistency expectations in the results. Can you give a bit more detail on this? And how should we think about these in the context of future outflows relative to historical levels?
I think that goes to you, Craig.
They're both mine, aren't they? Yeah, look, I think the best way for me to answer the first question is there really isn't anything to see there. We've got a very normal rolling property portfolio that has rent reviews and lease end break clauses that won't in itself contribute any shock to any future planning. I wouldn't have at hand exactly what it is you're looking for there in terms of contractual commitments. You know, we typically sign leases anywhere between five years and 15 years, depending on the location and depending on the long-term purpose of that property.
At any given time, we've got a number of those running, but it's certainly not anything that will contribute to any future shock. On the EV results, you're quite right, we have booked a persistency adjustment. It's not dissimilar to the adjustment we booked last year for bonds and pensions, but this one relates to ISAs and unit trusts. As ever, there's complication here, but there's a really simple narrative around this, which is that if you think about behavior, savings behaviors for ISAs, when they first came along, I think most people would have seen them as a short to medium-term savings vehicle. Whereas the reality with squeezes elsewhere, they've become part of mainstream pension planning. That's what we've seen on the books, and that's what we've reacted to.
Now, we have also, you're quite right, talked about this exceptional retention that we expect to normalize or at least move towards normalizing. Clearly, when you're setting long-term assumptions in an embedded value, you see through that. We won't allow exceptional experience to influence our analysis of long-term experience, and therefore our judgment on future long-term assumptions.
Emily.
If I could just go back to what you were saying about the leases. I get those are 10-15 years. If we look away from the property leases to just other types of contractual agreements, would the average years be different there?
I don't think we would even see it in that way. You know, we don't look at average contracts. We've got multiple contracts with multiple parties. Some of them are long-term. Some of those long-term contracts will have clauses in them that allow income expense to grow or be fixed. I think I go back to the statement I made earlier, which is that as we plan ahead, we will do so with discipline and do everything we possibly can to keep it lower than the headline rates of inflation. No, I don't think I have any appetite to start picking that apart on a contract by contract basis.
Thank you. Emily.
The next question.
Our next question comes from Nasib Ahmed with UBS. Nasib, please go ahead.
Hi. Morning. Thanks for taking my questions. I've got two here that are slightly related. Firstly, on the net impact on DAC, that's trending down, and I think you've guided previously that over five to six years it's kind of going to normalize. Is that kind of the trend that we should be seeing going forward on the net DAC? Then related, given your IFRS results in 1H is quite strong, is there an upside to the payout ratio of 70% if you were to, kind of, keep the second half bps flat or increase it? Thanks.
I think there are two questions, if I've understood, just to play it back, is I think you had a question around the DAC and the amortization period of the DAC. And then I think you had a second question around dividend payouts. Is that right?
Yeah, I must say I struggled to hear. The line was a little bit crackly on the DAC question. On DAC, I'll try and answer it. If you don't think it's answering the question, I'm sure you'll tell me. Generally speaking, the DAC follows the same pattern that we expected it to some time ago. Because you might remember when the Retail Distribution Review came along, we were unable to defer as many of the costs that we used to.
Those were locked up and are being deferred over a longer period. Then we have a continuation of deferred expenses but at a much lower level. I'm not sure there's anything particularly unusual in the pattern of either accumulation of DAC or amortization.
Just sorry, does that answer your question?
Yes, it does. Thank you. Thanks.
The dividend question, I'm afraid. That was a bit crackly as well.
Just to reiterate, we said we would pay 70% of the underlying cash flow by way of dividend. That's obviously, you know, an annual thing. The interim dividend's just a mechanical calculation.
What we've done is we set the interim dividend as a percentage of the prior year total dividend. Mathematically, it's exactly what you would expect if you pick up the guidance that we gave.
Sorry, the question was around whether you can increase the 70% for this year, given the IFRS result is quite strong.
I don't know. Because we haven't really. If you go back to the guidance we gave, this was all geared towards long-term planning, which accommodates variances in IFRS results. You're gonna see a lot of volatility in IFRS results for all the reasons that many of us are familiar with. I think when you're thinking about the future, you should just use the guidance that we've given, which is 70% of that underlying cash figure. What that does is it accommodates all of the complexity that IFRS is capable of either bringing or taking away.
Yeah. Good. Emily.
Thank you. Thanks.
Next, question please.
Our next question comes from Enrico Bolzoni with JP Morgan. Enrico, please go ahead.
Hi. Good morning. Thanks for taking the question. Just have a couple. On recruiting, first of all, can you tell us of the 17 new advisors onboarded, how many joined from the academy? Linked to that, I just wanted to know your 10% gross growth in gross inflows target, on what assumptions in terms of advisor growth stands? By that I mean, how many advisors would you expect to have by 2025? Second question is related to actually, competition and fee pressure. Clearly market today came down quite a lot, so a lot of prospective customers lost quite a lot of money. Do you foresee a change in fee pressure?
Clearly you charge an initial product charge 0.5% on certain products that some of the other competitors don't. Do you think that this potentially can be an issue that we might see a bit of pressure there? Partially related to that, do you expect any increase in terms of pricing pressure from the third-party companies you deal with, the actual fund providers, in terms of how much they are expected to be paid, given again the markets here today? Thank you.
Yeah. Okay. Let me try and pick that apart as well, in a bit if I may. I think around the recruiting and the 10% gross inflow target, as I said at the beginning, we're confident achieving our 10%. We're gonna be doing that through recruiting experienced advisors, academy graduations, you know, technology is helping efficiency, you know, new brand, et cetera. We're not going to get into the game of breaking that down by individual targets. That also applies between experienced recruitment and academy. I'm not gonna give you specific answers for those two. On competition and fee pressure, I'll start off by saying you need to remember we are a long-term business here.
The value of advice is very, very powerful. We are not seeing, to a large degree, any particular fee pressure on what we're doing. In terms of the investment management fees, which I think you're asking at the end, are we seeing investment managers asking for additional fees? I'm gonna hand over to Rob there. Or no, apparently I'm handing over to Craig.
It could be either 'cause I hope we give the same answer here.
I don't think I might do it well.
The short answer is no. Why is that? What we're able to offer are volume and consistency, and that's of enormous value to fund managers, and I'm sure everyone on the phone will understand that. If anything, over time, we would expect to negotiate even keener prices, and that will of course be to the benefit of our clients.
Hopefully that's part, but actually to answer your first question, hopefully it gives you what you needed.
Yeah. Thank you. Sorry, if I may, just because it's something in the past that you disclosed at times, can you give us the breakdown in terms of the new advisor joined, or it's something that at this stage you cannot tell us?
I think we've sort of said all we're gonna say in the presentation this morning. Emily, could we have?
Thank you.
Could we have the next question, please?
Our next question comes from Larissa van Deventer from Barclays. Please go ahead.
Two questions related to how we should think about AUM going forward. On funds under management, which indices would you say that we should think about tracking? Is it as simple as MSCI Global, or is there a slant towards a specific region? Related to that, how are you thinking about asset allocation in your instructions to your asset managers considering the current market volatility, please?
Just to repeat those questions, what's the best industry to use for AUM in your models? That's how I understood it. The second question was around asset allocation. I will pass to Robert this particular one.
Yeah. Hi, Larissa. Rob Gardner here. Just at a very high level, and again, I might point you to our annual value assessment statement, which has got a breakdown of all of our funds and their benchmarks and their fund managers. Roughly our funds are about 70% equities, 15% fixed income, 10% alternatives, and about 4% cash. The big shift that we have been on over the last three years, we're still on that journey, is moving to a global benchmark. It's fair to say that if you go back sort of five years, we would be much more sort of focused on FTSE and Gilts. Our target long-term asset allocation is MSCI World.
Well, actually MSCI ACWI, and then a kind of global fixed income benchmark like the Barclays Agg. That's the direction of travel. We're not fully global yet, but that's where we're heading. In terms of asset allocation, that's our job and our partner's job. Fundamentally, our job is our partner's job is to sit down with clients, understand their goals, understand their time horizons, and build a portfolio that meets their return, risk, fee, ESG profile. We have our underlying funds and building blocks for those partners to choose from. Then on top of that, our job as SJP is to give partners model portfolios, unitized portfolios, to meet that. The underlying fund manager's job is really around stock selection.
SJP owns the strategic asset allocation and portfolio construction to meet the needs of those 900,000 clients. Just a little fact, but with all of our funds, we can create 5 million different possibilities, and that's exactly our goal and the value that we add to clients over the long term.
Okay. Thank you, Rob.
Thank you. Actually, no, the question was, how are you thinking differently about asset allocation given the current volatility?
Yeah. Our mantra at SJP is decades, not days. As I say, our job. You know, I think you've heard Andrew and Craig talk about how our average client has been with us for 14 years. You've just heard how we've got clients who are literally babies, and we've got clients who are 100 years old. The most valuable thing that we can do is get our clients to invest for the long term. You'll know from your kind of Barclays, your equity study that the best way to beat inflation over the long term is to invest in equities. Over 30 years, if you've been invested in MSCI World, your money will be worth seven times more than inflation.
Really, the most important thing is to get our clients to have the right equity mix, right fixed income mix to meet their risk and return goals. Our underlying fund managers might. That's where they try and outperform their relative benchmark. In terms of the long-term strategic asset allocation, everything references our investment beliefs, which are again on our website.
Thank you.
Thank you. Emily, could we go to next question, please?
Next up, we have a follow-up question from Rhea Shah with Deutsche Bank. Rhea, please go ahead.
Hi. Thank you. Just going back to one of the previous questions around the dividend. Hypothetically, if the cash results did fall such that you need to cut the dividend, per share, would you look at cutting it or would you look at increasing that payout ratio, to at least keep it flat?
Hi. Thanks, Rhea. I think the answer to that question can only be given when you know what the trading environment is you're operating in and what the outlook is from that point on. That's probably all I can say. You know, boards make decisions on dividends based on the circumstances prevailing at the point at which any dividend is declared.
Okay. Thank you.
Thank you.
Emily, do we have any more questions? Got one more.
Our next question comes from Greg Simpson with BNP Paribas. Greg, please go ahead.
Hi. Morning. Thanks for taking the questions at the end. Just two on flows and one on costs. The first in terms of flows, I'm just wondering how much forward visibility do you have on within the business?
Paperwork and forms a few months before the money actually comes in, for example. Just when thinking about, say, your targets in an uncertain backdrop. Second one is also how much of the business is typically transfers in of already invested assets? When markets fall, you kind of get an external impact on those on that value being lower. Just the share of transfers. Then lastly, apologies if I missed it in the presentation, but is there any guidance on miscellaneous costs for the full year? I think there was an element that was more one-off related to the lower market values, but there was also a more recurring element of higher foundation activities now out of lockdown.
Just any way to think about this line going forward. It's a little bit lumpy. Thank you.
Really good news is Craig's putting his hand up here, so I was actually scratching my nose, Craig. Good morning. I think the first question was around pipeline and visibility and what we see coming towards us. Yes. I suppose each partner practice will have a very clear pipeline, but we don't necessarily have complete visibility of that. Once Salesforce is up and running, the possibilities might change in that regard. We have a very clear view of new business coming towards us at the point at which it's written. There's clearly a gap between the point at which it's written and issued.
Depending on what type of product it is and depending on what the circumstances of the investment are, we get a pretty good feel for what's happening out there. The real sort of critical long-term pipeline, though, is the day-to-day work that advisors do, finding new relationships, nurturing relationships, and that can be a very long pipeline indeed. That's not the sort of thing that lends itself to spreadsheet management, if you like, but it's something we can get a pretty good feel for through our field management team, because they will pick up how the partnership is feeling around the sort of evolution of their own businesses. There was a point there on miscellaneous and guidance.
I haven't given explicit guidance, but I think what I would do is take last year's charge and add a bit. You know, I'm not gonna start calling the markets to give a view on what the mark-to-market calculation is gonna look like on the 31st of December. If you just make an assumption that that lot sticks for the time being, it could be that miscellaneous might be GBP 3 million, GBP 4 million higher than it was, but for the last financial year. There are a number of things within that line, as you probably understand, but that's probably what I would stick in for the time being. Okay. I think your final question was on transfers.
This is where individuals are consolidating different pots, whether it be ISA pots, whether it be defined contribution pots. Just a couple of things there. Firstly, the money is already invested, so it tends to be less sensitive to markets in terms of do I transfer or don't I transfer. Of course, if markets are lower, then the transfer value is lower. There's a sort of two-edged sword there. In terms of how much, I'm afraid that's really dependent upon different clients and the individual clients we're dealing with. I'm afraid I can't really give you a number there at all.
Got it. Thank you.
We've got some other questions come in as well. Emily, if we could go to the next question, please.
Our next question comes from Andrew Sinclair with Bank of America. Please go ahead.
Thanks, guys. Just one final follow-up from me was just I noticed there was a decent step down in the level of bank loans in the period. Just really wondered how we should think about that. Is that gonna be a continued lower level of debt? Thanks.
Thank you. I think that's for Craig.
Yeah. There's one of the key contributors to that obviously is the kind of the net balance of managing working capital. In the area of business loans to partners, there's been more activity off balance sheet than on. You know, in some years, you find that partner business loans are a use of cash resource. At other times, they return cash resource. We've been in that return environment, some good work being done there.
Okay. That takes us to the next question please, Emily.
Our final question today comes from Andrew Crean with Autonomous. Please go ahead, Andrew.
Okay, thanks. Just one quick question. Any early thoughts on IFRS 17 or when you might be able to talk in detail on it?
I'm gonna pass that swiftly to Craig.
That's a potential stinger of a question to end on, but the good news is very, very limited for us because although we do have a very small number of old pure insurance type products, the mainstay of what we do qualifies as an investment contract, and therefore there will be some disclosure points. The sort of order of the primary statements might change around. The key metrics won't change. Which I'm sure is good news for anyone tasked with trying to get to.
Yeah. That's it. So that just leaves me to say thank you for your time. Look, I think the business is in great shape. I think the long-term outlook remains very, very positive.
Look, good luck with the rest of your reporting season. I know you're busy at this point in time and have a great holiday season. Thank you, Emily.