Hello, and welcome everyone to the St. James's Place 2025 full year results Q&A session. If you wish to ask a question, please press star followed by one on your telephone keypad now. If for any reason you want to remove yourself from the queue, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. I will now hand over to Mark FitzPatrick, Chief Executive Officer, to begin.
Thank you, good morning, everyone, and thank you for joining us. Unfortunately, Caroline is unable to be with us this morning due to a family bereavement. Instead, I'm joined by Charles Wood, our Finance Director. Before we open for questions, I'd like to briefly reflect on a year of strong delivery and execution for St. James's Place. We delivered growth in new business, growth in funds under management, and growth in underlying cash result, while at the same time delivering strong returns for our clients. Drawing out some of the results which are new today, the underlying cash result of GBP 462 million, up 3% year-on-year and 4% ahead of consensus. Underlying cash basic EPS of 87 pence per share, up 6% year-on-year.
We're returning 50% of the underlying cash result to shareholders through ordinary dividends and buybacks, and a total of GBP 313 million to be returned to shareholders for 2025. Alongside delivering a strong operational and financial performance, we made good strategic progress. Our simple, comparable charging structure implementation went live smoothly in late summer. The new structure puts our investment performance on a fully comparable footing with the wider market and enabled the successful launch of Polaris Multi-Index. This has broadened client choice and grew to over GBP 1 billion of FUM at year-end, just two months after launch. Our review of historic ongoing service evidence continues to progress.
Based on our experience in the 2nd Half of the year, we have released a further GBP 25 million from the provision today, taking total releases to GBP 109.5 million for the year. We are now deep into the operational delivery phase and are on track to complete the program in 2026. Our cost and efficiency program also made good progress. For example, we completed the transition to our new organizational design during the year, we remain on track to remove around GBP 100 million per annum from our addressable cost base by 2027. These achievements give us the confidence in the strength of our business and our prospects, which has enabled the board to update our shareholder returns guidance going forward, a year earlier than originally anticipated.
From 2026, we intend to increase our payout ratio to 70% of the underlying cash result. We anticipate that this will comprise ordinary dividends, which will make up at least 40% of the total shareholder returns, and the buybacks will make up the difference. A different way of thinking about is that dividend is expected to be at least 28% of the underlying cash result, and buybacks the remaining 42%. That's how you get to the 70%. Our priorities for 2026 are completing our remaining transformation programs, expanding the range of technology tools, including those which are AI-enabled, and making those available to our advisors with the goal of helping them to work as efficiently as possible. This will give them more time to do what they do best, which is building trust, deepening client relationships, and delivering personalized, high-quality advice.
We see technology deepening the human relationships between clients and advisors, not replacing them. Accelerating elements of Amplify, where we have the capacity to do so later in the year. We will focus on refreshing our cash proposition and enhancing our high net worth proposition. We look to the future with confidence. We have already made changes to the business. We're focused on strengthening and growing SJP over the long term. This means we are well positioned to capture the structural market opportunity ahead and deliver for all our stakeholders in 2026 and beyond. With that, I'm very happy to turn to questions.
Thank you. Our first question comes from Andrew Lowe, from Citi. Your line is now open. Please go ahead.
Hi, thanks for taking the question. I wanted to ask on AI and how you see the potential threats from your business. I'd love to hear a little bit more about what makes you comfortable about the potential threat to growth and pricing power from competitors, including D2C platforms, who, in time, might be able to offer AI-led financial advice. It'd be really helpful to hear a bit more color on the AI tools that are operational today, what we might expect in the next 12 months, and how much this could improve your advisor productivity going forward. The 2nd question was just on the advisor numbers, which fell by 0.4% in the 2nd Half of 2025.
Could you please give a little bit more color on the productivity of your departing managers? Just any comments on the outlook for advisor numbers going forward would be really helpful.
Great. Andy, good morning, and thank you for those questions. In terms of technology and AI, I think the way that we see technology is really it's an opportunity to strengthen our face-to-face, advice-led model. What we've observed over time, I think, is that while a lot has changed in and around the competitive landscape, what has been central actually is the primacy of the advisor-client relationship and the longevity of that relationship. Research that we have done and that we talk about in the accounts, and research that others have done, effectively emphasize that actually people still value human engagement in making financial decisions. They seek personal advice. whether it's around retirement, tax planning, and various other things, etc..
I think when we also think about AI, I think it's also important to bear in mind that advice in the U.K. is a highly regulated and a high-trust service area. Therefore, it requires the personalization, the suitability, and the accountability, and human judgment is absolutely core to that. Where we see AI can play a very, very positive role is in enhancing advisor productivity and client experience. You'll have seen in the presentation earlier on this morning that we're really using some AI tools to give advisors back time, and I think that's where the deep vein is going to be for the next few years for our advisors, for us, and for the whole profession.
I think the more we can give time back to advisors to really focus with their clients is gonna be absolutely key. I think by virtue of our size and scale, at St. James's Place, we've got the opportunity and the connectivity, and we are talking with some of the very biggest players, on their thoughts and on what we are doing, and how we can simplify, and how we can make what we do even better and even more efficient. Bear in mind as well, that of our 5,000 advisors, the vast majority of these folk are phenomenal entrepreneurs, not just in, being great advisors, but also in terms of finding solutions in their own businesses and, how they make themselves more efficient.
Within our 5,000 advisors, we have some of our businesses where they have actually created and built their own technology to improve some of their efficiency on how they do things. Through our oversight and through our blessing of data protection and everything around that, and security, we're making those and facilitating those to be available to far more partners within St. James's Place. The great thing is the innovation isn't just happening at the corporate level, it's also happening within the advisor community, where they're eating, sleeping, drinking this 24/7. Some really good ideas coming from them. What we're doing is making sure we can protect the data, protect the integration, and really make sure it plugs and plays properly with the rest of our kit.
At the end of the day, I think AI will enable greater productivity. It'll enable advisors to get back to what they really enjoy doing. It's not the admin they enjoy doing. It's actually being in front of clients. It's finding new clients, it's serving clients, it's being there for clients when they truly matter. Sorry, I'm rabbiting on. I'm conscious that this is a big topic. Therefore, I'm probably going a little bit fuller in the onset, just to kind of give everybody a little bit of color.
In terms of some of the features that we have today, etc., along the way, we have a number of tools that we're using, whether it's a advice assistant, which, you know, kind of harnesses the data in Salesforce and can produce suggestions on plan wrappers, investment amount, fund selections, and various other things. A rules-based engine based on our advice framework, you know, which has been trained on thousands of recommendations made previously by SJP clients. We've seen a very strong take-up from advisors around that.
Whether it's preparing meetings or whether it's summarizing and listening into meetings with clients, summarizing, converting the meetings into notes that gets sent to the client, notes that gets sent to the admin, actions to be done, those are things that we have trialed extensively, and we're now in the final stages of looking to roll those out across the partnership as a whole during the course of this year. Then we have something particularly innovatively called ChatSJP, which covers a whole lot of the documents in our advice framework and business submission guides and the like. What that does is enables the paraplanners and the admin teams, etc., just to check in on some of the advice that might be given and some of their thinking and some of the plans, just to make sure everything's aligned.
What that does is that saves, you know, huge amount of time for every query that otherwise might be done through a call center and enables the call center operators to really focus on considerably more complex matters. We're trying to introduce, or we're not trying, we are introducing technology throughout the organization because I do see that the technology providing us with different hands in terms of what we do, but it's not going to change the face of advice. Then, Andy, your final question on advisor numbers. Yep, advisor numbers declined modestly in the 2nd Half of this year. I said back in February last year that we'd be embarking upon an initiative, and what you saw in the 2nd Half of last year was the outworkings of some of that activity.
I think it's fair to say that the advisors that have left us as a result of that, their productivity was significantly below average productivity on both gross flows and from a firm perspective, which is why you haven't seen any real shift in productivity. If anything, productivity, and I can get to that later on, but productivity has been significantly stronger during the course of this year. Andy, thank you for those questions. Sorry, I'll try and be briefer for the next few questions.
Thanks. That's really helpful.
Thank you. Our next question comes from Andrew Crean from Autonomous. Your line is now open. Please go ahead.
Good morning, everyone. Just a couple of three questions. Firstly, can you say anything about trading so far in Q1 2026? Secondly, your liquidity, free liquidity targets. Just wanted to explore this a bit more. Do you have any targets for group liquidity? The reason I ask is because if I looked at your doubling of profits in 2030, one's talking about somewhere between retaining... If you payout 70%, you're talking about retaining somewhere between GBP 240 million and GBP 270 million of profit, which is in line with the amount of group liquidity you currently have.
I suppose that poses the question, whether up the line, once the earnings really get going, whether the 70% is too low, and you will just build excess liquidity over time. I, a third question is client growth. I think client growth was about 3%, this year or last year. Could you give us a sense as to what you anticipate client growth to be like over the next few years?
Okay. Andrew, hi, good morning. Thanks for those questions. trading-
Morning.
First off, in trading, we put out our Q4 trading update less than a month ago. I think the team provided a little bit of color about the fact that flows were normalizing. We were seeing flows normalize over that period, so I'm not minded to give necessarily a month-by-month running update. What I would say is we've seen that continue, and the partnership is in exceptionally good health. They're all working incredibly hard at the moment. This is a very busy time and with tax year end 5 weeks away. There's a huge amount of activity on the go, which is very encouraging. From a liquidity perspective, so some new disclosure for everyone in the world of liquidity and how we think about liquidity.
I think it is important for us to be able to make sure we have an appropriate degree of liquidity at the centers to support the capital allocation framework. The liquidity levels that we have, we will be considering them on a regular basis, and we will be making our determinations as regards what we do with that liquidity based on facts and circumstances at the time. If we see an inappropriate buildup, then it'll get activated through the capital allocation framework along the way. The 70% payout ratio that we've effectively indicated for the time being, bring it forward a year, I think is dripping with signaling of confidence in the business and how well the business is performing, and the great progress that we have made.
We're very pleased to announce that a year early. We're very pleased to have increased the level of the payout. We think the composition, the two sectors of it, in terms of dividend and buyback, are important and are weighted appropriately. If, and as and when that number builds in the fullness of time, as I said, facts and circumstances will dictate. We would expect, you should expect to see the 271 number grow as the business grows. We are a growing business, 271 for a business with GBP 220 billion and 1 million clients under management, feels appropriate for this size and this scale.
In terms of client growth, really interesting one, Andrew, because client growth is going to become a little more complex as during the course of 2027 and onwards, we have a stronger push towards high net worth. Because with high net worth, it's gonna be less about pure client numbers, and it's going to be a real focus on getting clients with larger funds under management, and our advisors doing more with them and therefore needing to spend a bit more time with them. That's something that we're thinking about internally.
What I can say is the vast majority of our advisors, when we did a survey with them, the back end of last year, indicated they are expecting client numbers to grow, and as is often the case, and has been the case with us for some time, the vast majority of our new clients are word-of-mouth referrals, which I think contributes to a very, very high client retention level, and very, very sticky relationships, which is a great business to be in. Thank you for those questions.
Great. Thanks.
Thank you. Our next question comes from Nasib Ahmed from UBS. Your line is now open. Please go ahead.
Morning, thanks. Three questions for me. Just firstly, following up on AI. You had the charging structure change last year. You had an opportunity to update your tech stack. I know there's, there's different tech solutions that you're using across the piece, but I guess the question is: Is your tech stack nimble enough to add on these AI, LLM-type models? Because, of course, you've got the scale, but with bigger companies, sometimes you've got legacy tech that can't really cope with this. Question number one, are you kind of happy with the way your tech stack can adapt to these new models? Secondly, on complaints, I saw kind of new open complaints, first half 2025 were still high. Relative to history, they're kind of stabilizing but to a high level.
When do you expect them to come down, and is that putting pressure on kind of your complaints team at the moment? I know you recruited quite a lot of people recently. Finally, on kind of regulation, D2C, simplified advice, what are your thoughts around here, targeted support as well within that? Would you kind of look to acquire a business and move into D2C as a result of that? Thank you.
Nasib, thank you for those questions. AI, the simple comparable charging, I'd have hated to have tried to weave in all sorts of other changes to what undoubtedly was the largest tech change program that we've had in the history of St. James's Place. On the tech stack, bear in mind that we have a tech stack that includes Salesforce, that includes Snowflake, that includes some really, really modern tech that gets updated on a regular basis. It's through that that we're able to kind of plug and play and interact. Indeed, with one of our advisor firms, who's been working on some great kit and has got some great AI kit that helps facilitate and improve efficiency. We've very recently plugged that in and got that working well with Salesforce.
Having done that, we'll be able to roll that out to other elements, and that's given us the confidence that we can plug and play, modern kit into our stack. Not particularly worried about that component. On complaints, BAU complaints, business as usual complaint levels are down. What we're seeing is there's still some activity in terms of the historic evidence review, etc., from, you know, some claims management companies, but much lower levels, you know, inordinately lower levels. You know, dare I say, we are doing more checks and balances in terms of whether the complaints that come in are legitimate complaints.
We have some complaints that come in, when we write out to the client, they say, "Yeah, I spoke to them, but I didn't want to complain," so it's not a legit complaint. Others, you know, kind of, aren't even our clients. We've got a lot of noise in the system, but on the substance, we're comfortable that BAU-level complaints are coming down and are coming down to a more normalized level. On regs, the government, I think is, both the government and the regulator are comfortable that there's a lot coming down the road in terms of the Mansion House reforms and really want to see how well these land. My discussions with Treasury and with the FCA, is they are very focused on ensuring a successful launch of targeted support.
In terms of disclosure regimes, they're trying to make things simpler, etc. The retail investment campaign, they're really focused on trying to get more people investing, so it seems a lot more joined up than it might have been in the past. Targeted support isn't really gonna be for us by virtue of the nature of how that's going to work. I think targeted support is gonna be very difficult if a human has to get involved, because a human can't unhear what they've heard. A human is likely to pick up something that might throw it out of the decision tree that is effectively so key to targeted support. Simplified advice, we are expecting some consultation papers from the regulator on simplified advice later on this year. We have been in contact with them.
That is likely to be a lot more relevant to us. A key component of that is ensuring that if and when simplified advice comes out, it's done in a way that is economically viable for an advisor to be able to engage with somebody without doing a full fact-find. There's still quite a lot of issues that need to be worked through, but the encouraging thing is that the regulator has demonstrated, and government have demonstrated a willingness to engage with industry and listen, and with trade bodies and, you know, take views on. I'm cautiously optimistic that if this comes through, it should come through in a good guise. There's lots to do around that particular patch.
As against D2C, if you think of what our underlying purpose is, which effectively is to provide invaluable advice, therefore, I don't think kind of a pure D2C play is something that's on the strategy. When you think that only 9% of adults in the U.K. take advice today, the market opportunity is so big for all of us in the U.K. I truly believe it is one of the really few growth areas in financial services in the U.K., the element of wealth, getting people to invest. If government, the regulator, we, all the players in the sector, D2C or otherwise, are getting people to invest rather than save, that's gonna be fantastic. There are 3 big gaps in the U.K. economy: there's an advice gap, there's effectively an investing gap, and there's a retirement gap.
too much saved, underinvested. We have too few people taking advice, and we all know we're into a DC in a DC world rather than the DB world. I don't think society has truly understood the risks that they are taking on themselves and their need to prepare for their retirement in a more fulsome fashion than they're doing today. I think there's lots of opportunity for us all to actually grow very, very successful businesses, and I think we're going to stick to our knitting in terms of the advice piece. Thank you, Nasib.
Thank you very much.
Thank you. Our next question comes from Benjamin Bathurst from RBC Capital Markets. Your line is now open. Please go ahead.
Thank you. Good morning. I've got questions in 3 areas, if I may, as well. Firstly, Mark, in your pre-recorded remarks, you mentioned you'll be looking to improve reporting of financial performance. I think you said before half year 2026 or for half year 2026. I just wondered if you'd give more details on the scope of that project and if it's going to extend to making changes to the underlying cash disclosure. Secondly, on flows, you saw fit to comment that outflows have normalized at the end of Q4 and into Q1. Just to clarify, does that mean a return to the levels of outflows as a % of AUM that you saw in the 1st three quarters of FY 2025?
Sort of related to that, but just on the pensions flows outlook, we're obviously edging towards the 2027 date for pensions to fall into the net for inheritance tax. I wondered if you started to see any differences in the typical advice that you're delivering to older clients around keeping funds in the pension wrapper, and if we should really expect withdrawal rates from pensions to tick up over the next year or two, in light of those changes. Thank you.
Ben, thank you. Three really interesting questions. For the 1st question, I'm gonna hand over to my partner in crime, Charles?
Hello, Ben. Very good to chat about this. Yeah, this has been an exciting project that we've been doing over the course of the last year. You'll have seen some of the output emerging. We streamlined our financial review at the half year. We've done that again at the end of the year, and we've introduced new capital and liquidity metrics. New section on that, hopefully, that answers a number of the questions that were rising. The implementation of the simple comparable charges, which happened in late summer, that was another important building block.
Building on that, we have been, we've been sorting out what the reporting should look like, and we are expecting to share that with you, certainly for the half year, and expect to share that with you all, probably later in Q2. Possibly May might be the right sort of time for doing that.
Charles, thank you. Ben, in terms of flows, I don't think I'd necessarily change your models based on what we saw in Q3, Q4. I think I'd look at more the long-term element in terms of flows and in terms of pensions. I think from memory, about historically, about 4% of individuals just across the market paid inheritance tax. I think the ONS, in light of the changes the government brought about, thought that that might go up by 1.5%, maybe 2%. May call it 6%. It's not for everyone, thankfully. What we are seeing, I think, is that investment bonds becoming a lot more attractive now.
Pensions still being an incredibly valuable vehicle for people to invest in, up to a certain level, and while they're working. What we're seeing is people now starting to utilize their pensions rather than considering them as a pure investment vehicle that they might have had as a generational wealth transfer vehicle. The advice is shifting. It's a very, very complex area. I know our team are deeply engaged with government and the regulators, working through how those changes need to come through and making sure the changes don't cross over with one another. We do expect, actually, pensions to continue to be important, but for those older clients, we expect to see them drawing down on pensions, probably in a slightly stronger way than they might have originally.
I'd expect them to be leaving some of the other investments alone, and we might start to see some of those withdrawal rates start to improve along the way. It's gonna be fluid. We need to see how it pans out. My big request of government of late is when the next budget comes up, please make sure that you are proactive in saying, "We're not looking to change pensions again, because we cannot have a third year of further speculation." Get out of the blocks and just try and close that down early as possible, please. Thanks, Ben.
Thank you for that.
Thank you. Our next question comes from Enrico Bolzoni from J.P. Morgan. Your line is now open. Please go ahead.
Yeah, good morning. Thanks for taking my questions. Sorry to go back again to the AI topic, but I have one follow-up question, if I may. I think there is no pushback on the argument that AI can dramatically improve advisor productivity and do wonders internally in terms of reducing costs, so on and so forth. I guess my concern, which I suspect is shared by a portion of the market, is more what the impact is gonna be on perhaps the future cohort of clients. Maybe those that, you know, in theory, would pick up advice in 10 years from now. Let's make an example. In the U.K., the majority of people pick up financial advice when they are approaching their retirement age, so I suspect people that are in their fifties.
The concern I have is, if these people that now are using B2C platforms, which is another where, by the way, you don't want to go, will be gradually see the benefit of AI in their existing B2C usage. Is there not a risk that these clients, when they reach the age where in theory they should pick up, and historically they would have pick up financial advice when they're in their late 50s, might decide not to do it? Because by the time that's gonna happen, it's gonna be in 10 years' time, they will just have, like, an amazing AI proposition within their B2C platform.
Are you concerned by that, and would you consider be a bit more explicit in guiding your advisor to recruit, so to use the additional capacity freed by AI to recruit younger clients, so get them when they are very young to avoid this risk of not getting them at all? That's my first question. The 2nd question is on the Polaris index range. I was wondering if you can give us maybe an update, some color in terms of what the appetite has been, if you're seeing clients perhaps switching out of their active proposition and into passive, or if mainly this is appealing to clients that put fresh money into the passive range, and they don't really switch from their existing investment into passive. Thank you.
Enrico, hi. Good to chat to you again. Really interesting point in terms of your scenario in terms of AI. Just a couple of useful facts just to share with you. I think by virtue of the fact that our average advisor is considerably younger than the average advisor in the market, actually, what we're finding is the average age of our new clients is actually coming down. Over a third of our new clients are under 40 years old, which is fantastic. We are effectively, the advisors are effectively ahead of this issue and building in a fantastic pipeline of future relationships by engaging with clients at a younger age. It's not just about the what do I do when I retire, and how do I prepare for decumulation?
It's getting them to do the right things and getting the right behaviors in place. As my 17-year-old son said, "Dad, SJP, it sounds like you guys are financial PTs, financial physical trainers. You get people to do what they should do, when left to own devices, they may not do it." I think the element of we're getting more and more younger clients. Our advisors are younger, which is helpful and also very helpful in terms of their comfort around using new tech as well. I think we see that quite a few of our clients actually have business with B2C as well as having business with us. Share of wallet has grown a little bit over the course of the last year. On average, I think we're about 50-55% or thereabouts.
It's not 100%. People have money in B2C, but they understand what they get from St. James's Place, what they get from the advisor, etc.. In time, what we see is actually more and more of that money coming in. The longer somebody is with St. James's Place, the more money tends to come in to St. James's Place, and the share of wallet tends to grow rather than stagnate, because they just see the value of what's there. To some extent, that talks a little bit of Polaris and Polaris Multi-Index. Effectively, what it is providing clients with a broader range of options, where there is something that is a little bit different from the conventional Polaris. What we're seeing to date is we're seeing new clients, new money coming into that.
We are also seeing a little bit of switching from the existing funds into Polaris Multi-Index. I think the reason a number of folk like that is they like the ongoing asset allocation, the ongoing rebalancing that happens along the way at an incredibly attractive price point for the client. It's, it's early days in Polaris Multi-Index. It's very similar to what we saw on the main Polaris when that launched. We saw a lot of switching initially. Then we saw a lot of new money coming in as actually the investment performance kicked in. People just had more and more confidence about it. I am delighted at what the guys have done.
I think it's fantastic to, in the 1st two months, have gathered, effectively, GBP 1 billion worth of assets into Polaris Multi-Index, and really looking forward to seeing the growth of that, because we can now offer clients a broader range of product across the way. Thank you for those great questions, Enrico.
Good call.
Thank you. Our next question comes from Greg Simpson from BNP Paribas. Your line is now open. Please go ahead.
Hi there. Good morning. Two questions on my side. Firstly, wondering if you could share any comments on how you're seeing advisors and clients behave with the new fee structure, and if you're seeing any differences versus the old model in terms of inflow, gross inflows and productivity. Just aware that Q4 is a bit unusual with the budget. Does it read anything into the flows? 1st question. Secondly, can you provide a bit more of an update on the high net worth push? What's the kind of timeline? Would you have advisors that are more directly employed by SJP in this model? What do you need to add on the product and investment proposition side? Thank you.
Great. Greg, thanks for those questions. In terms of the new fee structure, I think speaking to clients, they are candidly wondering what all the big fuss was about. From their side, they're seeing it very much in line with everything else that's out there in the marketplace. They think it's, from a client side, they think it's a lot simpler. The advisors, as I mentioned, I think earlier on, are incredibly busy engaging with clients, so they are absolutely connecting, very, very busy. You know, case count is, you know, very strong at the moment, so it's all looking, you know. That the fee structure is the old fee structure is in the history books.
We're now kind of level pegging with everyone else. In terms of the high net worth push, the high net worth push, I think, is one where I'm really, really excited and really interested for us to spend more time, more energy in. The element of the high net worth aspect is that we later on this year are looking to make even more impact on it. We've recruited some new talent. We're looking to streamline and improve the service that is available for both our advisors and clients in this area. We have, I think now, as at year-end, 10% of our FUM is effectively in the high net worth segment, so a slight increase on last year.
It is, the team are working very closely with some of our advisors who specialize in the high net worth area. We've had some off-sites exploring, what do we need to do about product range? What do we need to do about service? What do we need to do about our brand? We're clear on what we need to do. We're now just getting things done. We're recruiting, and as I said, additional people, and we're equipping the people, in that regard, and I'm quite excited about what we might do around this space. I think there are a lot of our advisors who are very interested in being more engaged in this space. A lot of them are very engaged in this space.
I think if we can provide them with greater support, they'll be able to do even more in and around this space, and they're all looking to grow their businesses. I think that's probably the route in, rather than us trying to kind of think we're gonna have our own employed advisors focusing on the high net worth space. I'm excited about it. In reality, I think it'll be the 2nd Half of this year that we really start to lean into it even further. It is part of the Amplify phase of the strategy, but wherever I have capacity, I'm looking to try and apply it to the high net worth opportunity because I think it is so real.
You've picked on a real pet topic of mine. Thank you.
Thank you.
Thank you. Our next question comes from Larissa van Deventer from Barclays. Your line is now open. Please go ahead.
Thank you very much, and good morning. Three questions from my side as well. The first one, Vanguard announced yesterday that they are launching a new model portfolio solutions product in conjunction with Wellington. How do you see St. James's Place's product range as differentiated relative to the other model portfolio solutions available in the market? Perhaps specifically referencing the Polaris Multi-Index that you mentioned in your presentation. Second question: on the historic ongoing service evidence review, you mentioned that you will complete that in 2026.
Mm-hmm.
Does that mean that we can completely put it to bed in 2027, or is there a statute of limitations that needs to run before you'll be able to finalize how much of the provision is needed? The last one, AI, a very topical.
Mm-hmm
... source of questions this morning. But with Polaris Multi-Index being a lower-cost offering and with AI potentially lowering costs, do you believe that margins may be compressed, and would you be looking to grow mainly from increased customer volumes? Thank you.
Okay. All right. MPS products that are out there. There are a number of MPS products that are out there. Polaris and Polaris Multi-Index are fund of funds. They're not really the same as a model portfolio service. Rebalancing in an MPS will effectively crystallize capital gains tax, and that wouldn't happen in a fund of funds. Hence, less frequent rebalancing in an MPS as against the rebalancing that we can do in the Polaris and Polaris Multi-Index range. We're more dynamic, and therefore, we believe in a world that is changing as rapidly as it is. We think that is an advantage for Polaris and PMI.
It looks like, you know, the latest MPSs out there has kind of got a mixture of kind of active and passive, etc., along the way. Effectively, at the moment, Polaris is, you know, kind of, we have Polaris, where there is some kind of systemic, systematic activities in normal Polaris and Polaris Multi-Index work through 14 index funds. As a blend is probably at a very, at a more attractive price point. Ultimately, I think in terms of product innovation, what our team have been able to demonstrate is a great ability to innovate, come up with solutions that work well for clients. So there's a real client, advisor, demand, and pull. It's been great to hear some advisors saying, "Mark," Polaris Multi-Index.
It's great that we have it now, and it's great that I can talk to them about it. In terms of the ongoing service evidence review, you'd recall one of the reasons we put a limit on our time period of going back to 2018 was effectively linked to statute of limitations. That has stood up from challenge from all sorts. I think at the end of 2026, we should be done now. There may be somebody who wants to take it to FOS and complain about X, Y, Z, etc., and that might draw the process out, but for all intents and purposes, I expect us to be done.
The team know my ambitions to have it done this year, and I'm certainly not on this call gonna let them off the hook on that one. In terms of AI and in terms of future growth and margins and the like, I candidly, when I look at margins, I think there are three elements to our margin. There's a margin for advice, there's a margin for the platform, and there's a margin for the fund manager piece. The fund manager piece, as all of you know, on the phone, and I won't insult you know the pressure that's under.
In terms of platforms, we see the fixed the cost base from that tends to be a little bit more fixed, and therefore, as we grow in size and scale, and I think we've mentioned this before, we would expect to give back some of that increased profitability and share that with clients at a later stage. In terms of the advice is really interesting because there are so few advisors in the U.K. The regulation is very high in the U.K. vis-a-vis advice, and therefore, we don't see there being a huge amount of downward pressure on that component.
I think our growth is gonna come through growth in terms of, in terms of both clients and in terms of funds under management, 'cause I mentioned earlier, as we do more in the high-net-worth space, that might give rise to slightly fewer new clients, but larger FUM, with that more sophisticated, more challenging needs, and therefore, a bigger role for the advisor to play. Rather than speaking to a client maybe once a year, it's speaking to the client, maybe, you know, once a quarter or more, more regularly than that. I think, I'm looking, especially in this market, where there's 9% of U.K. adults take advice. We have so few advisors in the U.K. An interesting stat I saw was that SJP contributes 52% of all new advisors in the marketplace through the academy.
It's really, really important and, that we have a thriving advice profession, and we need to make sure, like other professionals, they are appropriately paid and rewarded for the fantastic work they do. Thanks, Larissa.
Thank you.
Thank you. Our next question comes from Fahad Changazi from Kepler Cheuvreux. Your line is now open. Please go ahead.
Thank you for taking my questions. Only got just two left. Could you give an update on your target of doubling the 2023 underlying cash results by 2030? I know it's only two years in, but in terms of underlying assumptions on costs, AUM, etc., where you are standing now versus the target. Finally, just a follow-up on AI. We have controllable costs increasing by 5% in 2026. Could you remind us again what these are and if AI will help this underlying growth rate in the long term? Thank you.
Fa, very, very interesting question. Firstly, on the ambitions that we set out as part of our strategy, we remain very comfortable with the doubling of the underlying cash between 2023 and 2030. I'm not minded to rebroker that this early on, because while we have had a much stronger start than I think we all thought and we all expected, I am conscious that markets are not linear, and there's quite a way to go between 2030, etc., along the way. From controllable costs, controllable costs, by and large, cover people, cover property, cover tech.
In time, I would expect, as we get smarter in terms of how we use some of our tech, that that may give an impact or provide an impact in terms of what happens with our controllable expenses. The key thing to remember is that our main admin provider, SS&C, that cost base is not in controllable. A lot of the AI functionality will sit in there or sit in the advisor's business. There will be some that will sit in us, but at the moment, our focus is in terms of trying to make our advisors as productive and supported them as possible. Two, make client interactions and advisor interactions with the corporate and the admin as smooth and as simple and as standardized as possible.
Three, we'll be working out, right, how do we use AI within the corporate, etc., along that way? I'm being very deliberate in that sequencing, 'cause I think the biggest bang for buck is making the advisors' lives as easy as possible so they can spend more time with their clients. Second, is looking after the client interaction and all the admin processing, making that standard as simple as possible. Third, will be the element of how we actually simplify what we do internally here at the corporate and the role that AI can play. I know that folk internally do use AI is part and parcel of, kind of what a lot of us use.
At the moment, I think we are all experimenting with it, getting more comfortable with it, as against it being necessarily a major drag or reduction in our controllable costs at this stage. Thank you.
Thank you. Our next question comes from David McCann from Deutsche Bank. Your line is now open. Please go ahead.
Morning, Mark. Morning, team. Yeah, three from me, please. First one on the capital distribution to the new policy there. Can you just give us some color as to what the thinking was with the bias towards the buyback, you know, the 40/60 in favor of the buyback? What was the thinking there, rather than, yeah, a more dividend biased amount? That's the first question. Secondly, thanks to the new disclosures on the liquidity, that potentially is quite useful. Just wanted to know that where, yeah, how you're still thinking about the business in terms of the actual capital. Yeah, historically, you've sort of focused us towards MSB and the surplus around that as being the preferred metric rather than Solvency II.
If we're thinking about the actual capital and the free capital in the business, how should we be thinking about that today? Kind of what is the level? 'Cause I think that disclosure doesn't appear to be in the statement anymore. Then finally, sort of looking forward a bit more, you know, clearly, the business is in much better shape than it was when you came into the business, Mark, and, you know, lots steady, and the ship's been done, which is great. You know, looking at the business going forward, do you know, your predecessors really focus entirely on organic growth, in a different environment and with different levels of organic growth to what you're seeing, I guess, now.
Are acquisitions still firmly sort of off the table, off the agenda, or is it something that you might consider more, you know, now the business is in better shape again? A lot of things have been clarified, and you're kind of moving forward. There's the cash generation that's coming through and so forth. Be just curious as to how you're thinking about that.
Great. David, thank you. Good to talk to you. Let's take them in order. In terms of distribution, the 40% cash, so of this, you know, kind of 28% of the return is going to be cash dividend. That's a minimum. The balance of 42% is effectively the buyback. We felt at these share prices and the value enhancement to the market, to shareholders, of, having a stronger buyback rather than the cash dividend was important. I think, if you look at consensus numbers for 2026, and you model out the new, the new distribution, it shows a healthy uptick in both, cash dividends and in the buyback.
We, the board, was comfortable that that would respond to people who are very interested in dividend, and also people who recognize that actually a buyback has become a much more accepted tool in the U.K. market, and can be very powerfully deployed, and we were keen to deploy it on an ongoing basis rather than a discrete basis. On capital, there's a reference to the management capital coverage assessment, which I think is a new fancy word for what was the MSB. And I'll let Charles cover that in a moment, but I think the data is contained within the data book, around the capital and where we're at. Charles?
Yeah, that's right, Mark. Yeah, look, David, I think you're sort of referencing the fact that we are an insurance group, and therefore, we do have reporting requirements under Solvency II, and that type of thing. I think we would suggest that the new disclosure is designed to make clear that really that's not the sort of the limiting factor in terms of how we think about capital and about shareholder distributions. Really, the focus is on liquidity. That's what we focus on and what we'd like you to focus on, too.
The, as Mark notes, the management solvency buffer, the MSB, which has been replaced by the MCCA, still lives, and it features in our capital and liquidity disclosure, so it is part of the bridge from our total liquidity down to the free liquidity. Capital solvency suggests that's not the key thing to focus on. We would encourage you to focus on those new liquidity disclosures.
David, on your third question, you are right that I was very clear that inorganic was not something we were gonna consider, especially given the share price of bolt-on. I think there is such a strong organic opportunity ahead of us. That's where all our focus and attention is. We have seen when players aggregate up other folk, it creates huge disruption and huge distraction. There's a lot of distracted and disrupted players in the market. We plan on looking at that very carefully and seeing if there's opportunities for us to lift our teams, etc., from some of our competition, given that they are potentially somewhat discombobulated over recent events. Thank you.
Thank you. Our next question comes from Charles Bendit from Rothschild & Co Redburn. Your line is now open. Please go ahead.
Hi, Mark. Thanks for taking my question. One on AI and one on cash monetization, please. Just wanted to take a different tack away from how AI might change the customer experience and focus on the advisor experience. I'm just keen to understand if you think AI might drive advisor headcount to shift at an industry level between the restricted and independent channels. My question would be: How do you assess the risk that third-party AI-driven advisor productivity tools could make it easier for independent advisors to operate outside of the SJP ecosystem? If IFAs can now run more efficient practices and potentially capture a larger share of the value chain through higher advice fees or by offering clients lower all-in fees at the expense of platform charges, what aspects of the SJP restricted model remain most critical in retaining advisors?
Is it primarily brand, the broader support and compliance infrastructure, your succession framework, or do you just believe that AI solutions in the open market will never really be able to replicate the depth and the integration of your own tech stack? My 2nd question is just wondering if there's any update on your plans to further monetize idle client cash via your arrangement with Flagstone. It feels like the FCA is no longer scrutinizing retained interest. Just wondering if you see an opportunity to expand margin there. Thanks.
Charles Bendit, thank you. 2 really interesting questions. On the AI piece and advisor experience, etc., I think a few things stand out, this is kind of what advisors who come to us and advisors who've been with us a while say stands out. A is the element of the scale, capital, the resources we have to deploy. Bear in mind that we announced 18 months ago that we are deploying approximately GBP 260 million back into our business to improve our technology, use of data, broaden our client offering, focus on client segmentation, all of those kind of components. There's nobody else in the market that's putting that kind of money into the business, into any business. If anybody's putting money in, it's to buy businesses, it's not necessarily to improve them.
Those who are buying are talking about synergies and taking costs out, not putting investment in on that side. Brand and reputation is very, very important. The technical support, just given the complexities of pensions and other things, the technical support that we have, and then also we provide an advice guarantee for clients and for the advisors, effectively saying that we guarantee any of the advice that they give as a part of St. James's Place. That's before you get to the element of actually the frequency with which rates change and everything else like that.
For IFAs, it's becoming incredibly difficult, which is why I think you're seeing more and more getting consolidated up and aggregated up, etc., and why you're seeing, you know, kind of, small boutiques really struggling to kind of grow and cope with the, with the weight. If you're going to do technology properly, you need a checkbook, and we have a checkbook. Because of our size and scale, the big players come and talk to us. They want to know what we're doing, what we're thinking, how they can help. They're generally not coming around to the local shop. Effectively, our big offering for clients and advisors is that we give them the best of both worlds.
We give a client the local, long-term relationship from somebody who lives around the corner, whose kids might go to the same school as your kids, but that person is backed by the power and strength and the brand and reputation of St. James's Place, and an IFA just can't do that. As for the cash piece, the to use your phraseology, the idle cash, the Flagstone level has continued to increase. We have seen an uptick in terms of the number of Flagstone is GBP 5.7 billion in Flagstone. Just to remind everybody, that is not included in our fund number.
We are working with Flagstone, and we are pursuing other opportunities as well, in terms of what we might do in terms of cash off of cash to try and get that money to be more broadly invested. We know from speaking to our advisors, that while clients have money at Flagstone, there are a whole bunch of clients who have money elsewhere. Step one is for us, is to get some of the money elsewhere into something like a Flagstone or a company like Flagstone, and then secondly, is to actually get it more easily transferred across into St. James's Place. At the moment, it's a very clunky going from a deposit account to a holding account, to your own personal account, to an SJP account, and then to get invested.
Most people give up the will to live during that journey. What we're looking to do is to streamline that, so that can be a single click across from savings to investment. Dare I say, as we all know, I think people are over-saved in the U.K., as in the U.S., and we need people to invest more and be less worried about timing the market and more focused about getting the money in the market so it can benefit from the compound effect. There's quite a lot of time and attention focused on how do we work that better, and how do we help our clients be more effective. They've worked hard to make those savings. How do we convert them into sensible investments? Thank you for those questions, Charles.
Thank you.
Thank you. We currently have no further questions, I'll hand back over to Mark for closing remarks.
Thank you very much, everyone, for your questions and for your engagement. Really good questions today. Three key takeaways, if I could leave you from our results today. Firstly, was that 2025 was a year of strong delivery and execution for St. James's Place. We delivered strong operational and financial results while making significant strategic progress. We're delighted to have updated our shareholder returns guidance going forward, a year earlier than originally anticipated, and we move forward with an increased payout ratio of 70% of the underlying cash. Thirdly, we look to the future with confidence. We've already made changes to the business. We're focused on strengthening and growing SJP and the partnership over the long term. This means that we are well-positioned to capture the structural market opportunity ahead and deliver for all our stakeholders in 2026 and beyond.
Thank you very much, everyone, and have a great day. Thank you.
This concludes today's call. Thank you all for joining. You may now disconnect your lines.