After intense pressure from several quarters, wealth manager St James's Place said today that it would scrap most exit charges in a major overhaul due to be implemented in the second half of 2025.

The wealth manager, which has more than 4,700 advisers, saw its share price plummet by over 20% at one stage on Friday as investors became concerned about the impact of lower charges on profits.

SJP said on Friday that it was re-evaluating charges and costs.

In a surprise announcement today, SJP said: “Having completed an internal evaluation of our charging structures, and concluded on these changes for the future, we are ensuring we continue to have a sustainable and competitive charging platform for the long-term, offering simplicity, comparability, and a continued focus on value for clients.”

SJP's share price rose by 2% to 686p in early trading today.

There will be a revised charging structure for the “vast majority” of new investment bonds and pensions. In future these will operate with an initial charge and ongoing charges applicable from the outset, and without any early withdrawal charges (EWC) or gestation period, as is the case with SJP's unit trust and ISA business.

SJP says the new charging structure will be simpler and more easily comparable to other charges elsewhere.

The firm said: "In addition to benefiting from improved simplicity and therefore comparability, clients will see enhanced value from the changes we are making, with reduced overall ongoing charges for existing client investments across our core product wrappers. Our continued focus on value and outcomes for clients is consistent with the ongoing expectations of Consumer Duty and we are confident that our changes will work well for clients.

"Our charges will continue to compare favourably with competitor rates available in the marketplace, representing good value for the high-quality service that we provide alongside our partners. This will support our brand and reputation in the marketplace, which will, in turn, benefit the partnership."

The company says the changes may well affect future turnover and profit, at least temporarily, and will "reduce the Underlying Cash result over the next few years before growth accelerates over the medium term and beyond, aligned with the development of total group funds under management.

The company said that, additionally, charges across all its wrappers, historically disclosed primarily on an all-inclusive basis, will be separated into component parts. These will comprise initial and ongoing advice, investment management, and product administration which will be tiered for larger investments.

SJP said it would be “rebalancing charges” so that they better reflect the value clients see across each element of SJP's proposition.

The wealth firm said the changes hade involved discussions with key regulators.

Andrew Croft, outgoing chief executive, said: "The changes announced today are about positioning our business for continued success by putting in place a future charging structure that reflects the evolution of consumer engagement with retail financial services, and is aligned to the long-term value that we deliver to clients through the partnership.

“We have always been confident that SJP offers its clients real value that helps individuals and families achieve financial wellbeing. However, it is increasingly evident that consumers are seeking simple comparability, and this has been reflected in regulatory trends too, as highlighted with the Assessment of Value and Consumer Duty regimes. The review of our charging model reflects these developments.

“I am confident that SJP's ability to both deliver and demonstrate value in the future, with this sustainable model of charging for our end-to-end services, is good for clients and represents an exciting opportunity for SJP."

These changes will strengthen our business, supporting and underpinning our growth ambitions into the future. We expect they will also change the shape of the future Cash result, with a reduction in the short-term result, before growth returns over the medium and long-term.

SJP said that the implementation of the new charges will hit the company's profits, at least in the short term.

The company said the changes to fund charges would be introduced from 2024 and would cost £140m-£160m before tax to implement, with costs of approximately £10m over the remainder of 2023, £95m in 2024 and the balance in 2025.

SJP said it expected the net income from funds under management will be lower in the short term. This will reflect reduced and tiered ongoing product charges across its wrappers, partially offset by the retention of a proportion of ongoing advice and fund charges. 

It said: "We expect this to recover over the medium-term as existing funds under management in gestation matures and we benefit from all new business contributing immediately without entering a gestation period."

The margin range for net income from mature funds under management is expected to reduce by some 11 bps to a range between 43 bps and 45 bps from the point of implementation onwards. In the future, 100% of gross inflows will contribute immediately to mature funds under management and, therefore, to the Cash result, SJP said.

Because of the changes the margin on new business will mean there is no longer a contribution to the cash result from a margin arising on new business.

In the longer term the firm expects a rise in funds under management and new business "should arise" as new business contributes immediately to mature funds at the same time as existing gestation funds will also be maturing. 

SJP said despite the changes to charges there was no change to its 2025 business plan although it recognised the headwinds it faces in the current market environment. There is no planned change to the dividend policy.