St. James's Place plc (STJ) Earnings Call Transcript & Summary

Good morning, everyone. It's my pleasure to talk you through my first results presentation as CEO of St. James's Place. We have a full agenda today which will include how we're dealing with 2 historical issues. However, I want to keep insight throughout this presentation how fundamentally sound the underlying performance of these business is. We continue to attract strong net inflows, grow funds under management and deliver robust underlying financial performance despite challenging market conditions. Digging into those headlines a little more. We're now trusted with a record GBP 168.2 billion in client funds. Our partnership continued to impress, attracting new client investments amounting to GBP 15.4 billion of gross inflows in the year. Meanwhile, our client retention rates have stayed strong at 95.3%, which speaks volumes about our relationships with clients and their confidence in our expert advice. Together, these resulted in net inflows of GBP 5.1 billion. With the strength of our investment performance driving gains of GBP 14.7 billion, our funds under management have grown by almost GBP 20 billion in 2023. To put that into context, after this business was founded in 1991 it took 18 years for funds under management to reach GBP 20 billion, and we've grown by that amount in just 1 year. This really highlights the journey SJP has been on and the scale we have today. In terms of underlying financial performance, our business has been robust despite difficult market conditions and regulatory change. It's clear that our reported cash result of GBP 68.7 million has been significantly impacted by the provision we've established for potential client refunds, which is linked to the historic evidencing and delivery of ongoing servicing. I will cover this point in more detail later on. However, before moving on, it is important to note that the introduction of Salesforce provides us with robust evidence of ongoing servicing since its implementation in 2021. Whilst our results have been impacted by this legacy matter, the Board recognizes the importance of return to shareholders and has therefore proposed a final dividend of 8p per share. The Board has also decided to revise future dividend guidance, and Craig will touch on this shortly. Now for the rest of my presentation, I want to focus on 3 key areas. Firstly, my initial observations since joining SJP. Secondly, I'll talk about the 2 challenges we're addressing. And finally, thirdly, I'll look ahead and explain my priorities for the business. This final part, I'll cover after Craig has taken you through the financials in more detail. When I joined SJP last year, I knew I had to get under the skin of the business. So I started in my listening and learning tour within the first week. This highlighted some interesting observations for me, things such as the sheer size of the structural opportunity for financial advice in the U.K. marketplace today and its capacity to develop and grow over time. One simple way to look at it is through the number of people in today's mass affluent demographic. This stands at 13.5 million individuals who control approximately GBP 2.7 trillion in liquid assets. This segment is forecast to grow to 14.3 million people, controlling more than GBP 3 trillion of liquid assets by 2026, and we have around 1 million clients and manage funds of GBP 168.2 billion on their behalf. So the opportunity here is undeniable. So I believe we're operating in a market that has structural growth opportunities and where society is becoming more aware of the benefits and necessity of long-term investing. In terms of scale, SJP is a much bigger business than many people realize, with more than 4,800 financial advisers operating in almost 2,700 partner businesses. We have a huge market presence. And the pace of growth has been really impressive, more than doubling the number of clients over the last 10 years. Our community of advisers and partners has an average age which is 10 years younger than the industry, showing that we're building advice capability for future generations and providing a great pool of talent amongst our profession. Ultimately, SJP is the best place for our clients, for partner businesses to grow and for great careers to thrive, and we're confident that our growth will continue because we have several advantages that we work hard to sustain. We have a proven track record of retaining and growing the partnership. The SJP Academy has brought in more than 1,300 partners and advisers since it began. We have a market-leading succession support scheme that we call BSP, or business sale and purchase, which means longevity and continuity of advice for clients by ensuring we have succession planned in. And this scheme continues to work well for clients in the partnership. These things really set us apart from the competition. Most importantly, we are all committed to delivering great client outcomes that foster long-term client retention, advocacy and new business. Another compelling aspect of our business I'm beginning to know better is our investment proposition. This has, at times, faced some external criticism around performance. Over the last 12 months, we've seen strong performance across all 12 of our portfolios. And our newest range, Polaris, has been particularly impressive, delivering returns that outpace benchmarks by between 2.5% and 4.5%. This contributed to Polaris being the fastest-growing multi-asset fund range in U.K. financial services, and unsurprisingly, it's been hugely popular with clients, attracting GBP 25 billion in just over 1 year. We're also looking to expand our product range into low-cost passive investing space. This will ensure we continue to have a real breadth to our investment proposition, providing more choice for clients. So taking a step back, what I see is a fundamentally strong and growing business with a great distribution and asset-gathering capability and an attractive investment proposition that helps deliver good outcomes for our clients. In what's been a challenging year for the industry, SJP is a business that has shown its resilience, both through inflows and in its underlying financial performance. So on to my second key topic for today which pertains to 2 challenges we're really addressing. The first is the restructuring of our charges we announced last year. The second relates to the historic evidencing and delivery of ongoing servicing for which we've created the provision I mentioned earlier. Let's start with the charges structure, which is too often being seen as complex and has therefore been open for external commentators to challenge. In October, we announced the structural changes of unbundling our charges to ensure sustainability for the long term. This gives us confidence that we can grow the business without the need for any further changes to charges that would impact the guidance that was communicated to the market in October. These developments will be good for clients, appropriate for our marketplace and are designed for a Consumer Duty world. By extension, they will be good for our long-term business health and give us the opportunity to consider new propositions and also give us real agility in how we grow the business. Turning now to the second key challenge we're addressing, linked to the historic evidencing and delivery of ongoing servicing. Throughout late 2023 and early 2024, we saw a significant increase in the number of complaints, largely relating to whether clients had received ongoing servicing historically. Given the scale of complaints, we needed to explore this issue by assessing client experience. The crux of the matter is that the completeness of our evidence of our ongoing service being delivered is particularly challenging for those years before we implemented Salesforce as our CRM. In some instances, the frequency of services being delivered was below what clients should have received. This means that we may need to provide refunds for clients where we cannot find evidence that ongoing servicing has been provided. This is clearly a disappointing outcome for everyone. So to wrap up this section, we are dealing decisively with these 2 key historic challenges. We're moving away from a fee structure open to criticism and moving to one that puts simplicity and comparability at its core, future-proofing our model. We've identified shortcomings in the evidence of ongoing servicing in the past and are dealing with this. The implementation of Salesforce in 2021 now provides evidence of ongoing servicing, giving us confidence for the future. At this point, I'll hand over to Craig to give you a deeper insight into our financials before I come back to talk about my focus on future priorities. Thank you.

Thanks, Mark. Good morning, everyone. As Mark mentioned, the underlying business has performed well, but it's clear that some important developments have impacted on the financial results for the year. So I'll begin by providing some color around these. Firstly, as Mark has said, we made important announcements in 2023 related to our charging structures, ensuring both compliance with an evolving regulatory environment and a sustainable charging platform that will see the business thrive over the long term. In July, we announced the introduction of a fee cap on long-term bond and pension investments, which came into effect in August. The impact of this in the second half of the year was to reduce net income from funds under management by some GBP 12 million. Later in the year, we announced that we will be simplifying our charging structure to provide comparability across the marketplace and enable a clearer articulation of the value that we provide to clients across all elements of our proposition. As we explained back in October, this new charging structure will impact the shape of our financial results over time. We provided guidance on how our net income margin range would be affected, and we do not expect any future changes which will require a revision to this guidance. Investments in systems and processes will be required to deliver these changes. Much of the cost to change will fall in '24 and '25, but we started work and the post-tax cost in '23 was GBP 7.2 million, which is in line with guidance. These changes will result in a series of timing differences that will impact negatively in the short term, but positively in the longer term. Importantly though, they'll result in long-term simplicity and comparability, which can only strengthen our proposition, our brand and our reputation. During the first half of '23, we began to experience elevated levels of complaints in connection with claims that ongoing servicing had been charged for but not delivered. These complaints accelerated towards the end of the year, and our experience was that producing sufficient evidence of delivery was challenging, particularly for the period preceding the rollout of Salesforce in 2021. This resulted in a large volume of upheld complaints, followed by refunds for charges, which contributed significantly to the complaints cost within miscellaneous expenses. Given the volume of complaints received together with the higher uphold rate, a skilled person was appointed to perform an assessment of the extent to which issues raised by complaints are replicated across the wider client base. Based on the results of this assessment, the Board yesterday agreed a program to address those cases where evidence of delivery falls below an acceptable standard. The period of review will be from the start of 2018, and this is based on an assessment of the regulatory regime in place during this period, together with the requirement to retain evidence of delivery for this period of time. Having made this decision, we've booked a provision of GBP 426 million gross of tax, which amounts to GBP 324 million net of tax in the cash result. This charge is our best estimate of the total cost, and it includes an estimated refund of historic ongoing servicing charges together with interest and the administrative costs associated with completing the work. It's clear that addressing the financial risk of a lack of evidence of delivery has had a material effect on the results. But it's important to note that this is a historic issue and one which we've addressed for the future using the CRM capabilities within Salesforce. Indeed, the assessment itself shows us that servicing records improved markedly from 2021 onwards when Salesforce was introduced, to the extent that for 2023, we were able to ensure that we have evidence that all clients have received the ongoing service that they have paid for. As part of this exercise, we were able to isolate those instances where, for whatever reason, there was no evidence of delivery and proactively trigger refund activity. Contextually, these instances represented approximately 2% of clients and 1% of funds under management. This is a process that's been operationalized for 2023 onwards, and the cost of the refund for the year was largely offset against ongoing remuneration paid to advisers. The challenge we have is looking backwards, where the evidence is not as strong. We have more than sufficient funding capacity to deal with the financial impact of the decision we've made. You'll appreciate that in a regulated environment, it's important to have the necessary capital backs up with appropriate liquidity all in place at the point at which a provision like this is booked, and that's what we've done. We're confident that the provision we booked is sufficient, and we've also arranged access to an additional GBP 250 million of credit which we do not anticipate utilizing but which provides additional contingency funding capacity. As Mark has said, this matter is disappointing for everyone, and we're committed to putting things right, which is what we will do. From a financial perspective, we have the strength to do so and a financial business model that remains in good shape, which is a good point at which to move on to our underlying performance. Before I get into the detail, I'll comment on the underlying cash result, which is broadly flat year-on-year on a pretax basis and 4% lower post tax due to the increased rate of corporation tax. Given the challenging backdrop for our industry during the year, this is a strong outcome that highlights the fundamental resilience of our business model. Moving on to the key components of underlying cash. I'll start with the all-important net income from funds under management. As a reminder, this line represents the net annual management charges retained by the group after the payment of all the directly associated costs; for example, the advice fees paid to partners, investment management fees paid to external fund managers and the policy servicing tariff paid to our third-party administration provider. Total post-tax net income has reduced modestly year-on-year. But on a gross of tax basis, it grew by 4%, which reflects the increase in average mature funds and includes a contribution of over GBP 40 million of income from gestation balances that matured during the period. This was partially offset by the impact of the fee cap that we introduced on long-term bonds and pensions investments during the second half. The margin for the second half was within the 55 to 57 basis points guidance that we gave back in July. As we've previously guided, this margin range will reduce by a further basis point in '24 to a range from 54 to 56 basis points, purely as a result of the effective rate of 25% applying for the whole year. Encouragingly, the combined impact of net inflows and strong investment performance during the year has resulted in funds under management increasing by 13% to close the year at a record GBP 168.2 billion. This sets us up well for future growth in net income in 2024. What also sets us up well for growth in income is the profile of gestation FUM that we see maturing every year. Let me explain this for those less familiar. Under our existing charging structure, new life and pensions business does not generate annual product management charges for the first 6 years of its existence, but it does thereafter. The stock of funds under management that is within this initial non fee-earning window is what we call gestation. And we can see how this stock becomes revenue earning over time, therefore, providing us with strong visibility of future growth an income. For illustrative purposes, our current stock of funds in gestation stands at GBP 47.6 billion and could, in due course, contribute around GBP 270 million a year in recurring income to the cash result, free, of course, of any additional cost. For '24, we'll see around GBP 7 billion of FUM emerging from gestation and beginning to contribute somewhere in the region of GBP 50 million to the cash result for the first time. Under the new charging structure, from the middle of '25 there will be no gestation period for new business. Therefore, from that point, the cash result will see the twin benefit of new business contributing fee income from day 1 and the benefit of existing funds in gestation beginning to mature over time. I'll now move on to the margin arising on new business. As a reminder, this line represents the initial charges on new business retained after the payment of directly associated costs. These are predominantly the initial advice fees paid to partners or the incremental third-party administration costs. The total margin arising during the year was GBP 104.5 million, representing a 15% reduction compared to the same period in '22. The key drivers for this reduction are the lower new business volumes and the change in tax rate. Controllable expenses of GBP 283 million net of tax are up 2%, which aligns with our guidance of 8% on a pretax basis. The sharp rise in inflation that we've seen in recent years has begun to moderate, and we're budgeting to contain the growth in pretax controllable expenses in '24 to no more than 5% for the year. Allowing for the corporation tax applicable in '24, this is equivalent to 3% net of tax. Our business in Asia has experienced the same market and economic challenges that we've seen elsewhere. The increase in net investments of GBP 19.4 million largely reflects some restructuring that we described last year, which has included the closure of our office in Shanghai, some partnership rationalization and the establishment of a presence in Dubai. Given the challenging operating environment and the impact this has had on accumulated flows, we now expect Asia to break even in 2027, which is 2 years later than planned. We anticipate total net costs in 2024 of approximately GBP 11 million. Our DFM business has delivered a result slightly ahead of guidance, with the total investment reducing to GBP 6.4 million. We're entering the final stages of the back-office rebuild, which is charged to profit as the expenses incurred. As a result, we expect DFM to experience a reduction in costs in '24 and to perform somewhere in line with breakeven for the year. Our FSCS levy and regulatory fees expense of GBP 23 million for the period was more than 40% lower year-on-year. As we've reported already, though, this is a one-off reduction. And at this point, we believe that the FSCS cost for the coming year will increase by around 50%, while other regulatory costs will remain broadly stable. We continue to earn shareholder interest on invested elements of working capital at a rate closely linked to the Bank of England base rate. The low interest rate environment over the past 10 years has meant only a modest contribution to the cash result. But for 2023, as the base rate increased to its current level of 5.25%, you can see that it's been a significant contributor. For the purposes of modeling for '24, if the current base rate was to hold for the whole year, we estimate that shareholder interest could be somewhere in the region of GBP 60 million to GBP 70 million but you'll need to flex this number for your own view of average interest rates over the period. And just as a reminder, this income is not client related. It's income on shareholder assets only. Miscellaneous costs have increased to GBP 35.8 million, and the biggest single component of this was the elevated complaints experience that led to the Board's provision decision that I've already covered. In normal years, the cost of complaints typically net up against internal partner PI contributions. But for 2023, this wasn't the case. Taking all of this into account, the underlying outcome for '24 was a strong one, but inevitably somewhat overshadowed by the exceptional provision that we've established to deal with historic issues. I'll now turn briefly to embedded value. This, for the less familiar, is a basis of reporting that gives a measure of the total value that might be expected to arise over the lifetime of the existing in-force business without making any allowance for the new business that may be written in the future. The key figure here is the EEV net asset value per share, which now stands at GBP 14.11. This year-on-year reduction reflects the impacts of changes to the charges that we communicated last year as well as the impact of the ongoing service evidence provision that we announced today. Moving on to solvency. The ratio for our life companies stood at 162% at the end of the year. This ratio has increased markedly as a result of both future changes in the charging structure together with the change introduced as part of a wider package of Solvency II reform, which reduces the risk margin that we're required to hold. In the past and based on our current charge structure, we've targeted 110% of the standard formula within our capital management approach. Our future charge structure will redirect income from the life companies into other parts of the group. And while we'll continue to apply the same risk modeling, the reduction in life company VIF has resulted in a change from 110% to 130%. The effect of all of this is to reduce further the capital constraints in our life companies. This has enabled us to use surplus liquidity of some GBP 190 million to in part fund the exceptional provision that I've already covered. Finally, I'll comment on the dividend. Our financial results have been significantly impacted by the ongoing service evidence provision but the Board recognizes the importance of return to shareholders and is confident that sufficient capital and liquidity is available to deal with this legacy matter. In light of this, the Board proposes a final dividend of 8p per share to take the total dividend to GBP 23.83 per share for the full year. Looking forward, a combination of the creation of the new provision and an expected decrease in the level of profit retention in the business over the next few years as we transition to our new charging structure reduces resources available to invest in long-term growth in the business. Accordingly, the Board has decided to revise our approach to shareholder distributions. Going forward, the Board expects that total annual distributions will be set at 50% of the full year underlying cash result, and for the next 3 years will comprise 18p per share in annual dividends declared with the balance distributed through share repurchases. Once our new charging structure is fully embedded, we anticipate that the earnings trajectory will improve during '27 and beyond. The Board expects that distributing 50% of the underlying cash result will continue to strike the right balance between investment for growth and returns to shareholders while seeing shareholder distributions increase over time. The upward trajectory in profits should then provide the Board with options to grow the dividend element within the total return. So all in all, a strong underlying performance for the business, which is inevitably overshadowed by an exceptional cost of addressing a historic issue but which demonstrates a core resilience that bodes well for the longer term. For your convenience, the slide on the screen provides a single summary of all of the guidance that I've provided, which should enable you to estimate our financial results for '24 and update those estimates as market performance evolves over the year. Now back to Mark.

Thank you for that, Craig. Amongst everything that Craig has covered off, it is important to note that fundamentally, our underlying financial performance is robust. With the external environment likely to remain challenging in the near term, it's important that we continue to deliver on the core basics of running a great advice business. This means all of us in the SJP community doing what we can to help clients achieve good outcomes. It means creating an environment and culture that encourages and promotes excellence. And it means continually adapting and improving so that we build on our market leadership. So beyond dealing with the historic challenges I set out earlier, my 2024 priorities include setting a path for continued growth and success to 2030 and beyond which will be supported by a business review. We will start telling our story to the market rather than having this written for us. At our annual company meeting in January, we set out how we'll have a louder voice in the market to help shape and grow our vital profession. Finally, I commit to keep learning and broadening my understanding of the business, the broader advice profession, our clients, our partners and exploring how we can make the SJP community even stronger together. So to briefly touch on our business review, the work has just begun. We're just a few weeks in. I brought in a leading consulting firm to support us in developing this, bringing in fresh ideas, thoughts and challenge. They'll help us identify, build and turn the muscles to prepare for the future and ensure we continue to lead and evolve, plotting a sustained path for growth, focusing on good cost management and creating leverage through our scale and operational capacity. We're working at pace to deliver this review, and I look forward to updating you on progress with our half year results. So to summarize my presentation today, we have a number of key strengths that give us a real competitive advantage and these continue to position us strongly to capture the significant market opportunities ahead. While we will face some challenges in 2023 and into early 2024, we are dealing with them. We will not shy away from making difficult decisions, and we continue to explore how we develop SJP for the future. Thank you. [Presentation]

Good morning, and thank you for joining us. It's Mark FitzPatrick here. We'll open up for questions in a moment. But before we do anything else, on behalf of our entire SJP community, I want to share our condolences with the friends and family of Lord Jacob Rothschild, who sadly passed away. He was one of the founding partners of this business alongside Mike Wilson and Sir Mark Weinberg, and has left an extraordinary legacy for our industry. So on to the Q&A session. Before we open up the line, I want to just reiterate 4 key points from our results announcement and the presentation you will have just seen. Firstly, 2023 was a challenging year for our industry but our underlying performance has been robust. We continue to deliver scaled net inflows achieved through strong new client investments and high retention, and we've grown funds under management to a record level. Secondly, we're addressing a couple of important historical challenges. We're getting on with implementing these changes to the charging structure that we announced last year, which will future-proof our business, and we're dealing with the historic evidencing and delivery of ongoing servicing. This has led to the significant one-off provision we've reported which has impacted our financial results. Thirdly, we announced this morning that the Board is revising its guidance for future shareholder distributions, which we think strikes the right balance between investment for growth and returns to shareholders. And finally, while it has clearly been a very difficult period for the business, I want to make it clear that I'm very confident for the future. We have a huge market opportunity in U.K. financial advice, great fundamentals that allow us to prosecute that opportunity, and we're working on a business review that will help sharpen us up to accelerate growth, deliver economies of scale and improve returns. So we've got plenty of work to get done, but we're in fundamentally good shape and I've got a lot of optimism for the future, given the structural need for advice and our relative position in the market. Now I'm sure you've got a lot of questions given what we've thrown at you this morning, so let's dive into that. And operator, over to you, please.

[Operator Instructions]. Our first question today comes from the line of Andrew Sinclair from Bank of America.

Three for me as usual, please. First was, just on the provision, just really wondered if you can talk us through the process that you've gone through with the FCA, the regulator, to make sure this is just a one-and-done provision and that the regulator won't have any ongoing concerns. I realize the FCA never gets a sign off per se but what processes have you gone through with the regulator to make sure they're comfortable with your ongoing advice provision and compensation? That's my first question. Second was just on the buyback component of capital return. Just how is that going to work on timing? Will buybacks be declared once a year at full year results and just run after that? I guess first one at full year '24 results, and I guess will buyback be part of the ongoing toolkit from 2027 onwards? That's the second question. And third, Mark, you mentioned a couple of times in your intro comments there about a business review that's ongoing. Is that something that's going to be included in the existing 5% per annum cost guidance? Or how should we think about cost of that business review over the next few years?

Andy, thank you. I'll take 1 and 3, and Craig, if you could take the second one in terms of the buyback timing and the like, thank you. So this to the provision of the process with the FCA. We've been in extensive conversations with the FCA. We have had a skilled person appointed to look at the elements of our book and our ability to evidence ongoing servicing. I think we saw a significant spike in complaints at the back end of last year into early this year. So they have undertaken a review of the elements of our book and actually conducted a statistically significant sample that included a large number of data points that actually when that work finished, and that work, effectively looking at the sample, effectively finished earlier this week, enabled us to look at the overall findings from that and determine that we needed to make the provision that we have made. So we've taken the FCA through this throughout, there being [ bi nets and tri nets ] as is normal for these type of processes. I've been meeting with them regularly. We're having very open discussions with them on the findings. And so therefore, I don't think there's any surprises in terms of what we are announcing vis-a-vis the regulator. Clearly, as you say, the regulator is not in a position and does not generally kind of bless these type of things, but this has been done with their full awareness and understanding. On to buybacks, and then I'll come back to the distribute.

The buyback activity will be, in terms of timing, broadly consistent with the normal pattern of dividends. So you're quite right, end of '24 is the point at which that will be described and [ proxified ], and the signing of that will be likely spring onwards. The part B to your question was, do we see that as a longer-term feature of shareholder returns? I think at the moment, I would say quite probably, yes. But of course, these things are always dependent on the feedback we hear from shareholders and over the past few years, it's certainly been the case that we've had more shareholders with an interest in buybacks as a mechanism than perhaps we did if you go further back. So at this stage, I think it is likely to remain a feature.

One point of clarification. Sorry, it was just on you're saying that the buyback timing would be broadly in line with the dividend. I mean clearly, the dividend historically has been part interim, part final? Will there still be -- will there be essentially any interim buyback? Or will it all just be a pure one buyback a year?

Yes, essentially, there would be.

And in terms of the business review, it's -- we're a few weeks into the business review announced. It's still very early days. It is comprehensive. But as I think we've said in the announcements, actually, I've had a good look at the element of the charging restructuring that was announced in October last year and I'm very comfortable with where the guidance have got to, and I'm comfortable that actually that we will be able to grow the business without need for any further changes to charges that would impact the guidance that Craig and the team communicated to the market back in October. So I'm looking forward to sharing the output from the review of the market with the half year results and giving you an indication of what that shows and where the effort and energies are looking at. The element of the expense piece of it and the cost of it element, Craig?

So what we have at the moment in front of us is a balanced budget, which shows a 5% increase, obviously, as we head into that strategic review. That will be under consideration. But what I would say at this stage is that when you go into the sort of strategic review, it's rarely with an intention to push the cost base up. So right now, we have a balanced budget, 4% or 5%.

Sorry, just one final point of clarification. Apologies, guys. One final point was just for the actual review itself, will there be any below-the-line costs for that coming through this year in 2024? Or should we think that 2024, between the underlying and net cash generation line, is a cleaner year?

I think it's too early to say because the review hasn't even really got underway in such a way that you could predict the outcome. So that will be a judgment we make further down track.

I think a key element, Andy, for the review, in addition to looking at the market compared to other things is looking at actually how do we really focus and become even more efficient and how do we try to recapture some of the operational leverage that our size and scale should offer us.

The next question today comes from the line of David McCann from Numis.

So the first one is, when you're looking at justification of providing service to justify the fee, I mean what evidence do you actually need that enough is being done to justify those fees? I mean is it typically a case of an annual meeting that's happened regards of what was actually said or otherwise the meeting orders it needs to be more of substance. Clearly, as you're aware, the FCA is looking at it. So I guess what I'm getting to there is, even with the review you've done, is it possible the FCA could still challenge whether sufficient activities have actually been done, not just a box ticking exercise that a meeting has been logged as being done. That's question one. Second question, for the backward-looking part more is, I mean is this purely an evidence issue either that you just didn't have evidence prior to 2021 to document that you've actually done meetings and other points of contact, or do you think that, that could be something more of a structurally here that advisers us were systematically not providing the service and taking the fees for doing that? Thirdly, why is this review not pre-2018? That would be useful just taking your sort of records on the record there. And yes, fourthly, more broadly to this, I mean this is obviously the third instance, I guess, of something we've had like this in short order. Is there anything else that you're aware of, not related to this specifically, that could have a major adverse impact on the business which you haven't already mentioned to the market?

David, Mark here. So very valid questions, and thank you for those. Evidence required deliver of evidence effectively. So we've looked at what records that we have and effectively being guided by the standard and the level of evidence that the skilled person has effectively thought is appropriate in terms of the review that they conducted. So demonstrating that there was contract, if there was a meeting and there was some kind of notes relating to the meeting about the engagement and the level of discussion that was had. So it can't just be, yes, I logged a call, it needs to be a little bit more than that in terms of the level of evidencing. In terms of the kind of the -- is it purely an evidential issue, there are so many kind of regulators across industries that work off an axiom, if you can't evidence it was done, it wasn't done. So effectively, what we are looking at is an element of when we go in and when we talk to partners and we look at what it is they've done, they say, I remember reaching out to that person but I don't have a record on file for that component. And if we don't have a record on file, then actually that kind of fails the test and then we need to refund the client for that particular piece. I think one of the things I would just make sure everybody just hasn't lost sight of, because I'm [ contributor ] a lot of you -- lot at you this morning, is that since effectively 2021, with the implementation of Salesforce, that gives us really good oversight, central oversight of the level of evidence and the degree of evidence that we have. And during the course of 2023, when we wrapped up business at the end of December, we noted that actually, the size and scale of the issue for 2023 was 2% of our clients had not been serviced or we didn't have evidence of servicing, and that related to about 1% of our fund. We have written out to those affected clients already. We have made contact with them. And effectively, they will be refunded during the course of this year in terms of the fact that payment would have been withdrawn from their accounts. They will be made good on that basis. Why not pre-2018? So 2018 is a key year for 2 reasons. One is 2018 is when MiFID came in and when the requirements in the [ cops hand ] world was explicitly set out in terms of what was required, but also 2018 is when the statute of limitation runs in terms of the period with which this type of evidence is required to be retained. Clearly, we have evidence going back a lot longer where there are pension contracts or bond contracts and things like that, but evidencing ongoing engagements and discussions [ with clients ], that kind of evidential record is not required by law to be kept longer than 2018. So for both of those reasons, effectively, that we look at from 2018 onwards. And then the last question, which is -- I entirely understand the nature of the question. For instance, if anything else, Mark, look, I've been in the role 12 weeks. I've been spending a lot of time listening, learning, looking at things. I can't see any other significant potholes ahead of us. They're clearly going to be bumps along the way as there are in any businesses of our size and scale and as regulations change and as the environment changes. But actually, I'm confident that with this issue being kind of sized now, acknowledged and that we are dealing with this, we're also dealing with the element of the changes to the fee structures, all of this puts us up in a place where we can look forward with confidence. And I'm very glad that we have that central Salesforce. The guys did a great job a number of years putting it in because without that kind of centralized database, it'd be incredibly difficult to be able to give any indication to you or to anybody else in terms of where we are today. And that's also what gives me confidence that this is a historic issue as against a current issue.

The next question today comes from the line of Andrew Baker from Citi.

Yes, the first one is, I guess with a greater focus on servicing going forward because of these legacy issues, do you see any impact on new business capacity of the partnership or retention of advisers or anything like that? And I guess are there any implications for advisers themselves that haven't evidenced ongoing service levels historically? And then secondly, just on the dividend. I guess I understand, obviously, the underlying cash earnings profile for the next few years makes it difficult for the sort of 70% payout ratio, but I guess there's been a rebasing down to '27 onwards to 50%. So does this mean that you just see greater need for investment in the business than was previously the case? And then I guess related to this, should we read anything into the mix between the dividend and the buybacks in terms of do you see the buyback component as sort of more discretionary? Or should we just look at it as the 50% payout ratio is pretty much fixed?

Andrew, thank you. So again, 3 very good questions. Let's start with the servicing one. Craig, you can pick up the 2 or 3 around the dividend and the buyback business. In terms of the servicing going forward, well, to some extent, actually, June 2023, we had a good run at the partners and advisers engaging actively with clients, which is why we ended up with now 2% of clients and 1% FUM not serviced or evidenced during the course of last year. So I think the partnership is and has got the muscle now of engaging and seeing all their clients on an annual basis, one. Two is the element of with those kind of elemental frequency of intervention, especially when the market is moving so much, actually, that's really encouraging because it means that the advisers and their clients are building their relationship, making sure that the advice they're giving continues to stay relevant and continues, candidly, to be able to explore if there's any other ways that the adviser is going to be able to support their clients. So in many aspects, I think partners engaging with their clients and greater connectivity is a positive and to be seen as a positive. Retention of advisers, not seeing any shift or any change of that during the course of the year, if anything, actually, we're seeing really good numbers coming through the Academy. To be honest, that was one of real kind of gems. I think that I hadn't appreciated coming into the role, the strength, the scale of the Academy, what it does, how it does it, the scale of people coming through. I was in Bristol a few weeks ago meeting with some of the Academy members, just speaking to them about their enthusiasm and excitement. Young cohort. What it means is that the average age of our adviser in SJP is something like 46. The average age across the industry is 58. So we've got over a decade of extra longevity with our advisers, which is fantastic, which is great for clients, gives them longevity but also with the younger cohort, means that intergenerational transfer, the younger generation has got people who look and seem like that and feel like that same age profile, so it's easier for them to connect. So actually, I think the partners have had a very busy year last year talking to a lot of people. Markets have been kind of very volatile. That's the time when actually people need advice. And actually, [ as Seth ], as somebody mentioned to me the other day, if you look at each of our partner businesses almost as a branch, we have more branches, if you will, than the top 5 banks in the U.K. across the U.K. So we have phenomenal coverage, which is so important when banks are closing and so difficult to find a GP, actually, the person you can talk to now is your adviser, and that's becoming a more real and more mainstream piece. And anyway, let me get off my soapbox. Craig, over to you on the dividend piece.

Andrew, you called out the underlying cash profile and you're absolutely right. The structural change within these charges has the impact you described. But underneath this, it's really important to remember that this is still a growing business. We're growing funds under management. We're growing the number of advisers. That may not be reflected in the pattern of emergence of profit within the business in the short term, but it certainly is in the longer term. And what it means is that we need to continue investing in that capital. The other thing that is always within the sort of capital activities that the group does annually is a commitment to partner business lending, which is incredibly important to succession planning. And that's something that tends to grow in line with the value of funds under management. Where we look for the long term, we have to make sure that we've got the capacity to be able to keep that important thing going and continue to invest in the future shape of the business to ensure -- I think your question was, is there something that we need something for that we haven't put forward? No, it's very much a continuation of the growth that you see. Your second question was around the buyback element and whether that was discretionary, and that's certainly not how I would present it. The way I think I would present it is that we have a payout ratio that creates a financial envelope which is equal to 50% of the underlying cash. Within that, there's an element of fix for the dividend and I would see it more as a balancing figure in the way that we will operate that going forward.

The next question today comes from the line of Ben Bathurst from RBC Capital Markets.

I've got questions in 3 areas, if I may. Starting on the complaint provision, could you just provide some more details on what proportion of partner businesses do you think this evidence issue is related to? Was it a small minority or was it a sort of wholesale issue across the partnership? And secondly, related to the complaints matter, could you just confirm the cost recognized within that miscellaneous line in the cash result for 2023 that relates to the complaints received in that year? And then thirdly, on the charge changes announced in October, we're a few months down the line now. I wondered if you could comment on the partner response to the charge overhaul. Has it been received positively? Or do you envisage the changes having any impact on partner retention or growth over the short to medium term.

Thank you, Ben, for that. I think, Craig, if you could pick up on the second question, it is -- that would be helpful. In terms of the -- is there any kind of clustering, et cetera, from the samples that we have -- the skills person has done and that we have done, there doesn't seem to be any obvious cluster that we would be able to discern at this stage other than that there's a slightly higher kind of situation where there's lack of evidence where the fund level is lower. So that's probably the closest we have to a -- and you see that through the situation in 2023, where we said 2% of clients and 1% of FUM. And so we do see an element sort of slightly lower FUM and the evidencing of ongoing servicing is more patchy. Craig, in terms of the cost per com?

Yes. So in our disclosures on provisions, we show additional provisions made and this is, of course, gross of tax of GBP 61 million. Against that, you always have, as Mark says, provisions, but the cost of complaints and the cost of addressing those rights does hit the miscellaneous line within the cash result. In a more -- as I said in the presentation, in a more normal environment, the cost of complaints similarity to internal contributions that we see annually in advance from the partnership, but they sort of revealed themselves in 2023 because of the number of complaints together with the uphold rate. But if you look at the miscellaneous charge for the year, you can assume that, that net increase year-over-year was of course net of tax, can be entirely attributed to the complaints experience that those reset accelerated in the second half.

Thanks, Craig. And then in terms of the charging changes, the structural changes announced back in October, I know the guys had a lot of reaching out a lot of engagement with the partnership, and I've spent a lot of time talking to the partnership. Actually, what struck me with our partners and advisers is just how entrepreneurial they are and the speed of which they adjust, they adapt, their focus. There's a lot of energy and a lot of work being spent by the partners on how they're adjusting their business, how they're preparing for the element of the change. The element of -- when I look at the KPIs, is there anything that indicates a kind of shift in partner attrition or anything like that? I'm not seeing any kind of major shift. As I mentioned earlier, I'm still seeing people joining the Academy. So there isn't anything on that side that's causing a particular concern. We will be continuing to spend a lot of time working with and supporting the partners as they go through the element of these changes. We have a large field team that spends pretty much every working moment engaging, talking, supporting the partners, and I talk to a lot of them on a regular basis as well. So I think people are focused on how do I adapt to the change, what changes do I need to make? How can I get myself ready for it? How do I need to retrain, relearn, be supported, and that's all the work that we are doing to support them on that particular piece. But thank you for those questions, Ben.

The next question today comes from the line of Nasib Ahmed from UBS.

Firstly, on the provision, is that net of any insurance recoverables that you can get? And why isn't a lot of the lack of advice covered by PI insurance? That's question number one. Secondly, on the payout ratio. I mean you're going from 70% to 50%, but you already have a 5% growing cost base within the underlying cash result. So I guess, what is the delta? Where are you spending the other 20%? I see IFRS is no longer constrained. So to Craig's point, is that mostly partner loans? And then finally, on the RCF, you've used a little bit of that. Again, what was the use of that cash? I can see GBP 1.7 billion of liquid resources. Why do you need to draw down on the RCF and have an additional credit facility that you flagged?

Nasib, thank you for those questions. Those 2 questions strike me as 3 questions. I'd better hand over to my CFO. So Craig, over to you, please.

Yes, looks like a hat trick to me. So this provision, it's important to note that this is not a product failure, and this is not a misselling, a professional misselling failure. This is a question of whether a service was provided. But that's not normally the sort of PI cover that is obtainable. So we do, of course, have PI cover in the event that any of those instances occur, but it's not something I would anticipate would apply to this type of challenge within a business. So therefore, the amount that you see in the provision doesn't include any anticipated recovery of insurance. The second question is around the 5% growth. And you're absolutely right, of course, as we incur expenditure through the cash results, it impacts on the underlying cash, which, therefore, impacts on the financial envelope that I was describing earlier. But we do have a number of things that don't pass through the cash result but nonetheless are very important within a business like this. Capital is one that I always call out. And then I'll go back to what I mentioned earlier, actually, that the profile of earnings is impacted by the change in fees and charges structure but we are still growing business. Our manufacturing businesses continue to grow, and therefore, they continue to need capital and we have to anticipate that. We have a growing partnership and we have growing funds under management. And the partner business loans, again, it's important to remember that these are critical for our long-term succession planning. And good long-term succession planning results in good long-term retention, both within the partnership and both for clients. But as we look at fund growing, so too will the demands placed on the balance sheet to make sure that, that partner lending activity and the VSP activity that Mark referred to earlier is in good shape. Your final question was on the RCF, and the RCF is something that we dip into and we dip out of. And one of the reasons it is there is that structurally we have a business where a significant proportion of our profitability in any given year accumulates in a life company that makes one annual distribution in February or the March after the close of the financial year. It's fairly typical for life companies. And therefore, we have a situation where we have a lot of accumulated cash in a regulated business that hasn't yet become shareholder free cash. And whenever we talk about group liquidity, we tend to think about the latter. So the RCF is there as a facility, always has been, and I do see a long-term role for it to dip into and dip out of as it might be required.

Craig, if I can come back on the partner -- how much on-balance sheet loans do you expect to lend out over the next 5 years?

We don't have a longer term projection of that. But obviously, what we do as we look forward is we strike a balance between those facilities that we're able to fund using some of the banks that we work with who will lend directly into the partnership. We have a number of securitizations that Mark's referred to earlier and -- but whatever the case and regardless of how much of other people's balance sheet we could use, we do need flexibility within our own balance sheet both to lend and also to make periodic acquisitions, where, for example, the warehousing business is as part of a longer-term succession plan.

The next question today comes from the line of Steven Haywood from HSBC.

Three questions from me. One is on the actual size of the provision and what it covers. If you can follow me on this math, and correct me I'm wrong, that would be very helpful. On the GBP 426 million provision that is for ongoing advice, which is a roughly 50 basis points charge, that is equal to sort of GBP 85 billion worth of payment. You divide by sort of 5 or 4 years over the period since 2018, so you get to roughly GBP 17 billion of AUM, where you might have had -- or there might be a lack of evidence of providing service. And then this is GBP 17 billion of AUM over that 5 period is an average of over 10% of AUM. That does sound dramatically high. And please correct me if it is not the right area to go into. But what sort of evidence now do you have that things have dramatically improved? I see the Salesforce has obviously helped a lot. But is there now a mistrust issue and it will -- lack of goodwill with a lot of clients in your company. Secondly, you mentioned in the webcast that you're developing passive and low-cost range for your clients. I just wanted to understand how this would work and what would -- or who would be offered it and what products? And then thirdly, you have talked about a national advertising campaign going forward. What was the purpose of doing this and potentially what cost is this?

Steven, thank you. I'm going to ask Craig to cover the first. But before he gets into the element of any numbers, and hopefully, we don't lose everybody through that element, one of the elements to the kind of 1b of your question was is there a lack of goodwill? We're not seeing that. We're not seeing that at all. Actually, by virtue of the fact that client retention is high, client advocacy is high, by virtue of the fact that nearly 1 million annual wealth reports have landed at people's doorsteps or in their key box over the course of the last 6, 8 weeks that demonstrate the strength of the investment performance from the end of last year. Actually, clients are feeling positive about St. James's Place. Clients and advisers are feeling positive about the relationship because the relationship is intensified where, in some instances, it may not have been as close as it needed to have been in the past. So actually, as we look forward, I'm feeling very confident about what we have. I know in speaking to a number of advisers over the last couple of weeks, given the strength of the investment performance, they are really engaging with their clients and very comfortable engaging with their clients because of that strong backdrop. So we're not seeing any kind of servicing or goodwill related issue with our clients at all on that bit or piece. Why don't I just pause now. I'll hand over to Craig to have a chat in terms of elements of size of the provision, and then I'll pick up the other 2 pieces.

Yes. Steven, so very, very difficult to have a full-on mathematical conversation on a call, but there are a couple of things that might help here. So within that provision, there is a substantial allowance for the administrative cost of actually execution. So as well as striking a provision that includes the cost calculated of refunding for the service, we've also essentially, into this provision, brought forward the future costs of running the program that will result in those repayments. So all of the individual case reviews that we'll need to do obviously come as costs. Now that's obviously a different type of cost to project than the cost of refund, but we do have the size advantage there of having the complaints experience during the course of 2023. So we have a pretty good idea of how much it costs to get one of these things done. And we also have a good idea of what it costs to get it done at scale. So the breakdown of that, and it also includes some [ fast ] interest as well, which is lower in scale, obviously, but the other thing that you should take into account here is that you have a number of moving parts. So funds under management are growing pretty rapidly over that period. So 2018 was sort of the region of GBP 117 billion, and we're sort of in the 160s now. So funds under management have grown rapidly. You then have a pattern in the data that says the further back you go, the more likely you are to see gaps. So you see more incidents going backwards but with less effect because funds under management were lower. So there are lots of moving parts. And the other thing I would just emphasize is that 2023, I know you didn't use it in your math, but it would be tempting to look at the experience that we've quoted for 2023, which is that when we came to our final conclusion of the process, there were 2% of clients which were 1% of funds under management, which is another factor, actually, the scale of investment that you're likely to find, 2023 was using Salesforce operationally throughout. So the Salesforce disciplines were as they should be and as they will be going forward. So you can't look at the 2023 outcome and expect that, that tells you what you're going to find when you look backwards because '23 has been completely cleansed and operationalized going forward. So I'm afraid I can't reconcile your numbers, but hopefully, I've given you enough to show what the various patterns are within the data that we've used.

Lastly, you can always pick up with up Steven offline if there's machinations that each can work through. Steven, if I can move on to your second question. We really have passives in the Polaris range, and I touched upon the Polaris range in the script earlier on. So it's not new, but I think we're looking to expand it further as we're looking to try and offer more choice to clients, and the element of exactly how the guys do it and the way they do it, that's still being worked through. But as I said, there is some -- really some passives in the Polaris range, and the Polaris range has done incredibly well and we're kind of getting into effectively GBP 25 billion in the space of a year. So incredibly good for our clients and pretty powerful for our partners and advisers to be able to share clients towards that providers when they're within their attitude to risk. And then the last piece in terms of the advertising campaign, we're very excited by that. We gave a glimmer of some of the aspects at the annual company meeting at the back end of January. The overall size of that, I think, is kind of high single digits millions that we are kind of looking at. The geography of that, I need -- going to need help from our CFO on that in the advertising campaign.

That's all taking care of, again, 5% guidance.

The next question today comes from the line of Andrew Crean from Autonomous Research.

Could I ask 3 questions, maybe 1 request? In terms of the questions, what is within the provision of GBP 426 million? What in pounds million is the admin cost and the interest payments so we can get to the provision? Secondly, in the period from 2018 to '23, what was the overall amount received by partners for ongoing advice so we can reckon what level you're providing, and is there any chance of you getting some of this money back from the partners? Thirdly, you've given us the data in '23 in terms of 2% of customers and 1% of funds under management. You have the data for '21 and '22 because you've got Salesforce. Can you give us the detail for '21 and '22? And finally, the request, can you give us for the 12 portfolios, the 1-, 3- and 5-year performance relative to the benchmark so that we can see the whole picture?

Okay. Andrew, so I'm probably going to have to hand over to Craig for the majority of those, I'm afraid. Craig, do you want to kick off, please?

I think the first question, and sorry, the lines are a bit rough, but I think the first question is around the construct of the provision and what the various component parts are. We have clearly disclosed what we're required to disclose from an IFRS, an auditing standards point of view in the news release, which will be replicated in the annual report of accounts. And I absolutely understand that the more data we provide to some in the outside world, the more helpful that is. But it's also helpful to others in the outside world that may trigger thoughts around commercial sensitivity. So what we've done is we've set out the basis of the decision. We've set out the component parts in terms of the descriptors within the provision, but we are not at this point giving a full analysis of how that's constructed. But we have -- you'll see some sensitivity notes in the disclosures. In terms of recoveries from partners, I totally understand the question because the way in the current fees and charges [indiscernible], the way that works is that the 50 basis points is essentially paid through SJP to the partnership. This is clearly a very recent decision. Sorry, got some noise on the line, it absolutely could go on mute. So there will be instances as we go through this review where it's entirely appropriate for us to make a recovery from the partnership. There will be other cases where that's more of a challenge, and I think that's going to be a complicated part. Now where that leaves us from an accounting perspective is that we have what you would characterize as a contingent asset, but any estimates that we may make, and I think it's too early to make such an estimate, would be contingent in nature and therefore, not the sort of thing that you would book in the provision. So once again, that provision is a gross figure.

Andrew on -- so just to say, on the element of 2023, where clients have not -- there is no evidence of ongoing servicing, effectively, where I mentioned earlier, we've written out to clients, effectively, partners will be making good to the cost of that delta for the 2023 data. And as Craig said, there will be some instances where recovery of charges from partnership may be sought where there are gaps in service or lack of evidence of service. And then the benchmark there in terms of the investment performance, et cetera, we can send that out, we can put that up on the web page as of end of February.

Sorry, can I come back to you because I don't think you got the question about what is the overall amount paid for this ongoing advice in 2018 to now? And secondly, what was the experience in '21 and '22 in terms of lack of advice to compare with the 2% and the 1% which equated for '23.

So the total ongoing advice paid to the partnership is included within the total remuneration payments to partners within the financial savings, Andrew. So that isn't the data that we've previously published. But having said that, and I haven't got the math in front of me, if you have to take your view of average funds under management for each of those years and apply 50 basis points, that would give you somewhere very close to the answer. It's just not a number we separately publish because we incorporate this into the total partner remuneration costs, which includes new business.

And the '21 and '22 figures for lack of contact?

The 2021, 2022 figures from the Salesforce is not set. Actually I have to end [ here it all ], and... I think what Andrew has asked is what the component parts of that is in the provision. But as I mentioned, Andrew, we haven't broken that provision down. So we haven't changed this because we see that information that we are looking for the equivalent to....

[indiscernible] fiscal '22 and '21?

Andrew, that's not published partly because at this stage, the element of when Salesforce went in, in 2021, the level of uptake on it was -- took time to come through. 2023 went to, dare I say, the full, fat version of Salesforce being used extensively throughout the partnership. Usage evolved over '21 to '22. But to give you a pure -- I don't have it now. I'm not [indiscernible], I don't have the stat in front of me. The stat is likely to be misleading because it's not necessarily going to have all of the data up on it. And one of the exercises that we are embarking upon is getting all of the data up onto Salesforce over the coming months so that we can see clearly where the gaps are and which times we need to write out to and engage with for the element of exploring whether they wish to participate and whether they wish to or believe that they are eligible for a refund.

The next question today comes from the line of Enrico Bolzoni from JPMorgan.

So my first question goes back to the statistic you gave us of about 2% of clients accounting for roughly 1% of assets that were primarily this concerns the lack of advice was more evident. So the read across to that for me is that [ their ops ] is actually very difficult for advisers to service well, or rather say, it's not economical to service well with smaller clients. And if I look at the ratio of the number of clients per adviser in these places using some of your latest public figures, the average adviser has roughly 200 clients. Now this looks like quite a high number. So I'm wondering, should we actually think that we reached saturation in terms of how many clients actually an adviser can serve. And related to that, do you think this could have implication in terms of raising the bar or the threshold for an adviser to decide to onboard across the clients going forward just because they realize they know there's a lot of scrutiny and they generally need to serve also the smaller clients. So this is my first question. My second question is just about filings. Can you please give us an idea of how long you think it will take for these claims to eventually unfold and for this matter to be completely resolved. I have to say that the provision is now booked and this is it or at least this should be it. But I would just like to understand for how long this process might continue because also, as I suppose, in those instances where you might actually have the partner picking up the bill, so also actually we find a client that could cause a partial unwind in the provision you booked? And the final question. Can you just please provide a bit of extra color on the business review you're doing? So clearly, you went through already a meaningful change in pricing structure, now we have this provision, so what are the other key elements that you need to review? And what should we expect? And maybe linked to my original question, do you think there is scope for the business to invest more in new technologies to ensure that partners can service in an economical way also smaller clients without the risk of eventually have to refund some of them because they didn't see the service they paid for?

Enrico, thank you. So in terms of looking at question one, effectively, when I think our partners and advisers engage with clients, they're generally looking at clients or prospective clients where there's likely to be a lifetime value and a significant growth of wealth potential within that prospective client. And therefore, I think in the first couple of years, especially if you look at [ folk around the city ] or somebody like that, the number may not be huge, but they've got huge growth potential. So the advisers, when they engage with people, it's not just what you do on day 1, it's what might be, and the longevity of relationships that our advisers have with their clients is meaningful. It's very, very important. I've met partners and advisers who they are second-generation, [ Andy ], of partners and advisers in our business whose parents were kind of founding partners. They've retired, their kids have picked up the mantle, run with the business and continuing to look after their clients and children of the original partners, clients, et cetera. So the whole element of that scale, if we looked at it purely on a transactional basis, I could understand your thesis. By and large, I think, we are a relationship business and we're a kind of face-to-face financial advice component. Across the industry, the element of -- the expectation, I think, is clear from the regulator in terms of ongoing advice and what is required. And given the pace, the way things are changing in the market, you'd expect people to want, by and large, to be in contact with their adviser on a regular basis. So candidly, we think contact is good. Engagement is good, and understanding where people are, understanding their anxieties, understanding where they're at with stuff. As to your second question, in terms of the time period, I think our -- based on discussions we have had with folk who have had to go through a similar type of exercises, et cetera, along the way, how long we think it's going to take us to set up the infrastructure to be able to deal with this, to write out to all their respective clients that we think might be affected, so we think we'll be able to wrap this up in a 2- to 3-year window. I think anything shorter than that, I think we'd be kidding ourselves and we'd be kidding you. As for the element of the business review, as I said, I cogged out the element of fees because we're good with all of that piece, and we don't expect that any further changes to charges would impact the guidance that was announced in October. I am looking and encouraging the guys to look at elements around the market, how we see the marketplace changing, looking at the element of our cost infrastructure, how do we get better cost management to leverage. All part and parcel of that as well is consumer client needs are evolving. Our partner needs are evolving. The business we are today is different from the business that Jacob Rothschild and others set up 30-odd years ago. So we need to continually evolve our tech in terms of what we're doing. More and more clients want to be interacted with on the digital element. So we're going to be spending time looking at that, making sure we get the offering right. So we're going to -- so it is a broad view. It's deliberately a broad view. It's deliberately a broad view with the new CEO in town, kind of wanting to look at everything and kicking the tires on lots of things. And you can see how we create a business that can really make the best of the structural opportunity we have ahead of us. We have scale advantage. I want that to come through to the bottom line in terms of operating leverage as well. That's not being a feature of the industry to date. I think that's something me and industry to get a little bit smarter.

So if I may, just a clarification on the first one. This was very helpful. Thanks for that. But I appreciate your point that advisers look at the future value of a lifetime of advice and not just a single time when they meet the client. But my question is, is this sustainable for a single adviser to service 200 clients? Is it -- can they -- there's a limited amount of days in a year. We're talking about nearly just 1 day per client or roughly so, [ simply going ] holidays. So I'm just wondering, do you think actually that's a concern?

So candidly, not, because -- so let's take my own end, I can personalize this for a moment. So I'm a client of St. James's Place. My wife is and my 3 kids are, so we are classified then as 5 clients, okay? We're 1 household, 1 family. So the conversation with the adviser is with my wife and I, the kids don't get involved in that. So that's kind of 1 meeting that deals with effectively 5 clients. So there is a huge household component, family component that comes through on that element. That softens your 200 metric. The other thing to bear in mind is that society has moved on a lot in terms of the element of the type of interactions people want. So being able to interact on Teams or virtually through Zoom or any other media is incredibly valuable, a, for the adviser and the client because they don't both need to try and get physically in the same place at the same time. That has massively increased. And we're seeing that not just in this business but other businesses around the world, the efficiency has improved significantly.

The next question today comes from the line of Larissa van Deventer from Barclays.

A few quick ones, actually, from my side. The first one, you've had a lot of discussions on the provisions that have been raised for the lack of service. But on the fees or the gaps in service, on the fees, how can we get comfort that the fee revisions are not done? If you can give some color about the frequency and the nature of your communication with the FCA, that would be very helpful, please. Second one, you mentioned the releases from the life operations. Is it first to do further capital restructuring in that regard? Or how can we think about potential restructuring to make to the operations from capitalization overall.

Larissa, thank you for those two. In terms of the fees and the charging structure, as I mentioned, I've had a good look at it. I know that the team had extensive discussions with the regulator beforehand. So in my review, as I've said, actually, I'm quite confident that we can grow the business without the need for further changes to charges that would impact the guidance that Craig and the team set out in October last year. Candidly, the frequency and the level of detail with the regulator, I think that's between us and the regulator, if you don't mind. But suffice it to say, I've spent a lot of time with the regulator. They're an important stakeholder. It's important we understand their agenda, that they understand ours. Given our scale that we have in the industry, given the element of the advice guidance boundary and other things that FCA and Treasury are looking at, I think there's a very important role that we can play. So we should be working closely with them supporting I think, the future shape of the industry and working alongside the regulator in terms of how that develops. As for the capital restructuring, Craig?

Larissa, you're referring to the GBP 190 million, and we've tagged that as balance sheet optimization. That was possible on a one-off basis as a result of the Solvency II reforms that were announced at the back end of last year. And what that did is it reduced the level of risk margin that we're required to hold. So that's a one-off structural internal benefit that allows some lending out of the life company into reserves. And as you indicate, that's been in part used to fund the provision. In terms of will that happen again, nothing on that scale, no. That's a one-off benefit.

The next question today comes from the line of Greg Simpson from BNP Paribas.

There are three on my side. The first one is, with the -- of the increase in miscellaneous costs of the year, about GBP 19 million post tax. Can I just confirm that relates to actual complaints remediation in the year? And if so, can you talk about how many clients in AUM that relates to? The first question. The second one is the slide with the future cash results. Contribution from gestation, I get to a 57 basis point margin if I compare the 272 relative to the assets. Can you just talk through this in the context of the 43 to 45 basis point previously guided margin on the mature FUM with a new charging structure? And thirdly, can you comment on what you're seeing around client activity levels and risk appetite to start the year? I know markets are better, but rates are still elevated. So what kind of gross flows are you kind of budgeting for?

Why don't I start with 3, and then I'll ask Craig to pick up on item 1 and 2. So in terms of client activity level, we're seeing a lot of activity, a lot of activity with the partners and clients, as I mentioned, and your wealth report, hundreds of thousands of those landed recently showing a significant uptick. I was with one of our more established partners just last week, and he was telling me, actually, the group are really positive, really engaged, getting up there with partner. They feel that they've, including the strength of the performance at the end of the last year, the advisers are confident and having active conversations with clients. At the end of the day, whether that activity is going to morph into elements of significant flows, we need to see. There is still, as you say, a lot of uncertainty out there at the moment. Rates are still high. We know that, I think from stats I've seen, about 28% of mortgages that actually people took out pre-2022, are going to kind of unwind and have to be repriced later on this year. So that's going to be a drag for folk. And my personal suspicion is rates will come down, but it will probably slower than people were expecting earlier this year. So I think -- my hope and expectation is the year will get better as confidence builds and as people see a few more green shoots and a few more elements of the essence of potential rate reductions settling down, not just here but around the world. But I expect the first couple of quarters to continue to be fairly bumpy and sticky. Craig, on the miscellaneous costs and the gestation piece, please?

Yes. So miscellaneous costs include the costs of settling those complaints. We don't actually publish, as part of the annual report and accounts, complaint numbers or average settlements, but obviously, complaint numbers are published for the outside world in due course as time goes on. So those external disclosures will catch up. But all of the costs of complaints hit miscellaneous, as I mentioned a little earlier. The FUM in gestation has been recalibrated in order to take account of various things that have happened in the recent past. So if we start with the fees and charge cap, which affected the bonds and pensions that make up the gestation balance, we've had to take account of the fact that, for instance, by the time the early cohorts mature, some of the later cohorts will be subject to the fee cap. And what we've also done is we've incorporated into that the way we see the new margin guidance affecting the funds as they mature out of gestation. So the number you come up with won't necessarily directly relate to any individual bits of guidance. You find it sort of somewhere in the middle of the guidance because ultimately, at a point at which you choose to work out what the maturity is, you're going to have different charges applying.

Thank you for those questions, and thank you, everyone for joining us. I think we need to go off, and been going for just over an hour now. I think we need to go off and see some shareholders who understandably are keen to have a chat and catch up directly. I know there's been a lot to digest in this morning's announcement, including the key challenges that we're facing into, the change in dividends and also a little bit around some of the priorities that I see for the business in the short term. Well, we've got a lot to do. I'd hate everybody -- and I can understand that today may not be, but I'd hate everybody to lose sight of the fact that the business -- underlying business is performing well. Lots of happy partners are focused and delivering. It's a business with a really exciting future ahead of us given the scale of the market opportunity and the strength of our competitive position. So I look forward to sharing more of this with you later in the year, and I'm quite sure we'll be talking, kind of one-to-ones, over the course of the coming days and weeks. So thank you for listening, and thank you for your support.