Partners at St James's Place owe a total of £756mn in debt which they took on to buy other practices or books of business within the firm, according to the wealth manager's latest accounts.
The accounts for the six months to June 30 2024 showed advisers owed St James's Place £384mn directly, compared with £340mn at the end of December 2023.
A further £122.1mn is owed by partners but has been securitised. This means St James's Place has sold the debt on to third parties, but advisers continue to owe this debt and SJP is not responsible if this debt isn’t repaid.
That £122mn represents a significant increase on the £67mn at the end of December 2023, with the company stating that during the period it bought many loans its advisers owed to external banks and then securitised by selling to third parties.
The total of these two figures is £507mn, compared with £400mn at the end of June 2023, an increase of £107mn.
Loans to external banks represent the third tranche of debt St James's Place advisers have taken on to buy books of business. This figure totalled £249mn at the end of June 2024.
That debt is owed to a group of five banks - Bank of Scotland, Investec, Metro Bank, NatWest and Santander.
It is the advisers responsibility to repay this debt, but St James's Place acts as a guarantor. So, if the adviser defaults, SJP must repay the money, except in the case of Metro Bank, where it must repay half the money. These loans are given a AAA credit rating.
The £249mn owed under these arrangements is lower than the £289mn owed at the end of December 2023, which is partly explained by St James's Place buying some of these loans back and securitising them, as mentioned in the figures above.
This brings the total debt owed by St James Place Partners to £756mn, repayable at 8.75 per cent interest on a declining balance.
Repayments
The typical repayment period is 10 years. The interest payments are tax deductible but the cost of repaying the principal is not.
In the accounts, St James's Place said that historically less than 5 basis points worth of partner loans are not repaid.
The company deducts the repayments from client fees prior to passing the fee income on to the partner.
The accounts state: “The group collects advice charges from clients. Prior to making the associated payment to partners, we deduct loan capital and interest payments from the amount due. This means the group is able to control repayments.”
The company has previously told FT Adviser its loans to partners are to facilitate succession planning and that the model is “proven.”
This week, FT Adviser reported a number of advisers are worried about the falling value of their practices at a time when they have significant debts to repay.
Elsewhere in the results, St James's Place reported a profit for the six months of £205mn, compared with £207mn for the same period in 2023.
