St. James's Place Capital, plc
St. James's Place Capital, plc
Founded: 1991 as J. Rothschild Assurance Group
Total Assets: $11.82 billion (2003)
Stock Exchanges: London
Ticker Symbol: SJPC
NAIC: 524113 Direct Life Insurance Carriers; 525990 Other Financial Vehicles
St. James's Place Capital, plc is a financial services holding company. The self-employed sales force of St. James's Partnership attends to the financial and wealth management services needs of an affluent clientele in the United Kingdom. Companies of the St. James's Place Group subsidiary provide life assurance, trust, and third-party financial services products. HBOS (formerly Halifax) owns approximately 60 percent of St. James's Place Capital.
Rothschild Name on New Financial Entity: 1992–95
A rift between members of the famed Rothschild financial house sent family members off in different directions in 1980. Lord Jacob Rothschild would divide his time among financial ventures, philanthropy, and cultural activities. In 1992, Institutional Investor listed his principal financial holdings as J. Rothschild Assurance Group, founded in 1991; a stake in Global Asset Management money management firm; and joint venture J. Rothschild, Wolfensohn & Co., advisor to wealthy European customers of the U.S. investment banking concern James D. Wolfensohn Inc. St. James's Place Capital (SJPC) owned 100 percent of J. Rothschild Group. Since 1977, the SJPC group had controlled Lord Rothschild's interest in financial services and investment companies.
Control was a factor in the estrangement within the Rothschild financial dynasty. Lord Jacob Rothschild sought to cultivate outside business partners, while others felt that family members should manage the Rothschild financial legacy.
Sir Mark Weinberg, who had already succeeded in growing financial houses Abbey Life and Hambro Life (Allied Dunbar), was St. James's Place and J. Rothschild Group co-chair. Mike Wilson, former CEO of Hambro, was chief executive of J. Rothschild Assurance.
As well as bringing in new blood to manage the financial operations, Rothschild shared control of the assets. Institutional Investor reported, "Though Jacob remains the biggest shareholder in public companies Rothschild Investment Trust (RIT) and St. James's Place Capital, which owns 40% of RIT, he says his colleagues have significant equity stakes in the various businesses. For example, Weinberg has 'a very significant equity stake' in J. Rothschild Assurance."
Rothschild's SJPC entered into another new partnership in 1994, joining with New York Life Worldwide Holding to form Life Assurance Holding Corporation, a vehicle to acquire U.K. life businesses. SJPC's new partner was a subsidiary of New York Life Insurance Company.
Rothschild's Role Reduced: 1996–99
Holding company St. James's Place Capital entered into reconstruction during 1996. SJPC spun off its £123 million investment portfolio, creating Value Realisation Trust. Ownership remained with existing SJPC shareholders. According to the Financial Times, SJPC would concentrate its attention on the life assurance business. The core businesses were J. Rothschild Assurance Holdings, the principal life assurance business; Life Assurance Holding Corporation, the "vulture fund"; and Global Asset Management, holding £5.8 billion under management.
Lord Rothschild stepped down as joint chairman following the reconstruction. Sir Mark Weinberg continued as sole chair. Then in October 1996, Rothschild sold more than half of the family's 10.9 percent stake in SJPC. The move allowed Rothschild to turn more of his attention to the National Heritage Memorial Fund and Heritage Lottery Fund, which he chaired. Regarding the sale of the shares Weinberg told the Financial Times, "Lord Rothschild felt he had too large a family holding in a company in which he no longer played a managerial role."
J. Rothschild Assurance, seller of life assurance to the wealthy, engaged in a reverse takeover of holding company SJPC in 1997. The Financial Times reported, "The enlarged business will be better able to reward the self-employed sales staff of J. Rothschild, called partners, who together with the founders own 34 per cent of the company because of their remuneration in share options."
SJPC, which held 44 percent of J. Rothschild's ordinary share capital, was slated to buy the remaining shares. Prudential, the United Kingdom's largest life assurer, which held a 22 percent stake in J. Rothschild via its ownership of Scottish Amicable, planned to up its holdings to 29.9 percent and gain a greater presence in the affluent end of the life market. Sir Mark Weinberg continued as executive chair and retained his ownership stake, and Lord Rothschild stayed on as president but retired from the board.
During 1999, Life Assurance Holding Corporation announced that it was examining its ownership structure. In addition to SJPC and New York Life's equal split of 46 percent, Chase Investment Bank held 19 percent and Prudential held 15 percent. The move was prompted by a desire to improve the entity's purchase positioning. All four companies needed to approve deals for new companies. Also during the year, SJPC sold its stake in Global Asset Management to UBS.
Halifax Taking Control: 2000–05
Mortgage banker Halifax bought 17 percent of SJPC from Prudential in 2000, paving the way for gaining a controlling interest in the company. Halifax had entered into diversification away from mortgages. The Internet played a part in its new game plan. Halifax was in the process of establishing an online banking program.
SJPC, in turn, had been seeking an Internet partnership, but talks with Prudential did not pan out. Halifax envisioned a private bank operating under the St. James's Place brand linked with its new online program.
The United Kingdom's largest mortgage bank paid £750 million, or $1.2 billion, for 60 percent interest in St. James's Place Capital, the holding company for J. Rothschild Assurance, according to a May 2000 Private Banker International article. Intelligent Finance, Halifax's new Internet platform, and the resources of St. James's Place Capital would be the backbone for new wealth management venture St. James's Place Private Bank. Weinberg and Wilson would stay on as SJPC's chair and CEO, respectively.
The St. James's Place Capital purchase gave Halifax "a significant foothold in the UK affluent and high net worth market," according to Private Banker International. St. James's Place Capital had been Lord Rothschild's main corporate vehicle but was now primarily a life assurance holding company, with its main asset J. Rothschild Assurance. The 972 direct sales employees of J. Rothschild Partnership served 300,000 clients, for whom they claimed "a 95% 'share of wallet' in terms of clients' life and long-term savings products."
The Halifax connection would give the sales force a banking license, more products, capital backing, and the potential to cross-sell to Halifax retail customers. Potential risks to Halifax lay in its high level of dependency on J. Rothschild's partners to sell the new endeavor.
Intelligent Finance online bank began operation in September 2000. The private bank was scheduled to open in 2001. SJPC management expressed a desire to begin offering services to small businesses as well as wealthy individuals.
Despite a soft market new business sales grew by 42 percent during 2000. SJPC's profits also rose in 2000, to £80 million before exceptionals. In addition, the company's shares outperformed the market during the year by 142 percent. Even as SJPC continued to find success through a direct sales force, others had not. Prudential and Sun Life Financial of Canada exited the channel.
"We are now particularly well placed to be a major force in providing an integrated range of financial services for the 4m or so higher-net-worth and higher-income individuals in the UK," Wilson told the Financial Times. SJPC planned to use joint ventures to add general and medical insurance products during 2001.
A merger of Halifax and the Bank of Scotland in 2001 created HBOS, elevating both financial institutions in the process. Increased diversification and a strengthened strategic position yielded the fastest-growing bank revenues in the United Kingdom. The new entity succeeded in "raising profits and dividends when others could not," reported the Financial Times in 2003. But concurrently, the value of HBOS's 60 percent interest in SJPC had "fallen substantially."
A lengthy stock market downturn had depressed SJPC's numbers. At the end of March 2003, the market hit eight-year lows, according to the Yorkshire Post. But in the later half of 2003 the outlook improved and Weinberg expected to see a return to 15 to 20 percent increases in new business.
At the heart of our business is the St. James's Place Partnership, a team made up of some of the most experienced and able professional advisers working in financial services today. They provide exclusive access to the products and services of the three companies within the St. James's Place Group.
Despite the setback, SJPC ranked among the United Kingdom's top wealth management companies, with £8 billion in funds under management. The company was listed in the FTSE 250 Index and served 400,000 clients.
In 2004 the group moved into commercial property for the first time, tapping HBOS's Insight Investment to make £500 million in investments over three years. The action was in response to increased interest in commercial property by private investors. SJPC planned to advise clients to have 10 percent of their portfolio in property. The company's first investments were expected to be in two or three U.K. investment trusts, according to Property Week.
In September 2004 Mark Lund was appointed chief executive, succeeding Mike Wilson. Wilson in turn moved into the position of chair with Weinberg moving to the presidency. Plans for expansion of St. James's Place products and services into new areas such as mortgages and protection were in the works.
Total group profit before taxes for the year 2004 increased 37 percent to £142.3 million. The sale of Life Assurance Holding Corporation to Swiss Re accounted for £28 million of that amount. Funds under management rose 20 percent to £9.5 billion.
As for the future, SJPC faced an environment in which there were both challenges and opportunities. The United Kingdom was embarking on wide sweeping regulatory changes in the insurance industry; pension responsibilities were shifting from state and company onto the individual; and life expectancies continued to rise, requiring increased retirement savings.
St. James's Place Group.
Legal & General Group; Prudential PLC; Standard Life.
- Lord Jacob Rothschild forms an entity to control financial services and investment companies.
- J. Rothschild Assurance Holdings, plc is established.
- Lord Rothschild steps down as co-chair of the company he helped to found.
- St. James's Place Wealth Management Group, plc (formerly J. Rothschild Assurance Holdings, plc) becomes a wholly owned subsidiary of St. James's Place Capital, plc (SJPC).
- Halifax buys a controlling interest in SJPC.
- SJPC is ranked among the United Kingdom's top wealth management companies.
Adams, Christopher, "Companies & Markets: J. Rothschild in Market Listing: Reverse Takeover of St. James's Place Makes Weinberg Fresh Fortune," Financial Times London Edition, April 10, 1997.
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——, "Companies & Finance: UK and Ireland: St. James's Private Bank Starts in January," Financial Times London Edition, October 28, 2000.
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Love, Bruce, "Mark Lund: The New Chief Executive of St. James's Place Says He Believes That Advice Is the Key to Servicing Clients and That Without a Fresh Stock of Products on Its Shelves, Customers Will Not Buy and Advisors Will Not Want to Stay with the Company," Money Marketing, September 2, 2004, p. 25.
Mackintosh, James, and Andrea Felsted, "Companies & Finance: UK: Halifax Bolsters Internet Strategy, Banks Control of St. James's Place Capital Changes Hands in GBP760M Deal," Financial Times London Edition, March 23, 2000.
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Noonan, Brendan, "U.K.'s Prudential Sells Two Noncore Holdings," Bestwire, March 23, 2000.
"Pension Funds Smaller Group Winners," Money Management, April 1, 2003.
"St. James's Place Plugs Gaps with Multi-Tie Deals," Financial Advisor, February 3, 2005.
Urry, Maggie, "Cricket Fan Keeps His Eye on the Ball: HBOS Has Achieved the Fastest-Growing Revenues Among UK Banks," Financial Times, May 17, 2003, p. 22.