Overview
Barclays has downgraded St. James’s Place from "overweight" to "equal weight" and cut its price target for the firm by 23% to 1,300p from 1,680p, according to a note dated Tuesday. At the same time the bank raised its price target for Quilter by 21% to 170p but left its recommendation at "underweight."
At 05:52 ET (10:52 GMT) on the trading day referenced in the note, shares of St. James’s Place and Quilter were reported down 3.6% and 3.5%, respectively.
Valuation moves and modelling assumptions
To capture the risk posed by rapid AI adoption, Barclays raised the discount rate applied to St. James’s Place from 11% to 13%, reflecting an elevated likelihood of margin compression. For Quilter, the broker applied a price-to-earnings multiple of 15x in its modelling rather than the 16.4x implied by the current market multiples of UK-listed affluent and high-net-worth peers.
The note highlighted the low barriers to implementing AI-driven, UK-focused affluent/high-net-worth wealth-management applications, stating: "Implementation costs for AI-driven, UK focused affluent/HNW Wealth apps are low (below £1m) and quick to implement (less than a year)," and that ongoing costs could be roughly £0.3 million to £0.4 million per year.
Barclays quantified sensitivity to margin moves, estimating that St. James’s Place experiences roughly a 24% change in valuation for every 10 basis points of margin compression, and that Quilter shows about a 19% sensitivity for the same compression.
Downside scenario and incorporated impact
In a scenario where margins fall from the current roughly 45 basis points to 25 basis points, and future growth is reduced by 25% from year six onward, Barclays’ modelling indicates valuations could drop as much as 65%. The brokerage incorporated an implied impact of approximately 10 basis points of margin compression into its base forecasts.
The note also referenced a market reaction the firm labelled the "Altruist Effect" following the Feb. 10 launch of an AI-powered tax planning tool by U.S. technology firm Altruist. Barclays observed sharp sector moves in the immediate aftermath: by Feb. 16 St. James’s Place shares had fallen 17% and Quilter had dropped 5%, while industry platforms AJ Bell and Integrafin were down 7% and 4% respectively, compared with the FTSE100, which moved 1% over the same period. By Feb. 27 St. James’s remained 7% below its earlier level and Quilter had outperformed the FTSE100 by 4%.
Comparative fundamentals
Barclays’ note compared the two groups on several operating metrics. St. James’s Place holds an estimated 22% relative market share of adviser assets under management versus Quilter’s 11%. Since the first quarter of 2021 St. James’s has recorded an AuMA compound annual growth rate of 11%, while Quilter’s AuMA CAGR over the same period has been 8%.
On flows, Barclays cited average gross inflows since the first quarter of 2021 of 14% for Quilter and 11% for St. James’s. Cost efficiency and returns diverge materially: St. James’s reported a cost-to-income ratio of 36% for fiscal year 2024 compared with Quilter’s 71%, and operating returns on equity of 42% versus Quilter’s 10%.
Despite those differences, both companies traded at similar price-to-earnings multiples at the time of the note, with St. James’s at 16.3x and Quilter at 16.4x, roughly in line with the FTSE100’s 16.7x, according to Bloomberg data cited by Barclays.
Company-specific developments and forecasts
Barclays noted elements of St. James’s Place's turnaround plan, including a £426 million provision announced in February 2024 for client refunds, a revised charging structure that reduces ongoing charges by 10 basis points from the second half of 2025, and a new capital distribution strategy. Quilter’s recent path reflects its 2021 sale of Quilter International and the completion of a platform transformation programme.
In its forecasting, Barclays projected adjusted earnings per share for St. James’s Place of 82.4p in fiscal year 2026 and 108.6p in fiscal year 2027. For Quilter, adjusted EPS estimates were 11.1p for fiscal year 2026 and 12.6p for fiscal year 2027, with closing assets under management rising to £154 billion and £168 billion respectively.
Technology adoption and regulatory context
Barclays referenced research on technology adoption timelines, noting a shortening of peak adoption periods from about 17 years in 1999 to about 10 years in 2021, and an implied current peak adoption interval of roughly 8.4 years. The note also cited statements from the Financial Conduct Authority indicating that automated advice can be "a valuable vehicle to help tackle the issues faced by those consumers who are unserved or underserved by more traditional advice models."
End of analysis