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Blog: SJP’s charges and the unanswered questions

You may have seen some reporting on St James’s Place’s charges over the weekend courtesy of The Sunday Times. First up, kudos for continuing to push such an influential but guarded firm on such an important topic.

Specifically, the claim was made that on a £1m pot invested over 20 years, clients would see almost half their profits disappear in charges, which are “far higher than its best-known-rivals”.

The comparison is made with Hargreaves – while it is technically speaking, an advice proposition, I do have sympathy with SJP’s argument that it may well be-lighter touch, designed for those graduating from Hargreaves’ ever-popular do-it-yourself route, and not wanting full-fat financial planning.

But the larger point is that the way the maths is done doesn’t add up for me, and there seem to be a number of contradictions about what bit of which proposition is counted, and how.

Here is how The Sunday Times article, citing research from Candid Financial Advice, quotes Hargreaves’ charges, when comparing the most popular advised portfolios with each service (medium-risk for Hargreaves, the managed funds portfolio for SJP).

And SJP’s…

Several questions arise here, and more generally with the way the article is presented:

  1. Under Mifid II, wouldn’t all ongoing advice services have to conduct an annual review? Hargreaves’ optional extra fee implies you can opt out of the annual review, which doesn’t seem to sit well with the Mifid II requirements to ensure ongoing suitability. What does ongoing advice look like without an annual review anyway? What are you charging 1 per cent for? I ran this by former FCA man Rory Percival. His verdict? “It’s a good question and a lot of money for something we are having difficulty thinking of.” I’d rather not assume, but I would assume the 1 per cent quoted for Hargreaves is actually initial, and the 0.365 per cent is for all ongoing advice, which it would be okay to opt out of?
  2. The whole point of the research is to show SJP is more expensive than Hargreaves’ (comparable) advice service. But let’s add those charges up. For Hargreaves, at a minimum, you’ve got the platform at 0.25 per cent, the advice at 1 per cent, and the portfolio at 0.52 per cent. That’s 1.77 all in. SJP includes platform, fund, and advice costs at 1.68 per cent, 0.9 percentage points less on an annual basis. The Sunday Times article makes no mention of tiering in the Hargreaves portfolio costs that could counteract this, nor that opting out of the ongoing advice service means, on that face of it, SJP clients are getting something Hargreaves clients are not for a similar cost.
  3. There are no further words on the calculation, except that SJP applies a 5 per cent initial entry charge on funds. But over a 20 year time span as quoted in the article, surely these would become less and less significant as a one off cost at the start of investing. Say the Hargreaves client had less than £250,000 and decided to take ongoing advice. They would be paying 0.45 per cent, plus 1 per cent plus 0.365 per cent, plus 0.52 per cent, or 2.3 per cent in all. On an annual basis that’s now 0.62 percentage points more than SJP. We also don’t know the initial cost of advice at each offering (the fugues currently quoted for both appear to be for ongoing, unless my assumption above is correct), but there are permutations of this equation where SJP clients pay less in overall charges at the end of the day, surely? (Feel free to correct me on my maths here, of course).
  4. The only way this doesn’t hold is if the investor continually tops up their pots, at which point the entry/exit fees at SJP restart – they taper down by 1 per cent a year to zero otherwise. It would be a reasonable caveat to include, but this hasn’t been mentioned in the reporting. An SJP adviser informs me that if the client pays an initial charge of 5 per cent then there is no early withdraw charge. Where the early withdrawal charge (6 per cent ,5 per cent ,4 per cent, etc) applies there is no initial charge. It’s one or the other, not both. But I had to find this out from an adviser themselves, not publicly available information from SJP itself or from pre-existing reporting. Hence continued confusion.
  5. These are all notwithstanding performance effects of course, so the returns post-charges could theoretically be far higher for an SJP advised client than the Hargreaves advised one. The level of 6 per cent, constant, is what has been assumed in the Sunday Times article. I know assumptions have to be made, but that’s a lot of leeway when looking at the importance of downside protection, on say, sequencing risk and pound-cost ravaging.

For the purposes of consumer-facing journalism, the way the information is presented as stands currently serves its purpose. But if the smell test is actually getting senior staff at SJP to sit up and take notice of what remains a very valid challenge over its fees, it’s too easy too brush off analysis like this if every intricacy isn’t covered.

Let’s hope SJP doesn’t read the latest criticism as just another from media types who simply don’t understand its model. The point still stands that it is more expensive – we just need to make sure we are 100 per cent accurate on how.

Justin Cash is editor at Money Marketing. Follow him on Twitter @Justin_Cash_1



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There are 16 comments at the moment, we would love to hear your opinion too.

  1. From reading the information, the 1% charge Hargreaves make appears to be an initial, so the ongoing advice charge would be 0.365% and appears to be optional.

    The platform charge and fund charges will be standard and are for providing/servicing/managing the investment, so it would entirely depend on fund choices as to what the ongoing charges were.

    For SJP, my single biggest question is how they are allowed to incorporate the “advice charge” into the fund charges. The charge doesn’t appear to be optional and as from the information given the charge is not broken down to explain what the advice charge actually is.

    Now to anyone but a pedant, that makes it ongoing commission and that is illegal these days, so my simple question is how does the FCA allow SJP and exemption from the rules that apply to everyone else?

  2. Perhaps we’re not ‘big’ enough to get away with it?

  3. SJP’s charges are exorbitant. How can you gloss over a 5% entry fee? That’s a huge percentage and can’t be justified IMHO. It impacts subtantially on returns over time as the pot starts at 95%. You have also glossed over the like for like perfomance numbers in ST article.

  4. The ST article also mentioned SJP staff and evidence after a complaint to the FCA/Ombudsman.

    From what I read of the criticisms of SJP by the regulator of the customer complaint the SJP culture may have an element of toxicity to allow such events to take place.

    • I agree with you Philip regarding the client complaint and I am surprised that the SJP agent is still with them. It would help the comparison if the TERs for ongoing advice were used and the effect of the SJP 5% initial charge factored in as it is not clear whether ‘transaction charges’ have been included. Oh, and as for the overall performance of their available funds – well, let’s talk about the quality of the paper they give to clients instead!
      I feel that we have seen all of this before with Equitable Life – many serious issues, while widely known, allowed to fester due to ineffective, misdirected regulation and the threat of legal action from said company – perhaps this can explain the omissions you mention?

  5. Justin: the difference is 0.09% not 0.9% but that’s by the by.

    In an article looking to dissect the charges of 2 leading (? biggest) providers of investment services, there’s so much assumption / presumption and lack of clarity as to what is being paid for what it beggars belief.

    Level of charges aside, how do SJP continue to operate a bundled charging structure when RDR (and subsequently sunset clause regulation) unbundled everything so as to provide the level of detail sought in the article?

    Here there’s an all in cost meeting the cost of platform, funds and (I assume) ongoing advice fees.

    But what is the adviser being paid?

    There are also continued suggestions (elsewhere) that the 6% exit penalty on pensions is to cover the cost of advice – that is outlawed under RDR as far as I’m concerned – the cost of advice needs to be met at the point it’s incurred.

    5% Initial charge, whilst VERY hefty, at least is in the spirit of the regulation.

    Mifid 2 is to clarify all of this however given that these questions are unanswered 20 months after Mifid 2 came into force, it may be the case they’ll remain unanswered for a while….

  6. What are SJP, or indeed any other tied agents offering for their 0.5% advice charge?

    • Julian Stevens 24th July 2019 at 3:07 pm

      From what I’ve seen, little more than a cheery newsletter from HO (mainly) extolling the virtues of being a member of the wonderful SJP club.

      That aside, it strikes me as an intriguing coincidence that two of the UK’s biggest players in financial services both seem to enjoy exemptions from several of the rules by which their competitors are required to play the game. Why is HL still allowed to impose exit charges? One wonders what would happen if another major provider such as TransAct or Old Mutual started applying exit charges and, when the FCA came a-knocking, said: Well, you allow SJP and HL to apply them, so why can’t we?

      Re: Paul Stocks ~ You forgot to mention the requirement under RDR for firms to offer clients a choice as to how they pay for advice, one of them being a fee, entirely separate from the product they’re being sold. The FCA allows SJP an exemption from having to offer this option, as well as from having unbundled the costs of advice from their overall product charges. It all stinks to high heaven of corruption.

  7. Jordan Marshall 24th July 2019 at 4:32 pm

    I am a Chartered Financial Planner and a run a Partner Practice with SJP. To be clear, we provide high-quality ongoing financial planning at a cost of 0.5% of FUM. This is agreed with the client and includes cashflow planning and comprehensive investment management. If a client is not being advised, and wishes to ‘switch-off’ the cost of ongoing advice, they can.

    The initial charge on Unit Trusts is UP TO 5%. Not all of us charge this, and very unlikely on larger investments. This is by agreement with the client and clearly based on whether they feel it is good value for them and the advice that they have received.

    The overall cost of receiving advice and investment management is transparent and competitive, as proven by independent research when compared against other similar propositions, not by anecdote and hearsay.

    Finally, the performance of SJP portfolios is openly available and compares very well against the ARC indices and certainly against HL MM funds, as was used in the flawed comparison in the Sunday Times.

    Of course, with all these things, the proof of the pudding is in the eating and the vast majority of SJP clients remain very satisfied and value the advice and returns they receive. These two things are of course inextricably linked.

    I still have no idea why so many financial advisers wish to spend so much time trading in nonsense and untruths with regards to SJP. We’re all part of the same profession and should get on doing the best for our clients. I am sure this pettiness tarnishes all of us. Let’s just get on with the job.

    • Jordan, does the ‘total’ 1.68% charge quoted in the ST article include the 0.5% advisor fee, or is this in addition and by separate agreement with the client?

    • Jordan, I am sure that there must be SJP agents who do a good job but, being restricted, they can only look at the client picture in black and white rather than full colour. I cannot agree that the charging structure is straightforward and transparent and, I have yet to see SJP funds featuring strongly on research tools like FE Analytics (and that is before charges!). I recall how Allied ‘Crowbar’ use to like to compare the performance of its funds against cash, so a careful choice of benchmark can always make one look good. With regards to the value of surveys – Sir Humphrey, in an episode of Yes Prime Minister, demonstrated how easy it is to get the result you want by how you ask the question (and when). If you read some of the blogs about SJP charges you get a very different picture.

      You ask why so many IFAs take issue with SJP? Well, your last paragraph hints at it:

      1.The ‘nonsense and untruths’ have actually taken place – the recent ST coverage is the latest example but there are so many more, some I have personally witnessed.

      2. If we are all part of the same profession, how come SJP is allowed to play by a very different set of rules.

      3. And from your lofty position in the company, to describe our views as ‘this pettiness’ smacks of arrogance as we have to contend with ever-increasing regulation and associated costs, which is not petty or insignificant.

    • Interesting that there isn’t a single mention of charges and fees on Jordan’s own website. Perhaps it would help if these were neatly laid out and then there wouldn’t be all the speculation.

    • How do you offer “comprehensive investment management” when the only ranges of funds available to you are those offered by SJP, most of which compare pretty poorly with the best of the competition and that, as a tied agent, you are not authorised to offer advice on any other provider’s products?

      Also, how do you explain/justify SJP’s exemption from several key aspects of the RDR, such as offering a fee option as an alternative to commission, the removal of product exit charges and the unbundling of seller charges from those of the product itself?

  8. The problem as I see it is that we are working to different rules, with SJP deciding which ones to take notice of.

    I have it on good authority that the internal message was to ignore RDR, business as usual and avoid charging fees.

    So regardless of who charges what, the industry has a culture problem with some firms believing they are above the law. As with Equitable Life, friends in high places can be useful allies.

  9. OK, so you are comparing to expensive outfits. Why not compare with those that are really less expensive. (I don’t use the word ‘cheap’).

    Use the Share Centre ( and if you trade modestly) charges are well within £200 p.a – irrespective of portfolio size.

    So for a (say) a £150k portfolio the annual charge would (on the above basis) work out at 0.133% p.a. Add the advice charge – say 0.5% on this amount and average fund management charges of (say) 1%. That makes 1.633% on a £150k portfolio – all up – but excluding the initial charge of (say) £1,200 fee. (0.8% on a £150k investment).

  10. ???? What an appalling article, just creating more confusion on top of a complicated situation. And not a single mention of RIY (even from the advisers) which is the best way of assessing the total effect of all the charges over the period of investment. For the charges to exceed the growth they have to add up to more than 50% of the growth rate used in the RIY calculation. If the basic growth rate used is 4%, then charges will be more if the RIY is more than 2% (which is not unusual in the retail investment world taking initial, advise, platform and fund charges into account, even more if there are transaction charges and rebalancing advise is included. As a starter, for the benefit of Mr. Cash, in understanding compound interest, 5% initial charge has exactly the same effect on return as a 5% exit charge. In both cases you loose 5%, therefore get 5% less! If you want some calculations done, I am happy to oblige.

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