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Does SJP have a fee transparency problem?

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Advisers have criticised St James’s Place for its “secretive” approach to fee disclosure after an investigation by The Sunday Times.

The Sunday Times has attempted to shine a light on SJP’s charging structure after readers voiced concerns that its advice charges were not transparent.

The newspaper featured a story last month looking at indicative costs for advice among the largest firms. At the time SJP told The Sunday Times the newspaper was “not asking the right questions”.

SJP clients then wrote in to say they wanted further clarity on what they were paying for advice.

One reader told the newspaper: “I use both Hargreaves Lansdown and SJP and both are reputable organisations. Hargreaves Lansdown’s fee structure is very transparent, while SJP’s is anything but.

“Whenever I have asked about its fees I don’t get simple answers, as its fees are incorporated in its unit cost pricing structure, so nothing is transparent. SJP prefers not to talk about fees but focuses on the quality of its investment advice and the personal service to clients.”

Another reader said: “I recently tried to get to the bottom of the fees and charges levied by each of the four advisers, and only SJP has been difficult.”

SJP told the newspaper clients are only interested in one overall charge which covers advice and fund management, saying: “If you go to John Lewis and buy a television or a computer, you don’t ask for the breakdown of the costs to find out what the margin is that John Lewis makes versus the manufacturing costs and everything else.”

It adds: “The client doesn’t care about comparison with other funds typically, as long as the portfolio is delivering against their individual and specific needs, such as: ‘I want a return or yield of 5 per cent a year, and if the portfolio is producing that return, net of all fees, I’m happy.’”

However, advisers are critical of SJP’s approach to disclosing charges.

Forty Two Wealth Management partner Alan Dick says: “Lack of transparency seems to be in SJP’s DNA. We have tried to get to the bottom of their charges for clients in the past and found it almost impossible.

“Clearly it is in their best interests to keep their charges secret.”

Fernquest Financial Planning independent financial adviser Luke Fernquest adds: “Every adviser knows that SJP charges are among the highest in the industry, but that is not explained well to clients.

“It is very worrying that, so long after the RDR, SJP cannot give a clear and concise explanation of its fees.”

SJP’s charges

The Sunday Times article sets out that for Isa and unit trust investors there is an initial charge of up to 5 per cent.

For pensions and investment bonds initial charges range from 2.5 to 4 per cent. Clients are then charged ongoing fees of between 1.5 per cent and 2 per cent.

Exit fees of 6 per cent apply on pensions and investment bonds, which declines by one percentage point a year until there is no exit charge after six years.

It also gives the example of the annual management charge attached to the SJP UK High Income fund, managed by Neil Woodford, of 1.67 per cent, including a 0.87 per cent charge to SJP, a 0.5 per cent fee paid to the adviser, and a 0.3 per cent fee to the fund manager.

This suggests SJP charges have fallen from when the company first set out its post-RDR charging structure in 2013, when ongoing charges were set between 2.1 per cent and 2.3 per cent. At the time SJP said partners receive 3 per cent from the initial charge and 0.5 per cent ongoing.

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Comments

There are 27 comments at the moment, we would love to hear your opinion too.

  1. Is the Pope overly committed to Catholicism?

    Do bears have inadequate indoor plumbing?

    etc

  2. Stewart Tomlinson 16th September 2015 at 3:17 pm

    SJP’s comments remind me of the direct sales rationale to justify high, by comparison with the market, charges. “Expensive cover is better than no cover”

  3. I spoke to SJP and quizzed them on their adviser and product charges – from what I could fathom it was no different to commission structures pre-RDR. I came away thinking it goes against everything I have been saying to clients about explicit and transparent fees and why RDR was important.

  4. Does SJP have a transparency problem? Oh no, it’s not their problem! Why would it be? They have got away with obfuscating their charges by gulling the regulator into agreeing their ‘unique charging structure’ while the rest of us are busy explaining that 0.5%pa of £10000 is £50. Their clients are equally gulled. I’ve met two this year who were persuaded to cash in large discretionary portfolios by SJP in the belief that the reinvestment was costing them nothing. SJP are quids in folks, so I’m sure they regard that as anything but a ‘problem’. No doubt whoever it was at Chateau Birdbrain – sorry, Canary Wharfe – who waved their ‘unique charging structure’ through will in due course rotate out of there and into a lucrative post with … SJP! Nice.

  5. Even when you take a look at the corporate accounts a guide book is needed to fathom the figures in order to do a comparison. Ignoring how they describe their charges, their published accounts show they make pbt of 0.35% pa on their accumulated funds, being £378 per customer and £65,357 per adviser. Also, the funds/client is £107,438.

    Being a direct salesforce, most of RDR does not apply to these guys. The message on lack of transparency is relevant to a customer, not the regulator.

  6. SJP simply can’t or won’t move away from the 1990s approach – that model is dead and only existed in a commission world – the duck and dive on fees is because their fees are extremely high compared to other advisers in the Market place. The problem is now that the press have got their teeth into this it will not go away and could possible have consequences for all of us even though we are crystal clear about our fees which are utterly transparent. If the regulator bans providers from facilitating adviser charging it would be devastating. SJP are even coy about their fees to their potential advisers. I know this as they tried to recruit me a few years ago and I walked out of the meeting after becoming fed up with their sales tactics and inability to be open about fees. Ongoing fees of up to 2% is extortionate and appalling value. SJP Need to face up to the new world of advising, be upfront and transparent about their fees and most importantly reduce them. Finally tie in periods with early exit penalties on investments are also a thing of the past as it was part of a commission model and SJP need to get rid of them before the regulator does it for them.

  7. Good company to invest in, not great to invest with!!!!!!!!!!!!!!!!!!!!!!!!!1

  8. Partners? I was told by a recruitment person that they employed salespeople, “but we don’t tell the Clients that!”

  9. Two points.

    1. What happens now? It’s good to see the national press having a pop at the shadier end of the market for once, rather than a general moan about advisers who have the nerve to charge professional rates for financial advice. But we’ll all have a moan in the comments section of MM and the story will quietly go away unless a significant industry voice makes a real issue of this, whether it’s a professional body (PFS, IFP, etc.), a trade association (APFA, SOLLA, etc.), a provider or provider body (ABI, HL, etc.) or a consumer-facing organisation (Which? or Saga, maybe). There must be one body that isn’t in the clutches of the SJPmasons who would be prepared to take this on.

    2. 6% exit fees? WTF!!? For what? Exit fees were traditionally put in place to offset up-front commission paid to advisers. But commission has been banned, so what is an exit fee actually for? It would be interesting to hear how the PFS, IFP, FCA, etc., consider that this meets their codes of ethics. Comments please, ladies and gentlemen.

    oh and a third point

    3. If the John Lewis argument stacked up then RDR would never have happened and we would still all be hiding our fees. Investors have an absolute right to know how much they are paying and what they are paying for, whether it is fund management, advice, administration or commission. Sorry, I mean percentage-based, non-negotiable, contract-based adviser fees.

    • Having been at SJP myself in the past the 6% exit fee on bonds and pensions is simply to cover the staggered initial charge. It’s VERY common within SJP that “partners” tell their pension and bond clients that there is no “initial fee” as it comes out of the AMC,and protected by the exit charge. Indeed clients are often “guided” down the bond route in order to make the impact of charges sound less of an issue, which 100% works and gives SJP a perceived advantage.

      Makes you wonder who is in bed with who, as I’m sure the FCA would fine many skeletons in that closet….

  10. the FCA has a lot to answer for regarding SJP.
    Allowing SJP to sell the product in the first place and now allowing them to continue to sell it.

  11. It would be great if money marketing could start a campaign or challenge SJP or FCA why their charging structure is not RDR friendly

  12. If just about any other firm played these sorts of tricks over just what its charges are, the FCA would be all over it like a rash. I wonder why SJP is exempt from such attention?

  13. To a degree I agree with the ‘John Lewis’ argument as most of my clients just want to know the total cost and don’t care who gets what. However, I break down the fees both for my own peace of mind and BECAUSE IT IS THE LAW. It’s not about what the client wants, it’s about having fair rules that apply fairly to everyone.

    SJP appear to be able to side step the rules that apply to everyone else. Not only that, by applying the charges described above they are breaking the trust of their clients and behaving in a way that the RDR rules were designed to wipe out.

    This doesn’t affect my business on a day to day basis but it will impact on all of us when it goes wrong and hits the fan in a big way. We will all be tarnished by the fall-out and no doubt extra rules will apply to advisers that had been meekly following the existing rules all along.

    The FCA needs to act if it is to hold any credibility in the eyes of those it regulates. It also needs to act before the media make it look very very foolish.

  14. I may be wrong on this point, but if not then it is key to why they operate with such a charging structure…The NET allocation to investment under, for example, a bond, is 100%, not 95% after the adviser has been remunerated, etc. Hence the need for an exit charge. As I say, I will happily stand corrected if challenged by SJP or others on this!

  15. Well done Sunday Time Money. Waiting for the FCA to act is like waiting for Christmas.

    Ask any IFA their opinion of SJP and you will struggle to find one positive response because they are a throwback to the bad old days. Got to admire their spin machine though – its so 1980s slick saleman. They so reminds me of teflon Tony (Blair).

  16. If the client does not pay the fee upfront, but the adviser gets paid, then it is commission factoring which is banned under RDR for investment business. Perhaps they call their bonds ” Life Policies”, which are not covered by the commission ban.

  17. Basically SJP just have a problem with the truth. But as others have said they seem to get away with things that the regulator would have our guts for.

    I well recall a meeting at AIFA – at the time they were going to drop the ‘I’ – when they were trying (thankfully unsuccessfully) to get them to join. The conversation revolved at one stage around advice and we learnt that in many cases they don’t give advice. The mantra for this get out was (and for all I know still is) – and I quote:

    “If I were you this is what I would do” Or words to that effect. And this not from a drone, but from one of their big bananas.

    Incredible!

  18. They are the 21st century Allied Crowbar reinvented with a posh name – it seems now, however that they are finally being found out for what they really are.

  19. The reason the FCA probably don’t have an issue with the SJP charging structure is…….. theirs is built on the same mentality !

    Does any-one of of us know what we pay for, how the budget is calculated, what restrictions in place are there ? who gets charged what and on what basis ? how are the fines calculated ?

    Pick a number and run with it

  20. Having read the Time’s article it isn’t very hard hitting, doesn’t make any conclusions, doesn’t compare them with independent advisers, and makes incorrect statements about RDR introducing fee disclosure.

    All in all it turned into a free advert for SJP and Towry Law.

  21. Whatever happened to the (FCA) requirement that firms must be clear, fair and not misleading about their charges?

  22. No challenge on my earlier comment as yet from any SJP employees???? Am I right or wrong??

  23. Write to your MPs about it. I am. Today.

  24. I presume, Neil, that you mean write to our MP’s about the fact that SJP appear to have a highly suspicious exemption from the fair, clear and not misleading requirements stipulated by the FCA? Damned fishy, isn’t it?

  25. Getting back to the title of this piece, the answer to the question it asks may be that, in view of SJP’s apparent exemption from any attention from the FCA towards its decidedly pre-RDR charging structures, its lack of clarity as to just what they are and fact that its AR’s still seem to sell rather a lot of Investment Bonds, it didn’t have a problem. Now that the Sunday Times has run a feature on SJP and that its adviser/sales arm is apparently losing money, maybe it does. I’ve not read the Sunday Times report (to read it in full you have to subscribe), but many members of the public probably will have.

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