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FOS upholds complaint against SJP for unsuitable Isa advice

The Financial Ombudsman Service has upheld a complaint against St James’s Place for giving unsuitable advice to transfer an Isa from an existing provider to SJP.

A final decision by the FOS, published last week, upheld an adjudicator decision in favour of the consumer, who complained she had lost income and capital and was disappointed with the advice she received.

It says the client approached SJP in 2011, with the aim of increasing the income she was receiving from her Isa and an investment bond. The adviser recommended the Isa be transferred from the existing provider to SJP.

The suitability letter stated the client was attracted to SJP’s approach to investment management, and noted an initial charge would be incurred as well as higher ongoing charges.

Ombudsman Doug Mansell says while the client may have been attracted to SJP’s approach to investment management, this would be a “tenuous basis” for switching provider.

He also says the risks associated with the higher charges were not made “fully obvious” to the client.

Mansell says: “I am not persuaded it was suitable advice to transfer the Isa from the existing provider to SJP.”

He adds: “It is not clear how the change of product provider would achieve the client’s key aim – to improve the income she would receive. I note the suitability letter seems to be silent on this point.”

The decision notice says SJP should pay the client the difference between the value of the current Isa and the value it would have had if it had been kept with the previous provider.

A spokeswoman for SJP says this calculation has not yet been worked out, but it believes the customer has suffered no financial loss.

The spokeswoman says: “We are disappointed the client felt let down, but we believe there has been no detriment and their Isa remains invested with us.”


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There are 19 comments at the moment, we would love to hear your opinion too.

  1. E L Wisty (an only twin) 9th December 2013 at 1:34 pm

    So, “the client was attracted to SJP’s approach to investment management …….” Me thinks that sounds rather suspicious …… would a client really say, “I am very attracted by your approach to investment management”?

    We all know that some suitability letters employ a bit of poetic licence, but this one may well be up for next year’s Man Booker price.

    In any event, as their salesmen – sorry, partners (Oh yeah?) – really should not be able to claim that SJP provides “investment management” when all they do is flog certain funds where SJP has agreed higher-charged segregated mandates. Hardly proper discretionary management.

  2. Mr. Wisty seems to enjoy a spot of schadenfreude – let he whom is without sin cast the first stone. The presumption that you have nothing to sell would appear to be innaccurate, if you exchange money for a product or service you are selling, that makes all a salesman doesn’t it?

    I presume you are privvy to the full facts of the case? If not then why not keep your opining to yourself as it offers little real contribution. If as they say the client is not out of pocket and the funds remain invested with SJP then you should be perhaps more concerned about the FOS judgement which appears unjust at the very least. This has consequence for all whom advise.

  3. I’m no fan of SJP – far from it. But this really is a piece of non news.

    1. We all know that this is common practice at SJP
    2 On this occasion it was one adviser.
    3. I’m sure some other advisers and IFAs have been guilty of a similar offence.

    Anyway SJP are now on a slippery slope following the Autumn Statement. They are all going to be employees. That probably means that SJP costs will go up yet further and that VAT will now not be avoided.

  4. ‘Anyway SJP are now on a slippery slope following the Autumn Statement. They are all going to be employees. That probably means that SJP costs will go up yet further and that VAT will now not be avoided’. (Harry Katz 9 December 2013 2.02 pm)

    Two plus two equals five. What was stated in the Autumn Statement about HMRC looking more closely to see whether people are self-employed, does not necessarily mean that SJP Partners will become employees. It will depend on how the contract is worded and I am sure that an organisation as cute as SJP will find a way of ensuring that they are not classified as employees.

  5. E L Wisty (an only twin) 9th December 2013 at 3:29 pm

    @ Mr King

    Well, I certainly seem to have rattled your cage! The decision of the judgement was that the investor did suffer financially, as a direct result of this unsuitable advice, and that SJP should provide full restitution. As to SJP’s belief that the client has not lost out, I note that they have yet to make the calculation! Unsubstantiated beliefs and high-handed quoting from the bible is always a bit dodgy.

    Oh, and as for your intellectual illiteracy, there is a profound difference between objective advice (where one acts for the client) and selling a particular company’s snake oil.

    I am happy to disclose that I don’t have any involvement with SJP – do you?

    And, yes, I am certainly pleased to hear that HMRC may be turning its attention on the self-employed salesmen at SJP. However, it may well be that they can prove that there is no ‘master/servant’ relationship, and that they, in fact, flog products for lots of different companies (maybe double glazing and second hand cars as well?).

    As a former partner iin a professional practice, I take great issue with their self-confessed use of ‘partner’ as a “marketing term”.

    Pure sophistry.

  6. @ T Murphy

    Wanna bet?

  7. FOS state the client lost income and capital ! the SJP spokeswoman says the calculations are not finished yet and believes the customer suffered no financial loss ?

    Who is right and who is wrong
    Seems some-one is not in possession of all the facts ?

  8. This could be significant – the reason given for the ISA transfer is the same wording I’ve seen on every suitability letter from SJP I’ve ever seen on a switch (pension, ISA etc) – just that wording – nothing more in terms of justification.

    If the FOS says it’s not adequate evidence in this case then……

  9. abacus test comment

  10. abacus comment 3

  11. E L Wisty (an only twin) 9th December 2013 at 5:04 pm

    @ PP


    You’re right – time for a s.166 report in respect of this institutional failing 🙂

  12. I’m an IFA but to be frank what is the difference with what SJP say to most IFA reasons for switching anything? Wording may be a bit different but the prospect of better investment is the reason most people would change along with consolidating several pots surely? I think if the FOS are going to start upholding any complaint with this sort of wording then we might all be in trouble. Our Network is trying to encourage everyone to go restricted so we might all be advising/selling (depending upon how pretentious you want to be) from a restricted range of products soon that presumably we would want our clients to find appealing because otherwise we’re all in trouble.

  13. @RLM Only if you are daft enough to stay in your network.

  14. A former IFA friend of mine was seduced by the SJP package and became a partner. He then promptly embarked on a campaign of persuading all his clients that SJP’s funds and products are better than everything he’d sold them when he was an IFA and “advised” them to transfer all their existing investments into the SJP equivalents. He also took 3% commission on all the transfers, so they were 3% worse off from the word go. If that’s not brazen churning, I’m hard pressed to think what might constitute a better example. Yet SJP is forever telling its partners that the FSA/FCA is entirely happy with its business model. It doesn’t sound quite right, does it?

  15. I am inclined to agree with SLM and I do feel sorry for the SJP partner here damned if yoiu do and damned if you don’t. As an I IFA what happens if I move a client from a passive at .31% too an active multimamager as I and the client believe it kjs a better match? Or the reverse I move active to passive and charges go down but performance goes sideways.
    Think I might read this FOS decision and then express an opinion.

  16. Julian has a good point about the 3% fee to advise to transfer, that is where SJPs tf of ISA flaw probably was.

    We break down advice on ISA TFS in to research, advice and implementation with a charge for ongoing advice..

    We charge based on a % model (then expressed as a a fee) so if we take on new money it is 2% research and advice, client can then implement themselves OR we do for the additional 1%. If we provide ongoing advice at 0.5% and believe a change of ISA provider, fund or wrap is appropriate our standard charge is 1%. If SJP are taking 3% for a change and that involves a charge for ADVICE to change provider, that is I suspect where the flaw has noiw arisen in SJPS business model and contingent fees which FCA don’t like.

  17. southerner back down south 10th December 2013 at 10:48 am

    Whilst in the main I do not have much of a problem with the occasional bout of SJP bashing – I think in this instance we are missing the real point of the decision.
    Whilst SJP charges may be a little higher than what the majority would expect the decision by Doug Mansell that the charges were not made fully obvious is rather difficult to accept as the documentation supplied to the clients by SJP is normally quite clear on charges; precisly because they are higher in some cases than most of us would expect.
    Additionally Mr Mansell seems to be of the opinion that transfering in the search of better investment management is a tenious reason to transfer. Anybody got a better reason to transfer other than in the search for a better return?
    For a long time the FOS have been the consumer champion and this is yet another example (and I have personal experience of several strange decisions by Mr Mansell) where a guaranteed return is possible by investing in a risk based investment. Simply make the investment, wait several years and then put in a complaint, refer it to the FOS and hey presto – risk free returns alround!

  18. @ T Murphy

    SJP salespeople are ‘workers’ under employment law, so are network ARs and the likes of PoSol RIs.

    That is why they cannot subrogate liabilities for redress payments.

  19. The FOS decision reference is DRN2762066. Dated 16th October 2013.

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