View more on these topics

Richard Leeson: FCA must clear up advice charges confusion


A few weeks ago, Money Marketing ran a story headlined “Sunday Times takes SJP to task over charges”.

The piece explained that several readers had been in touch with the Sunday paper concerned about a lack of clarity surrounding the cost of advice from St James’s Place.

One reader told The Sunday Times: “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 four advisers, and only SJP has been difficult.”

From the readers’ comments, it would seem they have been unable to obtain a clear answer to a pretty reasonable question.

A question which, from their comments, others have been able to answer with adequate clarity.

It is mystifying to me that such an outcome can be regarded by SJP or the FCA as being in keeping with the principles in the FCA Handbook, which state that “a firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading”.

If a client asks about the cost of advice it seems wholly reasonable to me that a regulated firm, even a vertically integrated firm, should tell them in percentage terms and in pounds and pence so that they can make a properly informed decision.

What is more, that lack of information on the cost of advice means that the investing public are denied the opportunity to compare the market.

A non-vertically integrated firm would be required to clearly specify the cost of advice but a vertically integrated firm is not.

How can an investor assess the competitiveness of the costs of advice in that situation? How can such a situation allow the market to find its level?

The response from SJP was that clients are only interested in one overall charge that covers advice and fund management.

It said: “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.”

This seems to be at odds with the expectations of the readers quoted in The Sunday Times. It certainly makes it difficult, if not impossible, for clients to assess whether they are receiving value for money in the ongoing service from their adviser.

But what if SJP is correct and that clients do not care about the underlying breakdown of costs? That surely must be the same for all investing clients and not just those approached by SJP.

If we follow the logic, all clients would prefer to have a single price for product, advice, ongoing service and investment management. If true, then surely all advisers should be providing this packaged information and not just those working for vertically integrated firms?

Taken to its logical conclusion then we must tear up the entire Retail Distribution Review because it fails to meet this packaged price panacea that we are told people really want.

The FCA will surely want to address this situation. If its principles of “clear, fair and not misleading” communications with investors are to be taken seriously, then it must address the concerns raised in The Sunday Times about the cost of advice being made clear by vertically integrated firms.

If, however, it believes the line taken by SJP, then surely it will want to take steps to allow all advisers to provide this single-price approach in their disclosure.

Perhaps it is time to look at the issue of contingency advice fees. If an adviser is only rewarded for the successful sale of a product, one has to wonder if that might influence behaviours in the  same way as commission did before RDR.

Richard Leeson is chef executive of Adviser Advocate



Partnership plans US long-term care annuity launch

Partnership plans to expand into the US insurance market with the launch of a medically underwritten immediate needs annuity. The product, which will be distributed by American firm Genworth, is similar to the firm’s UK Care Annuity. The policies are sold to people at the point at which they enter long-term care and provide a […]


Govt to tackle GARs advice confusion

The Government could scrap the requirement to put a value on guaranteed annuity rates when deciding whether savers need to take regulated advice. A Department for Work and Pensions consultation, published today, sets out a proposal that would see the advice threshold based solely on the size of pots, not the value of guarantees. In […]

Claire Trott Talbot & Muir

Claire Trott: Investing in commercial property through a Sipp

Sipps were initially founded on the investment in commercial property and it has only really been the past 10 years or so that they have come to be all things to all people. Technically, a Sipp is just a personal pension where the member can choose the investments themselves, according to the FCA anyway. In my […]


News and expert analysis straight to your inbox

Sign up


There are 8 comments at the moment, we would love to hear your opinion too.

  1. SJP are not alone in this, I have a case where my comparison software suggests a RIY for the existing plan of 0.53%, and yet there is an AMC of 0.75% plus a 5% bid offer and an annual fee. In case you might think there is a loyalty bonus, there isn’t! Any offers on how they get a RIY lower than the AMC let alone other charges.

  2. Richard, you’re absolutely right. The status quo is not an option. Change must happen on this, one way or the other.

  3. A very good article and it makes perfect sense. It just makes you wonder how SJP get away with it? Their influence seems to stretch far and wide for some particular reason! I wonder what that is?

  4. For reasons which continue to baffle me, SJP seem to be enjoying a regulatory dispensation to obfuscate on the matter of charges.
    I suppose it’s possible that if we all acted in a similar manner, we too might have ‘blind eyes’ turned by the FCA.
    Perhaps it boils down to nothing more than SJP having the chutzpah to ‘give it a go and see what happens’. The answer to that is….. nothing, it would seem

  5. The reality is that SJP are hugely successful and will continue to be so because they get what clients want.They understand their market and serve their clients well. UK IFA’s should have an edge but somehow seem unable to take advantage of it. I think UK IFA’s have a lack of business acumen hence they are always calling for compulsory advice to solve their problem of failing to “attract”. If no one wants to come to your party, there will be a reason !

  6. Here we go again, costs, charges are up to the business to set but should be transparent. If they are not don’t do business with them. Is this hard to understand? What has happened to common sense.

    Its up to the client to agree and engage the adviser they prefer. If the consumers above did not understand SJP charges, its simple, don’t use them. This really is getting out of hand.

    We have enough regulation that if applied correctly works, we don’t need anymore.

  7. I have to agree with SJP thinking. Clients really don’t care about the breakdown. The only thing they are interested in is the total of what its going to cost. Like them or not, they run a very successful business model and will continue on this track unless the FCA force a change. Assuming that they will have had a visit or 2 since rdr, and they still run the same model, the FCA are obviously comfortable with how SJP operate. Good luck to them.

Leave a comment