Is it possible to feel conflicted by something you have read about St James’s Place? Because that was my experience after reading the recent Which? mystery shopping sting on SJP.
The background to this story will be known to most Money Marketing readers. Put simply, researchers from Which? went and talked to 12 SJP advisers, chosen randomly, telling them they had £100,000 to invest and they needed independent advice on how to do it.
The Which? researchers had two key aims in mind: the first was to find out how SJP’s partners would respond when asked about their charges. The second was how they would describe their status as advisers.
The outcome of the Which? investigation was that three out of 12 SJP advisers did not explain clearly they provided restricted advice. Which? claims this is in breach of FCA rules post-RDR, whereby “financial advisers in the UK need to explain whether they offer restricted or independent advice.”
In fact, the FCA’s own website is not exactly a model of clarity in its guidance to advisers. It says: “You must tell customers that you provide restricted advice and how it is restricted – by product or by provider. You must do this in writing and also verbally before you give the customer any advice.”
The issue would be whether the SJP advisers believed they were providing the Which? team with advice at their “free” meeting.
In the original Which? article on the subject, you can sense the research team’s annoyance at the fact they did not entirely manage to catch SJP’s hapless advisers with their pants down: “SJP’s advisers were highly skilled at saying just enough to be within the rules, but using carefully selected facts to give a very misleading picture…”
In other words, the overwhelming majority of SJP’s hapless advisers generally complied with the rules, bending them to suit the company’s narrative. Quelle surprise.
The disclosure discussion
A similar picture emerged when it came to charges disclosure. Eight out of 12 SJP advisers more or less complied with FCA rules on charges disclosure. Four “failed to talk in detail” about the likely costs of such an investment at the free introductory meeting where they met Which? researchers.
For Which? this is a heinous crime: “This is directly against the FCA’s guidelines for advisers, which state they are supposed to tell clients both verbally and in writing about the cost of their services,” the consumer group spluttered.
The problem is, again, the FCA’s own guidance is not clear. Its website states: “You must disclose your charging structure to a client upfront and in writing, so they have the information in good time before the advice process starts. You must also agree and disclose the total charges your client will pay as soon as you know this.”
Here, the emphasis is on “before the advice process starts”. Were SJP’s 12 advises in breach of this guidance by not disclosing everything at the initial meeting? My guess is notwithstanding Which? going hyper on the issue, this is a razor-edge decision.
Let’s be honest here: this was, at the end of the day, a pretty weak outcome to a Which? investigation. Not a single “discovery” about SJP is remotely new.
In the interests of research, I went through 25 of the most commented articles in Money Marketing, and on other websites too, over the past three years. Each story, certainly the comments below them, all repeat precisely the same claims from advisers about the way SJP operates.
There are references to the extraordinary six-year redemption penalty on investments, to a blurring of the distinction between independent and restricted advice and to high and obscure charges, particularly on the pensions front.
In a vague echo of the old-time “News of the Screws” exposé of suburban brothels, where the reporter would always write “I made my excuses and left” at the end of the piece, Which? talks of handing its findings to the FCA. Somehow, I do not see FCA goons beating down the doors of SJP’s head office with sledgehammers on this one.
Indeed, if I were SJP chief executive David Bellamy right now, I would be feeling fairly smug. Yes, an FCA suit might come round and have a few quiet words, but this is not exactly on the perp walk scale, in terms of offences.
Commission in all but name
Is there a problem with SJP? Yes, absolutely. The company does sail close to the wind, both in terms of charges and status disclosure. It has done so for years.
Notwithstanding Money Marketing trying to draw a distinction between product fees and commissions paid to its partners, I agree with Which? that SJP’s remuneration system is a commission in all but name.
SJP’s charges are high, opaque and it traps its clients in a closed ecosystem where, even if they wanted to leave in the first six years, they would face heavy penalties for doing so. Some fund returns are also weak, with some funds featuring in Bestinvest’s most recent Spot the Dog survey. All of its funds are affected by the company’s charging structures.
But aside from some splutters of synthetic indignation in the national media and rewrites of Which?’s press release filling up a few column inches, my gut tells me this is one that got away.
Nic Cicutti can be contacted at firstname.lastname@example.org