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Putting St James’s Place in perspective

I must respond to Wai Man Cheung’s “success story” regarding St James’s Place Partnership featured in Money Marketing, March 10.

I am sure you will get many letters praising the benefits of independence inthe IFAs.

multi-tied debate. I will leave that side of the story to people more articulate than myself. However, I do have intimate knowledge of the SJPC “success story”.

Wai, I am sure you are a decent chap but, as you said, you have only been in SJPC one year (“the honeymoon period”). During this period, all managers are very cuddly and specially pre-selected “partners” (salesmen), who have been there over 10 years, will have had a quiet word in their ear from the recruiting managers for them to blow SJPC’s trumpet for them.

However, Wai, read on. Since SJPC started business, approximately 3,500 “partners” (salesmen) have been recruited, yet only 1,139 remain. In fact, in 2003, SJPC started the year with 1,102 salesmen and grew the salesmen’s numbers to 1,124 (a net gain of 22). However, this masks the real truth that 233 new salesmen were recruited. This meant that 211 (19 per cent) of the existing salesforce had left SJPC in 2003.

If SJPC is such a fantastic success story, why and how could this be so?

The reasons are as follows. 1: Some salesmen who have left have been sacked for not acting compliantly (in which case, quite right, but why were they recruited in first place?)2: Some salesmen found somewhere better to go – the IFA route.3: The vast majority have had their contract terminated by SJPC. This is usually because of what is politely called “minimum standards”. Salesmen have been, and are continually being, sacked for not achieving sales targets which rise very year.

Let me explain. SJPC is a company quoted on the London Stock Exchange. Fund managers that hold SJPC shares in their funds for policyholders are judged on their quarterly performance. If these funds hold SJPC shares, then SJPC board directors will be under immense pressure from the City and shareholders to perform every quarter.In order for SJPC to perform every quarter, the salesmen will have to perform.

The penalty that SJPC faces if it does not achieve these sales targets can be shown by the drop in sales the company saw a few years back.

The City crucified SJPC’s share price to the extent that the share price collapsed from around 4.20 to 90pThis put immense pressure on the sales directors and branch sales managers to get sales and recruitment up. This is translated into immense pressure on salesmen to achieve ever-increasing sales targets. The result is that unless salesmen consistently sell higher and higher volumes of high-margin (high-commission) products to clients, their contract will be terminated – and their trail income, share options and practice buyout terminate with them. This again can be shown by the immense pressure put on salesmen to achieve their sales targets each and every year. This inevitably leads to the regular annual SJPC ritual up to hundreds of salesmen’s contracts being terminated in the first week of the New Year (unhappy New Year to you all).

Wai, so much for a caring attitude you perceive there to be.

Unless the salesman’s contract has been running for 15 years (an eternity in this business) he will not get 100 per cent of the benefits he has built up.

If you leave, SJPC says it reserves the right to contact the clients to “service the clients’ administrative enquiries”.

Is this something that you or your clients really want? Would you really give up independence for this?

SJPC is liable for your advice to the client and mis-selling compensation claims. However, your contract with SJPC means they have the right to sue you for the rest of your life to recover that shortfall from you. This is an open-ended liability that your family will carry for the rest of your life.

Leaving the IFA

multi-tied debate aside, why would any sane businessman sign a contract with these terms?

At least as an IFA you can set up a limited liability company or LLP to protect yourself.

Ask SJPC some questions. Can SJPC terminate your contract for any reason (no matter how trivial) at 24 hours’ notice and keep all share options and trail income that you have earned if you have been there less than 10 years?

SJPC has already been fined by the regulator twice and has promised to mend its ways. Is this constant ever-increasing sales target pressure consistent with the regulator’s wish for compliant advice? Is this pressure on the salesmen consistent with what clients want from their multi-tied adviser?

If clients knew their advisers were under this pressure to sell them something and paid on a commission basis, would they really want to be advised by this salesman? Don’t you think they would prefer independent advice?

Wai, my best advice to you, existing salesmen at SJPC and other IFAs that may consider joining the SJPC salesforce is to give your clients the independent advice they deserve and so desperately need. You owe it to yourself and your family to be able to run and control your own business independently.

Wai, I wish you luck, you will need it.

Name and address withheld

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