As competition for good advisers continues apace, one firm in particular is having little trouble bolstering its ranks: St James’ Place (SJP).
Last month, the advice giant revealed it had increased its qualified adviser numbers by 246 in the 12 months to 31 December 2017. This was of little surprise to many in the wider industry, who have become accustomed to the firm’s rapid rate of business, adviser and client expansion.
The firm now has 3,661 advisers, an increase of 7 per cent, within its 2,415 partner businesses. The company saw net inflows of over £2.8bn in the final quarter and £9.5bn overall for the year, driving funds under management 20 per cent higher to nearly £100bn.
With consolidators, provider advice arms and IFA firms all vying for the same pool of new recruits, SJP still seems to be high up the wish-list, despite many independent advisers’ critical views of the firm.
Money Marketing asks why the controversial firm still holds such as attraction for adviser recruits and how long its hiring power can last.
The SJP factor
A majority of reviews on job satisfaction site Glassdoor paint a positive picture of SJP, averaging 3.6 out of 5 on a site known for attracting negative comments from ex-employees.
Consultant Phil Young says advisers have long been attracted to the awards SJP has won and the wider brand knowledge; as one adviser put it, it is the chance to be “part of something bigger.”
Young says: “They are able to attract people at the beginning and the end of their careers, and they may not like that they are hooked in for an initial period of time, but you’re really in there for the size of the organisation which is far big than most others and there is so much marketing power behind it that drives leads through to them as well.”
“For advisers, it feels like a relatively good way of making money in a way that feels like you have a degree of flexibility and independence – you own your own business but without the downsides of doing it alone under your own name. It’s the beginning and the end of it that are the real big hooks for people, but if you want certainty and even if you don’t want to sell your business or you’re not sure when you want to, selling to SJP is always an option in the background which gives advisers comfort.”
The SJP name, and the incentives that come with working for the firm run all the way up from its ability to attract graduate advisers, who are then locked in for a set time period if sold a pre-existing client base with attached guaranteed revenue from a retiring adviser. For those that sell up, Young says many are drawn to commonplace knowledge that working for the firm for a minimum period of five years essentially guarantees you can sell your business with profit.
He says: “The buyout is the number one thing and if you’re younger, they will give you a lot of things to get you started; you know you will always get business through the door if you join SJP as an adviser.”
The biggest trends in acquisition activity
Merger advisory firm Quayle Munro identify changing demographics, pensions legislation, vertical integration and increasing regulation as the biggest current trends in acquisition activity, noting the direct lead from this to changing fee models and increased compliance costs. For many who sell to SJP, compliance fears and the lack of capital to allocate toward technology investment, ultimately making them less competitive, remains a key motivator.
A recent Quayle Munro’s report says: “By pursuing an aggressive acquisition strategy, [successful acquirers] have been able to rapidly expand their client base, gain a foothold in new markets and diversify their capabilities while providing the advisers they acquire with middle and back office functions and marketing capabilities.”
To help push its acquisition strategy, SJP’s public jobs board shows a variety of specialist positions relating to hiring IFAs into the firm, including integration specialists and compliance processors, as well as others positions specifically directed at new advisers including “partner structures” teams, roles facilitating the passing over of business from departing advisers, “regional administration managers” who also with recruiting new joiners, and “partnership development managers” to help advisers keep up to speed on SJP’s guidelines and documentation requirements.
Another adviser who spoke with Money Marketing says that this internal focus on integrating firms is executed in manner that is very attractive by potential sellers.
On the education front, SJP’s Training Academy is also maintaining a positive image, along with its Next Generation Academy which assists the children of its existing partners to join the business. The two-year program, which also selects candidates with no prior experience within the financial planning industry has more than 250 graduates and maintains programs in London, Edinburgh, Solihull and Manchester.
Manchester academy head Duncan Gregory said last year that the training program continued to be popular due to “unique opportunities” it presents for graduates to build up businesses.
He said: “With over 250 graduates from all walks of life so far, we will work to attract many more motivated candidates that share our values of strong relationships and quality advice.”
Just today, SJP announced that, at 22 years of age, one of its advisers had become the youngest ever chartered financial planner
Mark Meldon, managing director, Meldon & Co
There are plenty of IFAs getting a bit long in the tooth that need some sort of exit strategy, and if they have not got junior partners or younger people in the business who want to take it forward then that is an option because you have some sort of cash consideration up front, and perhaps some ongoing income for a time as well. My concern about that is they just turn everyone over. The other option is a merger with another smaller practice but that is fraught with difficulties as well.
The so-called partners or employees at SJP earn quite good money. Where is the word ethics? I think there is a fiduciary duty to clients and it is a very serious matter. It is all a bit murky; I can’t see why it can’t be in the public domain.
A wary marketplace
Some advisers remain concerned over the quality of SJP’s advice however. Complaints data from the FCA last year placed SJP as the third for the number of complaints by both pensions and investment policies sold. SJP received 5.8 complaints per 1,000 investment sales and 4.7 complaints per 1,000 deccumulation and pension policies sold in the first half of 2017. For those on the ground, including one small practice owner who wished to remain anonymous, the issue with national IFAs including SJP was a lack of ethics around transferring client banks, arguing clients would always hold stronger relationships with advisers at smaller firms.
The IFA says: “I have been approached by SJP in the past over email and I’ve just read it and binned it. Clients are not commodities, they are people.”
Another adviser recently approached by SJP and had a meeting with the firm to discuss potentially becoming a partner said that they declined the offer, believing the pitch to be too focused on the financial incentives of joining and lacking information about transitioning onto SJP’s investment process.
In the midst of changing regulation, Young says SJP may be “keeping their head below the parapet” until noise around new fee charges under MIFID II settles down, and says the notoriously tight-lipped firm should have no particular reason to remain quiet on their success, unless there were imminent plans to change the benefits its advisers and partners receive.
Kusal Ariyawansa, chartered financial planner, Appleton Gerrard Private Wealth Management
Advisers, like most humans will fall into two camps. Those who prefer to work for an organisation subject to its rules and those who prefer to work according to their values. In the case of the latter, many start their own business after getting frustrated with other organisations that promised much and delivered little and the primary issue is profits and culture.
An experienced or new adviser is looking to do the best job for their clients. They need a network of support, be it compliance or paraplanning, and new clients. Some established and progressive firms can nurture advisers by helping them holistically, however, the majority demand returns ahead of development.
Advisers should research a firm, its directors, culture and understand its values and see whether there is consistency in line with their own. It is vital that advisers have frank discussions at interview stage to understand the firm: whether they are building a business in line with their values or differ little from builders.
A former SJP adviser who spoke with Money Marketing says commission structures may have aided the steady recruitment drive.
They say: “I have a theory the reason they are currently successful in recruiting is that the older IFA really wants an easy life and pre-RDR commission at 3 per cent and a 0.5 per cent trail. Once this cohort of over 55 years olds has retired I suspect SJP will find it hard to recruit young advisers who have no experience of commission.”
“Another thing that ought to be considered is how easy is it to leave your network? SJP slapped a four-year restrictive covenant on me, not only that but the covenant says that I am not allowed to cancel, change, move any of the polices on the list at any time.”
In the latest trading report, chief executive Andrew Croft said retaining positive links with advisers remains a key focus at the firm.
He says: “At the heart of this sustained growth is the importance we place on maintaining long lasting relationships with, and between, our partners and clients and serving them well.”
Advisers face tough choices at larger firms
Innes Miller, director, Scydonia
If you’re working in a small company and you move to a larger organisation, there are a number of developments that can come from that, not least around training and development. That’s an area a lot of firms have trouble with.
If you’re someone administrative or a paraplanner, from a career perspective, there could be more opportunities open to you because you’ll get support. As an adviser, there may be systems in place that allow you to work in a more productive way that could filter through to you earning more money or having the opportunity to take on a management-style role.
The flip side is that you may find that in terms of how you’re expected to work, you have to be more prescriptive and more defined and you might feel you don’t have the freedoms you had working in a smaller organisation. That is one of the things that a lot of advisers working as independents find when they move into a more restricted environment.
You are also perhaps more curtailed in terms of the scope of advice you can offer to your clients and some advisers find that quite difficult, because they might want to feel they can tap into the whole market and offer their clients a solution or product that is best for them. That becomes tricky but in a smaller organisation, you may regain some of your freedoms moving to a larger one and if you’re in a management position in a smaller business it may give you the opportunity to develop that business and if you have some kind of equity position in it, that’s going to be very attractive.
From a technology perspective, there’s much more interest in financial planning and to be able to deliver a comprehensive financial planning service does require you to tap into levels of expertise that one person will not have. If you move to a bigger firm they can afford to have a few more technical specialists.
The market for financial advice is growing and larger companies can probably offer more in terms of employer benefit packages including pensions. There really are a lot of reasons why advisers may be attracted to one or another, but some small businesses are running out of steam. If you have someone in a small business looking to retire or to sell the company, you can potentially end up somewhere you don’t want to be.
Former SJP chief executive David Bellamy will be delivering the keynote address at Money Marketing’s forthcoming Interactive conference. Contact roberta.Stiavelli@centaurmedia.com for the full agenda and information on VIP tickets, or visit http://mmi.moneymarketing.co.uk/.