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SJP defends report claiming its charges are mid-range

Spotlight on charges 700x450.jpgSt James’s Place has defended the findings of a report that shows how its charges stack up against those of its peers.

Advisers questioned the methodology behind the Grant Thornton Adviser Charges Report, which is not publicly available but was published in part in SJP’s 2017 results.

Money Marketing obtained a condensed version of the report which shows 20 competitor advice firms were used to determine SJP’s standing.

The report was published in December and says SJP’s full advice charge is 2.3 per cent, a third of the way up the peer scale, which ranged from 1.9 per cent to 3.3 per cent.

Grant Thornton says the full report is not available because it was published for specific clients.

SJP advice charges
How SJP’s charges stack up with its competitors, according to Grant Thornton

A spokesman says: “It illustrates the comparative impact of initial and ongoing advice charges, platform/administration fees and typical fund management fees on investment returns over a 10-year period.”

An SJP spokesman says: “[Grant Thornton] collates and computes data from publicly available information, and some mystery shopping face-to-face meetings. Clients typically invest with SJP for 14 years and our solutions are designed to build wealth over the medium to long term.

Exclusive: SJP chief reveals all on charges, FCA and the future of advice

“The research shows SJP’s costs are at the lower end of the scale over the medium-to-long term based on the costs associated with offering the same full service as SJP.”

SJP’s controversial charging model sparked debate again at the Money Marketing Interactive conference earlier this month, where former chief executive David Bellamy said prices were “lower than average.”

While advice, investment, platform and performance charges at SJP receive frequent criticism, Bellamy said the separate expenses were rarely added together.

The firm’s charging structure is regularly called out for the level of exit charges applied. SJP operates an exit charge of up to 6 per cent, which reduces by 1 per cent annually over the first six years.

At Money Marketing Interactive, Bellamy explained the 6 per cent fee, saying ongoing charges were limited to a 1.5 per cent annual management charge.

He did not provide details of how the charge was split between advice and product charge, confirming the structure still effectively locked in clients for six years.

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. Julian Stevens 30th May 2018 at 11:40 am

    In an interview with this very publication, Bellamy stated that SJP had phased out its 6/5/4/3/2/1% early exit charge as long ago as 2013. SJP’s own website directly contradicts this.

    Also, the FCA has never explained why it still allows SJP to operate a combined product charge and seller’s remuneration model. This was quite specifically banned after 31.12.2012.

  2. If SJP abandoned their ‘investor takes the risk of early cessation’ approach, and ‘simply’ applied direct transparent charges – whether front loaded or not – I’d consider that fair. It is the invidious 6/5/4/3/2/1 early exit charge that is the issue.

  3. I think I am going to commission a report. I shall make sure that I select competitors who help us to achieve the result from the research we need to be able to present to suggest to readers (customers and prospective customers) that it is an industry respected report and that we’re great. We’ll also pretend that we are independent by saying we use only the top-performing funds from across the whole universe and shan’t mention that there are plenty who won’t play ball with us and those we shan’t use as they won’t pay us a fee for promoting them, as opposed to all the others that we do instead as they pay us handsomely.

  4. Jonathan Willis 30th May 2018 at 12:24 pm

    Why are SJP allowed to pay 3% commission to their advisers for selling pensions?

    Why are SJP advisers allowed to say there DB transfers are free and cost client nothing to transfer when rest of us have to charge explicit advice charge?

    Does this not pose huge conflict of interest and major contingent transfer issues?

    Is it possible for everyone else to reinitiate exit fees and no up front advice charges?

    How can SJP afford to provide such nice marketing materials and 3% commission upfront and such low alleged annual charges and make such huge profits? Are other parts of the business subsidising the advice part? If so is that allowed?

    What is the breakdown between platform, advice and investments each year? The rest of us have to show this, why do SJP not have to show this?

    Why does their website on pension charges differ from what they actually do? I was told it is because of a compliance requirement.

    Does the FCA allow this totally unlevel playing field to exist because SJP are too large to fail?

    What would happen if their advisers had to charge explicit upfront fees for their advice?

  5. If SJP are middle of the road, please can you let us know who are expensive?

    If this is such a good result, how come the findings are kept secret?

    SJP – Such Jacked-up Prices??

  6. Our typical ‘all in’ cost to invest are below the lowest figure quoted (and I suspect we’re not the exception).

    I’ve also never (ever) in well over a decade as an IFA seen an ongoing cost to invest of 3.3%.

    To therefore suggest the peer group is between 1.9% and 3.3% is therefore questionable.

    This therefore means that to then surmise the SJP charge is ‘below average’ is also questionable (as is being suggested by the graph).

    If that chart is in the public domain I’d have the view it’s to some extent (if not wholly) a financial promotion and needs to be fair and not misleading.

  7. Im struggling to see how anyone could get to 3.3%?

    1.5% AMCs
    1% ongoing advice
    0.5% platform

    All very expensive yet still only gives 3%!

    Mind, if you outsource to DFM and STILL charge 1% you can just about manage it

  8. This must be the reduction in yield over a 10 year period of time.

    If they charge as their website suggests on a typical unit trust portfolio 5% initial and 1.67% p.a.

    Rough maths says 1.67% x 10 + the 5% at beginning = 21.7% / 10 years = 2.17% p.a. However, if done properly (not via my rough maths) it probably would work out at 2.30% p.a as the reduction in yield on an investment, ie the real compounded effect over a 10 year time frame of all charges a customer pays. Which is as the article says is how long clients typically invest for with them.

    Other Weath Managers, DFM’s, Banks, and some IFA’s, probably have a higher compounded reduction in yield charge than this 2.3% for SJP, placing them middle of the road. I hate to say it, but the article is probably correct.

  9. On another note Lloyds Wealth are really quite expensive on total charges from an old friend who works there, and they mainly offer Scottish Widows funds that don’t perform that well.

    And Nationwide Building Society charge an astronomical 0.75% p.a. ongoing service charge. And they must have a 1000/1 ratio of customers to their advisors, and only have x7 ISA funds from L&G that they advise upon, 5 for growth and 2 for income apparently.

    How are these holistic advice?

    How these banks and building society’s keep dabbling in the financial advice market I don’t know?

  10. John Hutton-Attenborough 31st May 2018 at 9:15 am

    Andrew, If the DFM is charging VAT which they should then the total will add up to 3.3% in your example.

  11. Smoke and mirrors!

  12. Without seeing the actual report these claims are entirely meaningless. For example, some questions that arise immediately:

    Sampling – how were the 18 competitor firms selected? Were they randomised in any way? How large were the firms? Did they have common investment approaches? In short, how did the sampling methodology contribute to a test group representative of the marketplace?

    Actual costs – were actual costs used? The chart suggests “typical costs” – what does this mean?

    Passives – presumably these weren’t on the table. Independent advisers can use these for the truly cost-conscious clients. How about SJP?

    Investment size – how large were the investments in the mystery shopper scenarios? If any of the firms in question had fixed fees, those would look very expensive for cases below their typical minimum, while I’d expect to see much lower overall costs for fixed-fee advice for much larger cases.

    I’m sure there’s plenty more that would need to be addressed, but unless the full report is released for analysis this is completely unreliable at best, with the potential for it to be downright dishonest at worst. Which is a shame, because this sort of competitor analysis would actually be really interested to read if it is done well!

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