SJP DFM acquisition ‘not a deal breaker’ for advisers

Sam Brodbeck and Laura Suter

St. James’s Place’s plans to tempt advisers into joining the firm by offering in-house discretionary fund management will “not be a deal breaker”, say advisers.

In its interim results, published this week, SJP revealed it will purchase Rowan Dartington for £34m. The firm says it has long been planning to offer clients discretionary fund management directly and hopes the move will encourage advisers to join.

But IFAs say investment advisers are already well served by the market.

Money Minder Financial Services managing director Ray Black says: “If you’re a busy IFA involved in investment management these days there are lots of choices available for discretionary management from all the platforms, without the need to tie yourself to one particular company.

“I suspect those that were going to join would have irrespective of whether St. James’s Place offers a DFM in-house.”

Anand Associates managing director Bhupinder Anand says: “I don’t think it would be a deal breaker. There are a lot deeper issues around the decision to join SJP or not than whether they offer a DFM facility. I’d be disappointed if that was the only reason and people that viewed it that way might not be doing enough due diligence of their own.”

Rowan Dartington will use the next few months before its acquisition completes to review teams and bulk up staff.

Executive chairman Graham Coxell says the company will need to boost its 100-strong workforce and hire many more client-facing staff to help service new SJP clients.

He says: “The supplementary services, which include advisory portfolio management, direct equity, trust and charity portfolio management, will broaden the range of investment options we can offer to existing clients and enable us to access new clients who value such services.

“Between now and when get we get regulatory approval… we’ve already had conversations about what the scalability plan looks like.

“Teams are working through that, it’s a case of making sure we have the right people in the right positions to provide first-class service.”

However, it remains a priority for existing Rowan Dartington clients not to feel pushed out by the likely onslaught of SJP clients, says Coxell. Existing investment executives will continue to work with existing clients, and with new SJP clients “if they have capacity”.

“The priority is absolutely to make sure existing clients are looked after then to grow the investment executive base to support it in line with the planned increase in new business coming through,” he says.

While SJP currently works with a number of DFM services, it felt it needed an in-house service to offer clients.

Coxell says: “For them they felt given they are the UK’s largest wealth manager, it made sense for this to be brought into the core capability of the group. They have around 3,000 advisers, so not having a core group DFM proposition is seen as something that needs to be filled.”

Rowan Dartington will remain in its Bristol offices, retain its own brand and run as an autonomous business from SJP.

Finer details, such as the charging structure for any DFM services offered by Rowan Dartington for SJP clients, have not been finalised.

Currently the firm’s charges range from 35 basis points for a collective portfolio service run on another platform, to 65 basis points for the same service run on Rowan Dartington’s platform. A full, bespoke discretionary service is available for around 1 per cent.

Coxell has plans for growth of the business, with it currently having £1.2bn in assets under management.

Coxell undertook a management buyout of Rowan Dartington in 2011, buying it from Astaire Group.

Although not putting an exact figure on his five-year growth plans, Coxell says assets will be in the multiple of billions.

Rowan Dartington was hit with a £511,000 fine in 2010 from the FSA in relation to a £1.4m black hole found in the firm’s accounts.

Coxell says the firm was not looking for a buyer when SJP first approached. He is confident the wealth manager will not begin asset stripping, as has happened to other wealth managers.

He says: “Deciding to sell Rowan Dartington was one of hardest decisions of my life.”

And he predicts there will be more consolidation in the industry.

Around 70 per cent of industry assets are with the top 10 players in the wealth management industry, estimates Coxell, leaving the remaining 30 per cent of assets with around 100 wealth managers.

He says: “How on earth do these small players offer an attractive proposition to the market in today’s regulatory environment? It’s about reach and distribution and financial stability.

“I think at a macro level we will see more and more consolidation, and more vertical integration.”