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SJP: ‘Independence is not what we thought it was’

David Bellamy

The St James’s Place business model is no more restricted than most IFAs, says SJP chief executive David Bellamy.

In an interview with Money Marketing, Bellamy says SJP has strong fund management links, whole of market for protection, stakeholder pensions and employee benefits and its advice benefits from being backed by a big company.

He says: “I do not believe that it is any more restricted than an IFA who is having to scour the whole market, pick which fund managers he is going to access for his clients and basically paddle his own canoe.”

Bellamy believes attitudes towards restricted advice are changing, with advisers and the wider industry becoming more accepting of the restricted label.

He says: “More and more of the commentators in the industry seem to be suggesting a large proportion of the IFA community will find themselves in the restricted area.”

He argues that, as a result, the Solicitors Regulation Authority must reconsider its position that solicitors can only refer clients to IFAs for investment advice.

Sifa, the representative body for solicitor IFAs, recently warned that SJP advisers are continuing to market themselves to solicitors. In August 2009, SJP was forced to issue new guidance to its member firms after the SRA clarified that referrals by solic- itors for investment advice can only be made to IFAs.

He says: “Most of the industry is beginning to realise you have to bring some constraint around your operation. You may select from the whole market and create your own panels and if that means you call yourself restricted, so be it.

“The pace of the thought process that is developing around restricted advice ought to encourage the SRA to say, ’Look, we are living in a world where independence is not what we thought it was years ago’.

“The restricted area is where the majority of the industry sits and therefore the SRA should talk about ensuring clients are introduced to qualified advisers that have the right backing and solvency. That is what is important, not whether an adviser is IFA or tied.”

In its annual results last week, SJP posted an annual profit of £84.2m on an IFRS basis, up by 69 per cent from £49.9m in 2009. On an European embedded value basis, total profit was up by 25 per cent from £363m to £455m.

The firm was hit with a £4.8m Financial Services Compensation Scheme levy, mainly to pay for claims relating to Lifemark. This contributed to total regulatory costs for the year of £6.2m. The distribution part of SJP suffered a £1.2m FSCS levy and the fund management side took a £3.5m hit. The total industry levy for Lifemark was £326m across advisers and asset managers.

Bellamy says the levy is frustrating but consumer protection is worth the cost. He says: “It is fundamentally crucial that confidence is maintained in financial services. Whatever the failure, if the consequence of pro- tecting confidence in the market is the occasional one-off levy, then that just might have to be the price we pay.”

Bellamy hopes lessons will be learnt as a result of the Lifemark debacle.

The results show adviser numbers rose by 6 per cent during 2010, from 1,464 to 1,552. The firm says 700 advisers have the required diploma qualification to meet the retail distribution review standards and a further 700 are within one or two exams of reaching it.

The firm also claims the FSA is satisfied that SJP’s charging and remuneration structure is RDR-compliant.

Bellamy says: “Because we straddle both the adviser and fund management areas, we wanted to make sure we are interpreting the RDR requirements properly and that our product structures and the way that our annual management charges and exit penalties work is in keeping with the legislation. The FSA has confirmed it is.”

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Comments

There are 29 comments at the moment, we would love to hear your opinion too.

  1. He says: “I do not believe that it is (SJP) any more restricted than an IFA who is having to scour the whole market, pick which fund managers he is going to access for his clients and basically paddle his own canoe.”

    Well recently I looks at the entire OEIC market via Aequos and used a genrefic DNA sift. The questions was: How good are the SJP funds?
    Aqueous, is the same research software used by the FSA. There are some 70 pages of funds and to save you the trouble the first showing of SJP is:
    Page 24 one fund
    Page 26 two funds
    Page 28 one fund
    Page 30 one fund
    Page 34 two funds
    Page 39 one fund
    Page 44 one fund
    Page 48 one fund
    Page 52 two fund
    Page 54 one fund
    Page 56 one fund
    Page 63 one fund
    Page 64 one fund
    Page 68 four funds

    No quite as good as whole of market in terms of fund choice. If you had a choice would it be SJP?

  2. SJP Distributer Influenced Funds (DIFs) 7th March 2011 at 9:52 am

    SJP reps are obliged to use SJP Distributer Influenced Funds (DIFs) which can increases costs and complexity and reduces choice. This concern was expressed by the Financial Services Authority (FSA) who has issued a fact sheet on the subject which is available via the FSA website.
    In short this is what the FSA say:

    “We have seen increasing use of these funds and firms using them should ensure that they are in the best interests of each client and do not simply increase complexity and costs without providing new services that are suitable for the client.”

  3. Looking at the photogroph of David Bellamy, I didn’t recognize him without the beard! He does make a valid point though.

  4. SJP are known for their crisp and slick marketing operation. They are in fact so sharp they will cut themsleves. They came close when SJP were fined for churning products away from the whole of market into their resticted offering!

  5. The Botanist speaks! 7th March 2011 at 10:25 am

    David Bellamy’s (the botanist) is not a believer global warming but this version is, and what a load of hot air!

    SJP is a direct sales forced modeled on Allied Dunbar with restricted products and sharp suits!

  6. So they can churn more quickly then?

  7. David Bellamy – what a joke!

    So anyone who thinks being an SJP adviser means best advice for their client is a clown!

    Eg. would an SJP adviser EVER recommend, or be able to recommend, say Dimensional funds? No.

    So there. SJP = a glorified sales force pretending to be wealth managers.

  8. I met one former IFA now a tied SJP agent who was going around telling his clients that a merchant bank has purchase his practice but retained him to service those important key clients! A slight distortion on the truth – me thinks!

  9. Crisp white shirt, yellow tie and sharpe black suit! Defo SJP – but what of the crap products?

  10. Tony Slimmings 7th March 2011 at 1:26 pm

    Sorry IFAs I think he is right, most IFAs are commission sales people using the same product providers, aka SJP sales people and are confirming restricted is their preferred option.

    The gauntlet being thrown down is that to be “I” means more than fund/provider selection it means acting in your clients best interests, something SJP will never do but solicitors take for granted.

    Please move the argument away from product selection and the “I” sector will flourish, thereafter SJP will follow the banks into history, fight them on their ground and you will lose.

  11. Looks like they are seriously rattled by RDR and they obviously think that it will polarise clients into thinking is my adviser indepedent or restricted, and they are obviously frightened of the restricted tag line. At least an IFA can chose where to place the business, rather then being given the choice of the finding the best from a restricted list. Any network that uses this system is going to find the RDR a difficult place to make a living.

  12. “The St James’s Place business model is no more restricted than most IFAs” – As a certain Mandy Rice-Davies once said, “Well, he would, wouldn’t he?” (Google it if you’re too young to remember the Profumo affair)

    Why isn’t the FSA doing its job and telling SJP they can’t target Solicitors?

  13. Sounds like SJP are really worried now,for years they have flouted the rules as a direct sales force in disguise,trying very hard to be “independent” without the hard work and a bigger profit margin.I asked an IFA who joined them several years ago how he got in to see solicitors when they were unable to recommend clients to them and he said it was easy ,all the Solicitor had to say to the client was that he recommended SJP for “tax advice ” not financial advice !If SJP subsequently took them on as an advisory client that was nothing to do with the solicitor.Life is more difficult now as solicitors have finally woken up to their responsibilities and are recommending fee based advisers ,so SJP ‘s market will decline They offer a limited range of products and funds that are ok but certainly nowhere near best advice.How many platforms will they offer,will they do ETF’s and UCIS is their CIC the best for every client and are their pension plans flexible to cover all eventuailities ?

  14. Hoover sceptic 7th March 2011 at 2:42 pm

    SJP = Hoovers.

    Every time I come across someone ‘advised’ by SJP, it is ALWAYS their advice to ‘sell everything and switch it in to our products/funds’.

    eg A very elderly couple where all their liquid assets (mainly ISAs) are to now go in to a discounted gift bond (noting no discount likely due to their ages).

    eg Group pension schemes switched with AMC’s doubled to 2%pa from under 1%pa with no assessment of existing funds just that SJP funds might offer improved returns (but no guarantee) and oops you are tied in with exit penalties for 6 years but ‘there’s no upfront fees mr. client.’

    If the RDR stops this sort of ‘advice’ that sounds good to me!

  15. I’m no lover of SJP, far from it, but in my opinon RDR impacts on them less than for many IFAs. They go from being on the “tied” side to “Restricted” and will therefore be in the same camp as many current IFAs who fail to find a way round the new “Whole of Market” requirements.
    How will that feel?

  16. Nathan Hibbert 7th March 2011 at 9:34 pm

    Should the true measure of good, honest financial advice and alleged “wealth management” not be either; direct fee charging, up-front commission where the adviser is penalised when the client dis-invests (no client penalties) or up front customer agreed remuneration? Most IFA’s have already adopted these routes as far as I can tell from reading these forums.

    When SJP have a suite of products where the client does not perceive the advice they receive as “free” then find they then have to pay huge penalties to escape the investment or ridiculous switching charges to create an appropriate portfolio, then, and only then should SJP play in the IFA arena.

    Or, if they are so proud of their proposition, open it up to IFA’s, I for one would give it a miss, as would my clients!

  17. SJP connected in high places 7th March 2011 at 10:14 pm

    Sir Mark Weinberg is the President of St. James’s Place. In 1961 he founded Abbey Life Assurance Company. In 1971 he went onto found Hambro Life Assurance, subsequently called Allied Dunbar.

    Sir Mark was Deputy Chairman of the principal UK regulatory body, the Securities and Investment Board, from its inception in 1985 until 1990, having been an adviser on insurance affairs to the Secretary of State for Trade and Industry. Some consider him resonsible for the FSMA 2000. Lastly, he is a Governor of the London School of Economics.

    To say that SJP has friends in high places is an understatement and this is perhaps why they are able to call black white and tied independent! At its peak Dunbar only ever managed to sell 12% of its plan through the independent sector mainly becauseDunbar had a captive sales force that could only sell sub standard plans, plans that IFA’s would not sell because they had a choice! SJP follows this phlosopy.

  18. Scott Taylor-Barr 8th March 2011 at 9:28 am

    Question: when did the quality of an adviser boil down to how many products he does/doesn’t have a choice of?

    Better a good adviser with one product than a bad one with hundreds.

  19. Interesting points but SJP does attract clients with its “proposition” and in more volume than most IFAs – the clients vote with thier feet and maybe a lesson or two can be learned as clearly these people do not place a value on Independence but other things – it may be time for the IFA market to look inwards and learn to succeed in a changing environment rather than snipe at the opposition for being successful.

  20. Simply confirms what we all know; SJP advisers think they are independent and have no problem in telling clients – and anybody else who will listen – that they are.

    Q: How do you know that an SJP adviser is in the room?

    A: Don’t worry, he’ll tell you.

    These people believe their own hype and the world would be a better place without them.

  21. Well said Jackie and a great way to close the blog off!

  22. Jackie Chan – what a daft thing to say!

    Anyone can attract clients by pretending to be better than they are and talking a great story. How are clients to know what charges they are really paying and what happens overall?

    Last year a six-figure sum of pension monies was (eventually) transferred out of SJP . . . every year the “adviser” had got the client to put a lump sum into a NEW pension plan with capital units where the AMC was 4%. Did the client know what was going on? No!

    SJP = cowboys in suits

  23. Having a myriad of products is of course not the issue. However, what is the “issue” is having the choice, even if you don’t exercise that choice – merely having that choice is a safeguard for the consumer and a constraint for the product provider!

  24. Harry, not to reignite the debate or cause offence but I am certain that if you were to look at every peice of business that you did that was not “New” you would be able to point out the deficiencies in the agreement before transferring it to you, otherwise it woul not be a compliant act. I am not condonig the SJP plan you speak of, far from it, but I can think of more examples of IFA misselling that i have had to resolve (Bond sale, full enhanced bond taken as commission, pension transfer recommended at 8% comm, another at 7.5% comm plus 1% trail) all of which were misunderstood by the client. My point is that they do something that attracts clients and in big numbers, all SJP clients are not victims of misselling unless you know different? I think that they have a valid point, even if you choose the best funds that happen to be the same most of the time or best provider that happens to be the one that has offered you/the client better service, then you are not independant, as such the SJP appraoch (When done properley0 seems to be more up front about not looking from the entire marketplace whereas others label themselves as indie like Towry but only market their own funds.

  25. @Jackie Chan | 10 Mar 2011 5:04 pm 10th March 2011 at 5:59 pm

    Nobody has a monopoly on good advice – IFA, tied or restricted. SJP are quite capable of offering good financial advice and an IFA capable of offering poor advice. However, when restricted you are obliged to forced a square peg into a round hole. SJP have a regulatory history of churning and forcing square “whole of market” pegs into a round SJP holes. SJP attract clients because they are “slick”, a triumph of form over substance and many clients are seduced by their excellent marketing literature and sales reps. I have met numerous SJP clients and every one has been under the misapprehension that their advice is independent. But as slick as they are it does not change the fact that SJP is a high cost restricted product provider. It is a fact that their Distributor Influenced Funds are poor value and not the best way forward for any thinking investor. Of course there are a lot of high net worth non thinking clients out there.

  26. I see your point especially about charges but are you really saying that their 20 billion worth of aum are as a result of rich stupid people following a slick sales process, they must be offering something different as the welathy individuals I know are astute enough to invest where they see fit and some of them have got SJP advice as well as my IFA work , I would love to have everything but the performance has not been that bad and their pension has done remarkabley well.

  27. Come on Guys! At the end of the day, we all want to earn money and give clients good quality advice! How many of you are there who have given clients a really good quality advice which has included offering products which earn us zilt! like National Savings or deposits with institutions that offer 0% Commission? I have and I know a number of advisors also have but they are in minority. Those earning super dupper commission need to put their hands on their hearts (make sure that you have CIC plans in place first!!”) and own up!!

  28. Don’t waste your time knocking SJP, their model is the one that works best and they will clean up post RDR. Please stop kidding yourselves, we all know that the likes of Towry and Hargreaves are asset gathering for their own funds and are very like SJP without having the honesty to say ” we don’t want to be independent”. Credit where it’s due SJP tell it like it is and without being too “told you so” are discreetly saying that independence failed as a practical solution. I agree with them that independence comes in generic advice terms and not whether you choose red or blue. They have a great funds portfolio with over 30 firms operating funds for them. These are not DIFs by the way. And they are managed and monitored in a way no IFA could dream of matching by third party advisers. It’s a proper job and I’m on my way there just as quick as possible. Problem for most IFAs is that they are not doing sufficient investment business to go there and feel adequate because they have so many top advisers already.

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