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SJP under the microscope: Where does the profit come from?


St James’s Place’s 2016 results dropped a few weeks ago, and it proved to be another bumper year for the advice market giant.

SJP reported profits of £140.6m, alongside record gross inflows of £11.4bn over the year.

But the firm has come under fire in recent months over complaints and charges.

Money Marketing has dug into the data to see where the money is being made and see if the challenges to the firm stand up to scrutiny.


SJP has a number of different business within the SJP Wealth Management Group: St James’s Place Wealth Management, St James’s Place UK plc, St James’s Place Unit Trust Group Ltd, St James’s Place International plc and St James’s Place Investment Administration.

Together, they have around 550,000 clients.

SJP Wealth Management is responsible for the advice provided by SJP’s partners.

SJP UK plc is responsible for the administration of life assurance, pension and investment products.

SJP Investment Administration looks after the administration of Isa’s and unit trust products.

The SJP group structure, as interpreted by MM

Going back through SJP Wealth Management’s accounts for the year ended 31 December 2015 – the latest set available through Companies House – the advice arm actually looks to have made a loss. Though turnover grew from £590m to £667m, losses doubled from £12.9m to £25.7m as the cost of sales increased.

Losses have actually been on the way up since 2012, even as turnover has grown rapidly.

SJP Investment Administration’s latest accounts also say that profits only amounted to £3m, and “the majority of the Company’s income and expenses have been earned following the re-registration of £14.5bn of clients’ SJP unit trust investments into the name of SJP Nominees Limited in late October 2015.”

So, where does the profit come from then?

One source with knowledge of the firm, who has also noticed the “advice business” is not making money, says: “Basically, SJP is an investment management business and generates margins from both product charges and, far more importantly, from investment management charges. In essence, it’s all about assets under management.”

They add that, eventually, SJP may fall foul of cross-subsidy rules by supporting loss-generating advice income.

“Over time this could be a significant issue as the RDR contains very clear conditions for vertically integrated firms. In essence the fees generated must over time be capable of covering the expenses in order that there is no subsidy.”

The following section from the advice arm’s 2015 accounts implies that adviser’s remuneration is also tied to cross-selling through the group:

“The Company’s appointed representatives also act as introducers for life insurance and unit trust business sold by other companies in the SJP Group. In relation to this role as introducer, the Company receives a distribution allowance from each of SJP UK, SJP Unit Trust Group, SJP International plc and SJP Investment Administration. This distribution allowance is based upon the levels of business introduced.”

People, places, charges

SJP advisers are in effect self-employed partners of the business; the client pays SJP which then pays the adviser.

Essentially, this means that the adviser’s fee is paid out of sale of SJP manufactured products: up to 3 per cent initial for unit trusts, pensions and bonds, and half or a quarter of a percent ongoing for unit trusts and pensions respectively.

Anything outside of SJP’s investment deals, for example life insurance or medical cover, the firm runs a whole of market approach.

While partners may be self-employed, directors are given “uncapped” indemnities by the company against liabilities.

This from the Plc’s 2015 accounts:

“SJP…has taken out insurance covering directors and officers against liabilities they may incur in their capacity as directors or officers of SJP or its subsidiaries….These indemnities are uncapped in amount and protect recipients from certain losses and liabilities that they may incur to third parties in connection with the furtherance of their duties as directors or officers…”

Complaints and satisfaction

Here’s how complaints break down for three of the business lines between 1 January and 30 June last year, the latest data available. (An SJP spokesman has confirmed that complaints data for the second half of 2016 will not be published because SJP had too few complaints to have to disclosure them under regulatory rules.)

To account for the relative sizes of the different business streams, let’s look at complaints per thousand customers.

While advisers might be surprised to hear the actual advice is, proportionately, the least complained about part of the wealth management giant, it might not be so reassuring that administering simple products like Isas is seemingly generating complaints twice as frequently.

Breaking down SJP’s advice complaints by product also shows that pensions and investment complaints dominate the workload compared to general insurance, pure protection and home finance related advice.

Clients remain happy with SJP’s service, but it is instructive to look at the wording of the statement that SJP provides on customer satisfaction:

“The results of our 2016 client survey, which attracted more than 33,000 responses, showed that 98 per cent felt SJP offered excellent, reasonable or good value for money and 95 per cent would recommend SJP.”

Simple statistical logic suggests that, without separate percentages for clients who rated value for money as “excellent” compared to “good” or “reasonable”, the vast majority could in fact just rate the service as “reasonable” – a significantly lower bar to praise that “excellent.”

Two months ago, SJP did attempt to shed some light on this, saying that 82 per cent were in the “higher categories”. That still means, technically speaking, that zero per cent could rate it excellent, and 82 per cent good.

The jury is still out after all of this, but at least people should be able to know a bit more about what’s causing the arguments.

Justin Cash is Money Marketing’s news editor. Follow him on Twitter @Justin_Cash_1



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There are 33 comments at the moment, we would love to hear your opinion too.

  1. Slightly concerned about the photo. When putting a virus ‘under the microscope’, a prudent bacteriologist would wear protective clothing.

  2. “…the advice arm actually looks to have made a loss. Though turnover grew from £590m to £667m, losses doubled from £12.9m to £25.7m as the cost of sales increased.”

    I have been pointing out the discrepancy between losses and COBS 6.1A.9R for years (yes, years, see my previous comments on this subject). Given losses are still increasing it would be interesting to know how this rule is being complied with, especially as a breach would give a commercial advantage to a firm. In effect, they would not be charging the level of client fees they should, making them look more competitive against other advisers, including IFAs…

  3. I don’t confess to being a fountain of knowledge on this, but if they are self-employed selling on one providers products, surely they would fall foul of IR35?

  4. Uber & Pimlico Plumber rules 30th March 2017 at 11:25 am

    Maybe we’ll see a claim from one of the ‘partners’ for holiday pay, just like the other gig economy workers have done.

  5. SJP is NOT an advice market giant. It’s a product selling giant. True advice is independent of the sale of a product and that means fees, which no SJP partners charge. EVERYTHING they do is predicated on the sale of a product.

  6. It seems that as many have suspected that this organisation is adept at bending the rules (almost to breaking – if not beyond) to suit their own purpose and to puff up their standing.

    Is it really a case of “The King is in the altogether”?

  7. robert milligan 30th March 2017 at 1:03 pm

    any normal Advice firm showing such a repeating loss must be untenable, Take away the Product Provider incentives, the Advice Arm is bankrupt obfuscation, a Tied Agent is exactly that “A TIED AGENT, and the product sales force should be ashamed of its self, but hey most of the Partners are simply there for the Passing of the Buck for the advice accountability and the Practise Buyout!! Not the giving of Financial Advice

  8. Unless I’m reading this wrong, if it’s making losses on the advice arm, I infer from that that payments to advisers are being cross subsidised by product charges etc – otherwise it’s seemingly not a viable advice business.

    Payments for advice being cross subsidised by product charges is surely commission?

    Commission was banned on advised products many years ago. This would suggest that the SJP approach sticks 2 fingers up to RDR (or at least, is not in the spirit of it).

    They are therefore able to ‘hide’ or at least water down any initial advice costs in the knowledge it’s paid over time. We as IFAs are unable to chat for initial advice via product charges and therefore we are indeed at a competitive disadvantage from a client charge option point of view.

    Gray Area’s point above therefore hits the nail squarely on the head in my mind.

    • You are correct on a plain reading of the information available. The guidance on this rules does say:

      (2) the allocation of costs and profit to adviser charges and product charges is such that any cross-subsidisation is not significant in the long term; and

      So I guess you could raise a case about £25.7M not being significant but convert that to an hourly rate and divide it between the clients seen during that year and I’d guess it looks worse not better.

      This is the ‘big story’ in this story.

  9. Nicholas Pleasure 30th March 2017 at 1:22 pm

    I’ve just had a meeting with a client who has had a portfolio put in place recently by SJP. Whist I would never claim it was bad advice, it was rather clumsy and used an investment bond for the majority of the money, which didn’t appear to me to be the most tax efficient option.

    I wouldn’t be particularly proud of this quality of work. I hope this is a one-off.

  10. It is sad that Equitable Life’s claims could not have been put under the microscope at the time too. I published challenges to their comments about ‘no commission’ (bonuses and high salaries based on sales) and was threatened at the highest levels by that organisation’s legal advisers to stop defaming them or else…. when sales’ reps were ‘earning’ over £100,000pa and the man from the Pru averaging £20000 in ‘commission’…. and all those duped accountants and solicitors not seeing that the ‘marketing fees and costs’ to pay for their wining and dining as nasty IFAs took commission and they didn’t… were coming out of the Withprofit funds before bonuses were then declared and seemingly small charges applied to those afterwards to keep the ‘product particulars and disclosure’ rules happy – all in the published accounts.

    I wonder if something will break here and I agree – tied representatives should be treated as employees. The arrangements are sham insofar as tax and NI are concerned and there are many such arrangements in the industry which are on the wrong side of the line.

    • When pension drawdown first came out (’98) Equitable went to all those with £100k+ PPP then gave them their tax free cash which was put in a capital bond and the income (say £6k per annum) was re-invested into a 10 year MIP. Over £10k per £100k in new commission was generated. It’s a not so Equitable Life Henry!

    • I, being now very old, remember being interviewed for a regional manager’s job at Equitable shortly after commission disclosure was introduced (1995 ?). They had the lowest (illustrated) charges of any provider yet the interviewer assured me that it I hit my 7 bonus targets, 5 of which were really easy, I’d be earning £72,000 a year, about twice what I was earning at the time as a Top 10 producer for a national IFA. Agatha Christie’s They Do It with Mirrors sprang to mind, as it does again now!

  11. A CEO who has admitted publicly that their advice charges are not clear and an “advice” business that has made significant, multi million pound losses for 5 years in a row. What does the FCA have to say about this?

  12. “Basically, SJP is an investment management business and generates margins from both product charges and, far more importantly, from investment management charges. In essence, it’s all about assets under management.”

    If I understand this correctly then the advice arm is losing money but the investment management arm is making money. Therefore to continue operating the investment management arm must be subsidising the advice arm. How is this not a contravention of RDR rules? Can anyone at SJP or the FCA explain this?

  13. Could Money Marketing ask someone at the regulator how this fits in with their view of RDR and the spirit of clarity when it comes to charges?

    • Sure, MM could ask, but a clear reply is highly unlikely to be forthcoming. SJP has a special (and decidedly fishy) relationship with the regulator.

  14. SJP are immune from challenge ans the usual rules.Rothchilds’ influence? Shareholders include: Columbia Threadneedle Inv
    Baillie Gifford
    BlackRock (Index)
    Fidelity (FMR)
    Allianz Global Inv (Germany)
    Legal & General
    Old Mutual Global Inv
    Vanguard Group 2.69%
    State Street

    Best to concentrate on why we/you/me are better.

  15. Page 16 of the accounts reads…
    “a net cost of £106.7 million (2015: £84.2 million) has been incurred to attract the £11.35 billion of gross new funds (2015: £9.24 billion).”

    This loss is obviously not the advice fee paid separately to the product. The £106m loss each year is paid from ongoing product charges of in force policies. The customer doesn’t get to see this on their fee disclosure.

    This is in direct breach of COBS 6.1A.9 R

  16. #Philip Milton: The main reason that Equitable Life representatives were paid so well was that they were more productive than others in the sector at the time (writing £1 out of every £6 invested in UK pensions). There was a basic salary, on top of which Representatives received a bonus of no more than 10% of annual premium income, and Senior Representatives received 12%. This is not intended to represent a defence of what subsequently happened, merely a statement of fact.

    • Consideration of Equitable may be a little off the topic. However while we are at it, I never used them even though I charged fees and didn’t take commission. I’m no actuary, but what stood out for me was:

      1. If their WP fund was so good, how come their managed fund was so poor?
      2. As I didn’t take commission how come there was a bid/offer spread with Equitable, but if I put the money with (say) Standard Life or Skandia then not only was there no bid offer spread, the client actually got more invested than the face value of the cheque on account of enhanced units. (103% to 105%)

      Also when visiting clients (I never made house calls) the Equitable advisers usually went in mob handed and driving flash cars which wasn’t always appreciated.

  17. Why mention D&O insurance?

  18. Why are advisers so obsessed with SJP ? For goodness sake let them get on with their work and lets get on with our own, I’m busier than I ever have been so no time to worry about unimportant stuff such as other adviser firms!

  19. Richard, I believe that this obsession (and I confess to my hackles also rising whenever SJP is mentioned) is down to four things:
    1. Their arrogance – not from all of their advisers but from the top down.
    2. The commercial advantage they enjoy over the rest of us by the cross-subsidising succinctly described above and how they are able to treat their ‘partners’ as self-employed when clearly they are not. Level the playing field then many of the complaints will disappear.
    3. Oh, and their clever use of statistics – good deconstruction of them above plus 33,000 responses equate to just 6% of their 550,000 clients so 94% of their clients think so little of them that they couldn’t be bothered – or did they just ask those who would give them the answers they were looking for?!

    Interesting to note that the SJP apologists are very quiet!

  20. Come on MM, it’s now time for you to start asking questions directly
    to the FCA about
    these alleged COBs breaches

  21. One word “Bribery”

    I am very glad that at last people are pointing to specific rule breaches as finally, the scatter of breaching the spirit of RDR cannot be ignored by the regulator.
    If it is and no comment is made to clarify why or why not SJP are within or without the rules, then this could quite easily now become a criminal investigation under the Bribery act.
    I would suggest that Justin Cash at MM now contacts the head of supervision at the FCA on the record for comment so that they can be the person put clearly in the sites of the CPS for any criminal investigation.
    Watch this space.

  22. Now that Rory Percival no longer works for the FCA, perhaps as a supposed compliance consultant, he would care to comment on whether these ARE rule breaches in his opinion?
    Or does he only have an opinion if he is paid or it doesn’t contradict the FCA’s stance?
    Come on Rory, will you be the person to state the “Emperor has no clothes on” or will you continue to be in the F-pack crowd and state that everything is in the Finery and not the all together as most of us believe?

  23. Cobs are rules rather than principles and as such, rule breaches will have to be documented and if someone like Rory Percival DOES comment as above, it will put pressure on the F-pack to have a documented position as to whether a rule breach has or has not occurred and if so, what action they have taken for when of if the CPS are forced to look at any accusations of the breaches of COBs being more than that and possibly a breach of the Bribery Act.
    I am not saying anyone HAS committed a crime, just that failure to document reasons for a rule breach being allowed can easily lead to a responsibility to report a suspected crime. I for one am watching this space for a response/comment from the F-pack as with no formal reply to Justin’s accusations in this article and Charlie Palmer’s citing of perceived COBs breaches, what is good for the goose, si good for the Gander I would have thought in Charlie’s case.

    • Need to take care which of the group firms the COBS rules refer to when raising question, SJP Wealth Management PLC is the only one for the questions raised here. Other SJP subsidiaries will have their own legitimate costs not subject to COBS.

  24. The reason why Equitable Life reps were productive was because they sold lies. Not only did the society not provide for their guaranteed annuities but the money they took off the WP funds before declaring bonuses and then pretending to have low costs was obscene. If the reps didn’t know, they were either incompetent or else if they did know they were abetting the fraud. Do they feel guilty? I suspect not. They should do.

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