St James’s Place (SJP) has been in the news for all the wrong reasons. The press has had its claws out for the company, criticising a lack of transparency, the perks paid to advisers, aggressive selling and just this week, allegations of a macho culture.
Chief executive Andrew Croft rebuffed the accusations about the sales culture, saying they did not provide a true reflection of the firm. But what has been the impact on the wider industry? Have all financial advisers been tarred with the same brush?
In August, The Sunday Times claimed to have seen a secret dossier that contained an illustrated guide with nine graphics outlining how SJP advisers answer concerns about the firm’s fees. These are designed to show clients that fees are a relatively small piece of the overall investment. The revelation has led to accusations that SJP is trying to hoodwink clients.
Another document outlined the commissions SJP advisers can receive for selling investments and the costs they can incur if they fail to sell enough in a year. If sales targets were met, advisers received huge rewards, ranging from Montblanc pens and Mulberry bags to the company’s annual, week-long overseas conference where the firm would charter planes and take its people on luxury cruise liners.
SJP has since said all current overseas meetings have been cancelled and it is reviewing its internal processes.
Industry had been cleaning itself up since RDR
While St James’s Place may argue it is its own business how it incentivises staff and spends its profits, the financial advice industry in the wake of the Retail Distribution Review (RDR) has done much to rid itself of its sales-led image. The image of financial advisers with sales targets, accused of pushing products rather than creating financial plans, represents a setback.
Darren Cooke, a chartered financial planner at Red Circle Financial Planning, believes the wider industry may suffer from association. “Sadly, I don’t think many people will distinguish between SJP and other advisers and what they do,” he says. “It does tarnish the whole industry when the public read stories of cufflinks, expensive holidays and a sales culture.”
The real problem may not be the fees but rather the lack of transparency. Cooke adds: “SJP gets a bad press but its total fees are often no more than many other vertically integrated firms and some IFAs. I just wish it was more explicit about its fees and played by the spirit of the RDR rules – not just the letter of the law – and fully disclosed a broken-down fee structure.”
Graham Bentley, managing director of GBI2, agrees. He says: “Our calculations suggest an all-in charge of around 1.68%. Advisers will often charge 1% a year to give an Isa, plus a platform fee, plus the ongoing charge for the funds. In this context, SJP looks reasonably competitive.”
He admits the exit charges are high, but they reduce from 6% on a sliding scale linked to how long the investment is held for. It could be argued that investments should be held for at least six years anyway.
An SJP spokesperson says: “Independent research by Grant Thornton shows that St James’s Place has competitive fees compared to other fully advised wealth management services in the UK. Our holistic approach allows our partners to efficiently create tailored and diversified solutions that match the requirements of individual clients to achieve excellent client outcomes.”
SJP clients might not necessarily care about independence
If the problem is not high fees but a lack of transparency, do clients care? Clients tend not to judge their adviser on whether they deliver the ‘best’ product but rather the extent to which they understand their personal financial situation and have a good relationship. Fees may not be as important as whether or not SJP clients feel like they are being well-served.
The same may be true of the independence versus tied debate. Bentley says many financial advisers feel aggrieved that SJP is not looking across the market and therefore assume its offering is low quality. The negative headlines tend to support that view. However, for many clients, independence is less important than the fact that their pension is growing, and their financial needs are being sorted.
If clients feel they are getting a good service from their individual adviser at SJP, they may want to stick where they are whatever the press.
Bentley says: “When people started to invest in unit-linked products they were ‘persuaded’ to buy, the charges were often horrendous. But they got high returns, which worked well for them. The problem today is that the expected returns from markets are lower, so price has more of an impact.”
Cooke says: “I think only a few clients will leave SJP after reading the press. More will contact their existing SJP advisers and be convinced to stay. What we won’t know is how many potential clients will walk away before even making contact with them.”
Phillip Instone, financial planning director at PGI Financial, agrees. He says: “I do not believe the majority of clients take particular notice about the internal politics or incentives of companies they employ, and instead feel more loyalty to their own adviser.”
SJP’s most recent half-year report claims the group has 700,000 clients, with a 96% retention rate. This is up from 682,000 clients in its previous report. It also notes a 93% advocacy score across its advisers, only slightly down on its previous score of 94%. Its biennial Wealth Account Survey received nearly 39,000 responses, with 89% claiming to be either satisfied or very satisfied with their overall relationship with St James’s Place.
The SJP spokesperson says: “In the past few months we have been developing our 2025 strategy, exploring a range of areas where we can continue to improve the value we add to clients and the support we provide our partners in delivering this.
“We’re taking a fresh look at our rewards and recognition policy to make sure we recognise the value that partners provide to their clients in a way that reflects the organisation we are today and aspire to be in the future. This consultation is ongoing and we hope to share the findings with the partnership in the new year.”
SJP makes it hard to leave
Nevertheless, there seems to have been some leakage. Both Instone and Paul Richardson, managing director at Concept Financial Planning, say they have taken on SJP clients who have complained of poor service and product push.
This does seem to be a handful of people who have had a bad experience with an individual adviser, however, rather than a mass exodus in response to bad press.
Martin Bamford, chartered financial planner at Informed Choice, says: “It’s rare for clients to leave a financial adviser, except in cases of terrible advice or poor service. Despite the negative headlines SJP has attracted, I suspect their clients will remain broadly satisfied and stay put, as long as service standards are maintained.
“The profession is often too focused on what we believe matters to investors, rather than the issues they actually care about.
“The recent spate of negative press has not resulted in a flurry of enquiries from disgruntled SJP clients. Any negativity around SJP incentives and charges is likely to be viewed by the typical investor as representative of all financial advisers.
“We need to take care not to throw fuel on that particular fire, and instead focus on delivering a great service to our clients.”
There is the problem that SJP makes it hard to leave. In his experience, Richardson says SJP made it “as difficult as possible” to effect a client transition. “First, in the age of technology, you have to send a letter to them. Once they have logged it on their system, you have to write again to ask for the information, and you will probably have to write again because they have not answered all the questions or they have missed a policy the client holds.”
However, this isn’t a universal experience. Justin King, managing director at MFP Wealth Management, reports no problems other than those famous exit fees.
If nothing else, the bad press draws attention to fee levels as a whole. King says: “It can’t help the profession generally as it feels a bit like mud-slinging; and more clients will question advisers’ relatively high charges.
“Expensive offerings are under pressure these days with long-term yields squeezing downwards. I foresee the ever-increasing use of trackers as a way of mitigating costs. This may not be a bad thing, of course.”
Bentley points out that advice is the one area where costs continue to rise. Platform and investment management costs are both falling. Increasingly, investors are going to question why 1.5-2% is coming out of their portfolio each year at a time when investment returns are low.
In practice, the SJP saga is probably unhelpful for the industry but it hasn’t prompted a rush away from advice, not even in SJP itself. That said, it does feed into a narrative on high fees and, at some point, that may come home to roost.
