Scrapping luxury cruises and changing up its incentives programme may make it harder for St James’s Place’s to recruit advisers “motivated by the trappings of an old school sales role” but advisers say a radical overhaul of the company culture is required.
SJP has been at the centre of a media storm over its “cufflinks and cruises” rewards system which sees advisers showered with lavish gifts for meeting aggressive sales targets.
Repeated negative press has taken a toll on morale at the firm, with reports emerging last week that some SJP advisers have threatened to stop selling investments for the rest of the year in protest of their annual luxury cruise, disguised as the company’s week-long overseas conference, being scrapped.
The backlash has prompted SJP to conduct a review of its business practices and sales perks which it is hoping to conclude by the end of the year.
But the message from senior management has been muddled.
SJP managing director Ian Gascoigne has acknowledged change is needed, telling 700 of the firm’s advisers on a phone call that was leaked to the Sunday Times that he personally struggles with the rewards systems and that “no amount of workshops can justify a trip on a cruise ship”.
This contrasts with recent statements made by the firm’s chief executive Andrew Croft (pictured) defending the trips offered to partners. SJP abruptly axed an upcoming excursion around the Greek islands, which served as the company’s week-long overseas conference, last month, allegedly sparking an internal revolt.
Croft told City AM on Tuesday, when SJP revealed it had reached a record £113bn in assets, that the overseas trips “are also very much business meetings” and said there was nothing wrong with offering incentives in principle.
But he added: “The spotlight has made us say, actually, are these overseas trips still appropriate and proportionate a 21st century situation.”
Culture clash
“Scrapping sales perks is likely to make it harder to recruit the type of adviser who is motivated by the trappings of an old school sales role,” says Informed Choice chartered financial planner Martin Bamford.
But Darren Cooke, chartered financial planner at Red Circle Financial Planning, thinks that getting rid of the incentives might help SJP recruit advisers “who would have been put off by that in the past”.
Though Cooke notes there is plenty of doubt being thrown at the Sunday Times story about the internal rebellion at the firm “mostly by SJP advisers” he says the reward culture at SJP and other vertically integrated firms is “clearly from another age”.
“Rewards based on sales have long been shown to have the potential for poor client outcomes when the less ethical can be incentivised to achieve a target and reward by making a sale regardless of if it is in the client’s best interests or not,” says Cooke.
Root and branch review
Bamford says SJP needs to “grab the bull by the horns and instigate a root and branch review of its culture”.
“Rather than knee-jerk reactions to negative press reports, SJP should get on the front foot now, repair its damaged reputation and implement positive changes,” he says.
Bamford says the negative reports about SJP have been damaging to the consumer perception of financial advisers, “including those of us who would never associate cufflinks or cruises with our roles as financial planners”.
“Financial rewards are only one reason for choosing to be a financial adviser; it is a well-paid profession, but it has come a long way from the sales-led culture of the 1980s to one which should place the client first.”
SJP, Hargreaves and Woodford triple whammy
CWC Research director Clive Waller says the bad press hitting the three biggest brands in financial services – SJP, Hargreaves Lansdown and Neil Woodford – has left a dark cloud hanging over the industry.
“There’s nothing going on that makes us look good,” he says.
The long-term impact to SJP’s business will be marginal, he thinks, it’s the rest of the industry that is going to suffer.
“The combined effect of what you call the scandals or bad news that’s coming from around the industry generally, I think will be a negative. If I was building a new business, I’d be looking at passive funds, I’d be looking at non-traditional forms of advice, everything to get away from the way it works now.”
A spokesperson for SJP told Portfolio Adviser: “We have had overwhelmingly supportive feedback from partners to the consultation so far and continue to seek the views of a broad range of stakeholders. We recognise that rewards and incentive programmes should be proportionate and balanced for supporting positive client outcomes and other business objectives both today and the company we want to be in the future. The consultation is ongoing and we hope to conclude it by the end of the year and share the findings with the partnership in the new year.”
