St James’s Place has been accused of failing to address the questions asked by the Financial Conduct Authority in its value for money assessment with its focus on bundled fees making it difficult for like-for-like comparisons to be made with asset managers.
SJP released its value for money assessment in July deciding its fund range offered overall value for money.
But the comparable market rates section, which addresses one of the criteria set out by the FCA, states comparisons with the fees of Investment Association sector rivals have been examined as if “provided as part of a fully advised offering to clients”. All SJP funds got a “green” rating in this section, as part of a traffic light system.
Portfolio Adviser sought clarification about how SJP determined this figure.
A spokesperson said comparisons were carried out for a “typical portfolio and for each of our funds” with Grant Thornton analysing 19 full-service firms for the former and another external consultant using Fitz data to compare SJP fund charges with those across the applicable Investment Association sector.
But Portfolio Adviser was unable to get clarification about how these two analyses were used to determine a final view on whether SJP fund charges compare favourably to rivals.
‘It feels as if SJP has answered the question it wanted to be asked’
JB Beckett, independent fund board director and former fund selector, points out the FCA sought a comparison of fees between funds, rather than comparing bundled advice, investment and platform structures.
“It feels as if SJP has answered the question it wanted to be asked; rather the one posed by the FCA, and has curated a story that doesn’t offer easy comparability or transparency,” Beckett says. An assessment of the value of advice could be valid exercise in future, but it is not the current focus on the value assessments, he adds.
The FCA did not respond to requests for information about how vertically-integrated firms should address the comparable market rates section of the value assessment.
Lang Cat director Mike Barrett agreed that the assessment did not seem to focus on the asset management side of the equation, as per the regulator’s requirements.
This undermines many positive elements of the assessment, such as its client-friendly language and easy accessibility on the SJP website, says Barrett.
“The downside of having a bundled approach is if something’s clearly unbundled you can look at the individual elements and say, ‘Okay, yeah I’m happy about what my advisers are doing, but how are my investments value for money?’, and that’s the bit you can’t really achieve from the SJP assessment.”
See also: FCA assessments in the spotlight as Hargreaves omits reference to Woodford
Bundled fees make more sense from a client perspective
Boring Money chief executive Holly Mackay reckons there is some sense in using bundled fees.
“I think it is logical to add the advice and investment fees together as this mirrors a client’s experience. But to do so requires better clarity of the component parts for those who want it,” says Mackay.
“At the moment, most OCFs are reported as between 1.6% and 2% with a comment that these are appropriate and reasonable. That’s a decent slug of money to pay year-in, year-out and I think a bit more evidence behind that statement would help.”
Beckett reckons the SJP board could have provided investors with information about both the full-service fee and the fund cost.
Barrett points to several reasons why SJP may have avoided that route.
“I think it would be easy for them to separate fund costs but I’m not sure they’re necessarily going to want to do that, because it would expose exactly how much they’re making on the investment management side,” says Barrett. “And in a lot of cases it’s probably commercially confidential between them and the underlying manager.”
See also: Segregated mandates fail to save SJP and Omnis from Woodford hit
SJP clients should be able to see how fees compare with non-advised alternatives
Age Wage chief executive Henry Tapper says any unbundled fee would have to have some bearing on the end client’s experience rather than representing the low cost at which SJP accesses its external managers.
It has previously been reported that SJP accessed Neil Woodford for 0.35% when he was at Invesco, and that he likely received a similar rate at Woodford Investment Management, while the end client paid 1.66% to access the SJP High Income fund.
“By the time these funds actually reach the consumer they are so pricey,” Tapper says.
“If you compare what’s going on in SJP with other DFMs, I believe it is possible to say SJP are relatively inexpensive, as per the Grant Thornton chart. But if you are to compare SJP with what you can pay for a comparable asset management experience with Vanguard or in a workplace pension then the costs are simply not comparable.”
SJP clients should be able to see the cost of a non-advised alternative for comparison, Tapper says.
Out of 19 anonymous wealth managers, SJP was the twelfth least expensive. Charges ranged between 1.7% to 3.8% with Grant Thornton pinning SJP’s fees at 2.4%.
Anonymised comparisons with rival wealth managers is unhelpful
But the Grant Thornton data is not necessarily validation of SJP’s bundled fees either.
Mackay says: “Their analysis of how the total costs compare with competitors is not going to be helpful for most consumers because the advice competitors in question are not named and the timeframes and amounts are set by SJP.
“SJP’s charges are still too complex overall as can be seen by the regular Twitter debates about what they actually are – amongst very experienced industry practitioners who still can’t work it out.”
Tapper says because Grant Thornton’s data is anonymised it is possible to question whether the UK’s most expensive wealth managers were used for comparison.
A disclaimer beneath the data states Grant Thornton “accepts no duty of care or liability of any kind whatsoever to any other third parties” and that the report does not “absolve any third parties from using due diligence in verifying the report’s contents”.
