An insider’s view of SJP funds, fees & cashflow

A St James’s Place adviser offers NMA editor William Robins a candid view on what really goes on at the asset management giant, highlighting the challenge it poses to IFAs

It is no news to anyone that New Model Adviser® has taken a sceptical attitude towards St James’s Place (SJP) over the years. As a large and ever-growing insurance company, whose advisers overwhelmingly recommend its own products and funds, SJP contrasts starkly with the smaller and privately owned advice firms providing financial planning and independent advice. These were the early adopters of what we dubbed ‘new model’ advice (defined largely by charging fees, not commission, recurring income and qualifications).

It may also be unsurprising that regular contact with SJP rank and file has been a rare occurrence. Instead our questions are typically handled by a PR, except on the rare occasions we are granted an interview with senior management. That has probably not been an optimal state of affairs.

 I was delighted, therefore, when a SJP adviser reached out to me seeking an off-the-record chat to explain some facets of the SJP proposition that, they reckoned, were missing from our coverage. I have to say, I found what they said enlightening and, to some extent, unexpected.

The SJP partner in question was an ex-IFA, so I suspect stressing to me the flexibility SJP allowed them was important to them. In any case, it presented another dimension that for some reason has not been given an airing on our pages before.

It is no news to anyone that New Model Adviser® has taken a sceptical attitude towards St James’s Place (SJP) over the years. As a large and ever-growing insurance company, whose advisers overwhelmingly recommend its own products and funds, SJP contrasts starkly with the smaller and privately owned advice firms providing financial planning and independent advice. These were the early adopters of what we dubbed ‘new model’ advice (defined largely by charging fees, not commission, recurring income and qualifications).

It may also be unsurprising that regular contact with SJP rank and file has been a rare occurrence. Instead our questions are typically handled by a PR, except on the rare occasions we are granted an interview with senior management. That has probably not been an optimal state of affairs.

 I was delighted, therefore, when a SJP adviser reached out to me seeking an off-the-record chat to explain some facets of the SJP proposition that, they reckoned, were missing from our coverage. I have to say, I found what they said enlightening and, to some extent, unexpected.

The SJP partner in question was an ex-IFA, so I suspect stressing to me the flexibility SJP allowed them was important to them. In any case, it presented another dimension that for some reason has not been given an airing on our pages before.

Fees

SJP partners have more flexibility on fees than I realised. 

Probably the most contentious element of SJP’s charging is the early withdrawal charge on some products, including pensions. The charge is 6%, reducing by 1% each year for six years. The upside is the client has 100% of their pot invested on day one.

The SJP partner suggested there was in fact some flexibility around this. However, when I checked with SJP the company affirmed the early withdrawal charge is ‘applicable to all pension investment clients.’

The only exception, SJP told me, ‘is if the partner believes it is best advice for that particular client to opt for an ISA or unit trust as the wrapper instead of a bond or pension’.

But the SJP partner I spoke to did go further. They offered clients the option to pay for a financial plan separately to implementation. This was particularly surprising given how SJP makes money from its own funds. The partner told me they use cashflow planning software Voyant to help construct financial plans.

The partner said they would charge a flat fee, ‘pounds and pence’ for Voyant cashflow work. They had clients who were doing pure financial planning, where at this stage at least there is not going to be a product involved.

If the firm does end up doing a piece of investment or pension business for the client and gets paid for implementing that, the normal way, the partner said he would be expected to offset the financial planning fees and the cost of the financial planning work. The partner said he could not charge more than £1,200 for cashflow planning work.

SJP’s product entry charges, which cover the cost of setting up investments and of initial advice, typically range from 4% to 5%.

I put this to SJP, which said: ‘The majority of clients come to partners looking for both financial planning and implementation and, of course, ongoing advice. Therefore, partners are generally providing holistic advice and planning that understands and reflects a client’s goals and objectives; a personalised tax-efficient plan and investment strategy; and then reviewing circumstances throughout the relationship and managing the client’s plan.’

SJP confirmed that if clients only want the financial planning aspect ‘there is the ability to provide this through Voyant.’

Cashflow

At a high level, SJP partners can choose to offer Voyant planning as part of their standard offering, the spokesman said, ‘utilising it often at the beginning of the client relationship when a full financial review and financial plans are being developed. If, subsequently, the partner implements the plan that has been designed for the client, the Voyant fee would be refunded if the initial advice charge is charged.’

There is also flexibility in ongoing advice fees, which could ‘be commercial’ on fees taken for large amounts of assets, the partner suggested. SJP said: ‘There is a set framework of fees that are standard across SJP. Within that framework, there is some flexibility on how the fees are structured,’ adding: ‘the key thing is that partners provide a bespoke service and distinct advice to each individual client and can work within the framework to best address clients’ needs.’

Pension switching was also mentioned. The partner said, because of SJP’s controls around the overall cost of any transfer, fees would often have to be discounted when it came to pension switching.

While often he would not charge ‘anywhere near’ full initial fees on replacement business, which he said was very tightly monitored. He said he cannot replace any business done in the last five years, including outside SJP, without a very strong reason to do so.

Investment choice

SJP owns discretionary fund manager (DFM) and stockbroker Rowan Dartington. It is in its early stages of development under SJP, but it is worth knowing it can be used for things like direct equities and investment trusts that cannot be accessed through SJP’s main fund proposition.

The business itself is mature, though, with £2.3 billion under management. SJP acquired Rowan Dartington in March 2016 and it has since added £1 billion of assets. SJP recently acquired another DFM, Dublin-based Harvest Financial Services, which will lead to the DFM services provided by Rowan Dartington being extended to clients in the Republic of Ireland.

Rowan Dartington, the SJP partner said, is suited to sophisticated investors and bigger portfolios, which were managed previously by discretionary managers.

The partner said he thought the DFM was ‘competitive’ with rivals in the market in terms of pricing and ‘far from most expensive’.

Training and development

SJP’s Academy programme and Next Gen Academy are becoming better known. It is a good news story for the business which, unlike many smaller firms, has the resources to put behind recruitment and training on an industrial scale.

Last year SJP invested a further £10 million into its academy programmes. Over 450 have graduated through the Academy and Next Generation Academy so far, including 142 in 2018.

According to SJP there are currently 379 in the programme. Last year SJP invested a further £10 million into its academy programmes and it said it wants 170 advisers to graduate this year. That would take it past 500 graduations in total.

Last year academy director Jason Flood told us it was putting ‘clear blue water’ between the sales forces of the 1990s when there were 250,000 staff calling themselves advisers. Instead, he said, the academy was ‘more professional, much more organised and much more supportive’.

The programs

There are three programmes in all:

 

  • The core Academy, which is for second careerists. In 2017 and 2018, 344 people joined the SJP Academy career change programme.
  • The Next Generation Academy, which is a separate programme focused on succession planning for existing partner practices and the average age is 27.
  • The Paraplanning Academy, which helps support staff become qualified level four paraplanners.

 

The SJP partner I spoke to said he used the programme to get an already experienced paraplanner accredited with SJP. Firms that are members of SJP can grow by putting people through the academy accreditations and exams. 

Furthermore, the partner said his SJP business could use an external, outsourced paraplanning firm as well, so long as it was vetted by SJP.

SJP also runs a support programme for advisers aiming for Chartered Financial Planner status. The spokesman said SJP had ‘created our own module in conjunction with the Chartered Insurance Institute, available exclusively to the our partnership and staff.’ Another statistic thrown in was that SJP had 743 chartered advisers.

All business goes through a central compliance function at SJP anyway, the business assurance unit, and in that sense SJP works exactly like other networks.

A challenge for IFAs? 

SJP is really a network of advice businesses run by its partners. But these businesses can range substantially in size, from dozens of advisers and support staff to one-person operations.

It also means the advisers in these businesses can have varying approaches and come to the job with different levels of experience. The SJP partner I spoke to joined after a career as a financial planner at an independent firm and no doubt this has coloured how he uses the SJP apparatus.

Other partners may not push SJP’s flexibility on fees and investments as hard as this one or use cashflow modelling as heavily in their process. But no doubt some are doing so.

The exchange was a worthwhile addition to the SJP picture. It is odd though that SJP does not talk more about some of the options available. Perhaps it is worth being flexible mainly to satisfy advisers who have had to give up independence in return for the resource and security of SJP.

New Model Adviser® has previously revealed how the financial engine room of SJP is its fund proposition. Last year SJP earned nearly £1 billion from its fund range. And its standard default charges will have been carefully priced, but with many clients paying 5% upfront, SJP’s fees are high by any measure.

With rising regulatory and professional indemnity insurance costs, SJP knows it has an opportunity to attract advisers to its stable, as well as clients. It is hard to argue that cashflow-based financial planning and training support are not desirable things to have. And there is even some sort of fee and investment flexibility, albeit limited.

SJP is laying down a challenge that should give IFAs food for thought.

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