SJP slammed over ‘commission-style’ rewards for advisers

Added 13th February 2017

St James’s Place, one of Britain’s biggest wealth managers, has come under fire for paying its advisers using an ‘air miles’ type system which rewards them with trips and jewellery for bringing in high levels of client investment.

SJP slammed over ‘commission-style’ rewards for advisers

According to The Sunday Times, unlike the majority of advice firms operating in the UK, SJP does not pay its advisers a salary, instead they receive a cut of the money they bring in from clients, which is then topped up by gifts based on a credit system.

To get the top bonus, successful advisers must rack up 1.5 million credits, equivalent to advice fees of £1.5m ($1.9m, €1.75m), a document seen by the paper shows.

When advisers reach “key milestones” they will also be “presented with Asprey cufflinks in recognition”, which can cost up to £8,100.

Meanwhile, others are invited to lavish dinners with celebrity guests such as Bill Clinton.

The FTSE 100 wealth manager, which manages £75bn of client funds, is currently partnered with 3,400 UK advisers – roughly a tenth of the UK total.

Hargreaves Lansdown said a system offering such rewards “should have been confined to the history books long ago”.

'Initial commission'

The SJP document, entitled How Partners Get Paid, also refers to the fee paid by clients every time they invest as “initial commission”.

However, chief executive David Bellamy denies running a commission-based firm, describing the initial fee as a ‘contingent system’. He told the paper SJP was selling a relationship, not a product.  

He said: “If I go into John Lewis and look around the shop, they don’t charge me. If I buy something, they make some money. That’s what I call a contingent fee. It’s the way the world works.”

UK regulator the Financial Conduct Authority (FCA) told The Sunday Times: “While we cannot comment on individual cases, firms need to consider if their incentives increase the risk of mis-selling, including where they are based on fees.”

Hong Kong operations

The exposé raises questions about SJP’s business model in Asia after the acquisition of IFA firm The Henley Group in 2014. The buyout involved the transfer of £400m ($500m, €469) of assets under management, with SJP admitting it has since doubled the number of its advisers in Singapore, Hong Kong and Shanghai.

Speaking to International Adviser last month, Mike Gravestock, international partnership director at SJP Asia, confirmed that the company has replicated SJP’s UK model in Asia and is to roll out services from discretionary fund manager Rowan Dartington across the region during the first half of this year.

Exit charge controversy

The news is the latest controversy facing SJP, which in recent months has repeatedly been the subject of The Sunday Times Money investigations.

In January, the restricted advice group was blasted over claims it will not be caught by an incoming 1% cap on exit charges on pensions, converted or transferred by anyone aged 55 and over. SJP currently charges a fee of 6% if a client withdraws from their investment in the first year. This falls by 1% every year for six years.

The company has publicly claimed that since its charges are based on the duration the investment is held, not the age of the investor, it will not be hit by the cap.

 

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Independence

Let’s hope the public in Hong Kong and the wider Region begin to fully understand the concept of independence, I am hopeful the new SFC consultation on this very issue gathers momentum. There is advice and there are salespeople who are remunerated on the back of what they sell, this is before the argument about why you will NOT see a simple ETF recommended by a tied company such as St James.

Posted by: Rick, 14 Feb 2017

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Monira Matin

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Monira joined International Adviser in March 2016 from Informa Global Markets where she worked as a eurobond reporter for over two years, covering fixed income markets. She has previously held a number of editorial positions covering politics, insurance and technology. Monira has a degree in Journalism and Economics from City University.

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