Industry experts say the company may be immune from any commercial threats because it is growing in strength and the current state of competitors in the market is weak.
The latest broadside against SJP came from Which? and involved a mystery shopping sting, which assessed 12 SJP advisers, with the consumer group arguing that it found several wanting in terms of disclosure of the services and charges involved.
Covered in depth by the Sunday Times, the story led to the usual social media storm while Which?, in time-honoured tradition, has passed its findings on to regulator.
Passing muster
Of course, this isn’t the first critical story, yet given the absence of any substantial regulatory action, one has to assume that SJP has passed muster, despite other advisers querying the firm’s interpretation of the rules and marvelling at what they see as its high initial charges on investments and early exit penalties on bonds – at least before year six.
Meanwhile in the business pages – as opposed to the money pages – the charges merit a good news story.
Alliance Bernstein recently described the firm as a “high-quality compounder” which should continue to drive strong net flows at high margins with its advice-led model while asking what the firm could look like in 2026.
Among other things, the broker raised its target price for the stock from 1220p to 1340p and predicted the firm would increase its UK partner and adviser numbers by 9% a year for the next five years and 6% for the five years after that, and to grow assets from around £80bn to £260bn by 2026.
In business terms at least, it looks like SJP can take the criticisms in its stride.
Competition deficit
But, if charges are on the high side, where is the competitive challenge?
Canvassing opinion among IFAs, it is very clear that they don’t like the SJP model and argue that they charge significantly less.
However, they also ask why or how they can take on such a ‘behemoth’. Some add that there are enough clients to go round particularly in the wake of the pension freedom reforms.
Others describe SJP as a marketing and recruitment machine, the strongest brand in the market, and “a slick operation – like bancassurance, but better run”.
One person, who has attended one of the firm’s recruitment drives at Mayfair hotel Claridges, says: “I attended a recruitment day for would-be joiners and there was nothing in the day that I heard that was remotely unprofessional, or lop-sided. It was a bit smooth and bit a slick – but that’s the product of an organisation that has been recruiting for more than 20 years.”
Sales, sales, sales
The firm has had a relatively long existence for an advice business. It was founded in 1991 as J. Rothshild Assurance. In 2000, HBOS took a 60% stake though the merged Lloyds Banking Group and sold its final share of the business in late 2013.
Ownership by a bank may have turned from a boon to a frustration during the banking crisis, but it was never ‘taken over’ in terms of its business practices. The firm sits in the FTSE 100 with single digit holdings up to about 5% from a range of well-known asset managers.
During its history, it has maintained a famously vigorous sales culture while seemingly coping with the big regulatory shake ups of depolarisation and the RDR. It added DFM Rowan Dartington and tax and technical firm Technical Connection in 2015 and 2016 respectively.
On the client side, regulatory consultant Rory Percival suggests that SJP has been skilled at creating a good quality customer experience.
But he also says that more broadly, the advice market is not competitive. It is based on trust and there is a lack of consumer awareness of the costs and the different options for advice.
Goodmans financial planner Andrew Moore says: “The window for competition is very small. Once someone sits down in front of one adviser, then very little comparison is done. The value in the relationship is rarely dominated by the investment piece.
“Hence the costs around it aren’t the issue. The client is establishing a trust-based relationship and only wants to go through the process once, leading to high retention levels.
“Therefore, to truly compete with SJP, I need to be in front of that person first and this is a marketing issue. Most IFA firms are growing at a pace they are happy with, so there is little proactive marketing budget in play but SJP are proactive. Until there is a better balance between capacity and excess demand, SJP will appear to have no competition.
“Nobody does in this space.”
