St James’s Place (SJP) has a 3,400-strong adviser network and now accounts for one in eight financial advisers in the UK, according to data from the Association of Professional Financial Advisers (Apfa).
SJP attributes its success to strong customer satisfaction and a “unique proposition”.
However, according to Which?, SJP is extremely expensive with typical upfront costs of 5%, which is 40% higher than would be paid to an IFA.
Going undercover
The watchdog organised 12 undercover meetings with advisers from SJP, who are only able to give restricted advice, for which they earn commission.
The advisers were arbitrarily chosen and told that a client was looking for independent financial advice on around £100,000 ($129,959, €111,347) of investible assets. The advisers were asked about costs and what the client could expect in return.
Which? was particularly interested in what the advisers would say about charges and how clear they were that they were not IFAs and still earn commission.
“Only with an independent adviser can you be sure that they are putting your interests first rather than chasing payments for themselves,” Which? said.
“Under rules introduced in 2012, financial advisers in the UK need to explain whether they offer restricted or independent advice, yet one in four of the SJP advisers we met with didn’t.
“That’s even more shocking considering our researchers’ initial enquiries were for independent financial advice – something that SJP can’t provide.”
Which? added: “The broader problem we found in this area was that SJP’s advisers were highly skilled at saying just enough to be within the rules, but using carefully selected facts to give a very misleading picture – that their restricted advice would be better, or cheaper, than independent advice.”
The consumer watchdog has shared its findings with the Financial Conduct Authority.
Discrepancies and fees
When Which?’s investigators met SJP’s advisers, they found that most were relatively forthcoming with information about their fees.
However, four of the 12 failed to talk in detail about the likely costs. This goes against the FCA’s guidelines, which state that advisers must tell clients both verbally and in writing about the cost of their services.
Even where advisers did provide information, there were discrepancies. Some said there were initial charges of 4.5% of the money invested, while others put the up-front cost at 5%.
In addition, SJP levies annual fees that pay for both the advice and the cost of the investments it recommends.
Only seven of the 12 advisers mentioned these – and their estimates ranged from 1.25% to 2.3% – a difference of £525 a year on a £50,000 investment.
Which? concedes that there are legitimate reasons why costs may vary, as funds have different charges. However, the watchdog found that even when SJP’s advisers disclosed the charges, estimates tended to be on the low side.
The actual charges on SJP’s funds, and the fund splits outlined in its marketing literature, suggest that SJP customers pay 1.59% a year in charges (plus the initial 5%) for a low-risk portfolio of funds, rising to more than 2% for more adventurous portfolios.
Alarmingly, one adviser described SJP’s charges by saying “there’re no charges, there’re no fees, the only thing is, if you do anything, that’s when I would get paid”.
“This is nonsense, as if you’re a customer the fees still ultimately come out of your pocket,” Which? said in its report.
