As the UK’s largest wealth manager St James’s Place makes the final preparations for its new customer charges, the business looks to draw a line under its past troubles.
Sweeping new fees next month seek to rebuild the group’s reputation, which has been savaged by complaints about poor service and opaque charges.
Mark FitzPatrick, who was parachuted in as chief executive at the end of 2023 to turn the group round, told the FT that the clearer charges should help customers “compare and contrast” their products with competitors.
The new model includes separating charges from a “bundled” cost so that customers can more clearly see individual fees for product wrappers, funds and advice.
The move follows regulatory scrutiny over the company’s complicated charging structure, which coincided with a drive by FitzPatrick to clean up its culture after years of excessive perks for top-selling advisers, ranging from overseas cruises to luxury Montblanc pens.
It has also set aside £426mn potentially to repay clients who claimed they received insufficient levels of advice.
But some analysts and consumer champions question whether the clearer charging structure will help the group attract new customers and boost business over the longer term.
“The all-in pricing of St James’s Place has never actually been that different from peers, but its bundled nature made it look more expensive,” said Rae Maile, analyst at Panmure Liberum.
“That meant advisers would spend half of a meeting with a prospective client having to explain how charging worked and how it was comparable really. That time is not now going to be wasted on charging and can be spent on providing clients with the advice that they need.”
It has certainly been a tumultuous period for the Gloucestershire-based company, which boasts the biggest advisory network in the UK with 5,000 financial advisers, nearly a fifth of the total in the country, serving more than 1mn customers managing nearly £190bn of their assets.
Its new fees come in response to Consumer Duty, a sweeping regulation introduced by UK regulator the Financial Conduct Authority, which aims to at ensure customers receive a fair deal from financial services companies.
SJP also suffered from a surge in customer complaints from the beginning of 2023 over the regular advice they should have received, driven by claims management companies.
The wealth manager tweaked its fees when the rules came into force in July 2023, but pressure from financial regulators led it to announce a bigger overhaul later that year, with the changes due to take effect from the end of August.
The group’s new model includes the removal of its controversial “exit” fee or early withdrawal charge, which was applied to investment bonds and pensions. These charges were as much as 6 per cent of investment value and were applied if customers withdrew their money within the first six years.
But some experts question how SJP has managed to charge an exit penalty for customers since Consumer Duty came into force two years ago.
“SJP appear to be addressing the opacity of their fees that has managed to inexplicably escape regulatory requirements that other firms have had to comply with,” said Gina Miller, co-founder of investment firm SCM Direct and a campaigner for clearer industry fees.
SJP’s new fee model has already suffered teething problems, having originally been slated for May. People close to the situation said the delay was due to testing IT systems internally before enacting the changes.
Critics including Miller argue that the delay has potentially allowed its financial advisers to charge higher fees for longer. SJP would charge up to 4.5 per cent as an initial advice fee, although this will be tiered to between 1-3 per cent depending on the amount of money invested once the changes are implemented.
FitzPatrick denied that the firm was trying to “squeeze” clients, noting “that’s not who we are. It’s about making sure a large IT change is done carefully and successfully and with minimum bumps down the road for clients and [the] partnership”.
So what impact will the fee changes have on the business? David McCann, analyst at Deutsche Numis, said the new charges “remain about industry average”, noting that the new structure is “unlikely to materially change the outlook” for SJP’s growth prospects, providing some reprieve for shareholders.
In some cases, fees will be lower for customers. For example, the initial product charge for Isas and unit trusts will drop from 0.5 per cent to zero and the annual ongoing charge will fall from 1.64 per cent to 1.59 per cent. Initial financial advice charges of up to 4.5 per cent will drop to between 1-3 per cent based on portfolio size.
However, some costs will increase. The new ongoing pension and investment bond charge of 1.66 per cent is an increase on the current 0.92 per cent fee for the first six years, but compares favourably over the long term, down from 1.92 per cent in years seven to 10 and from 1.77 per cent after that.
McCann said SJP’s new charging structure will mean a typical client will pay total annual costs of about 1.9 per cent, compared with a range of 1.6-2.1 per cent charged by SJP’s closest rivals.
FitzPatrick is keen to look beyond the summer and the other developments that are in store for SJP’s customers.
One of his focal points is the SJP Financial Adviser Academy, which trains prospective advisers.
“We continue to be a huge source of financial advisers for the market. Over the last five years, SJP has trained 50 per cent of people who have joined the profession,” FitzPatrick says.
“We will continue to invest heavily in the academy to bring new young advisers into the profession, training them up, giving them the skills, because what we want is young clients to have the choice to engage with young advisers their age.”
He said SJP will also continue to develop its use of artificial intelligence to assist both advisers and customers. “We continue to roll out AI across many aspects, not just client-facing, but also how we provide support to advisers.”
Last year, the wealth manager started using artificial intelligence in its call centre to identify any kind of intonation or language used by a client that could suggest that they are a “vulnerable” customer.
FitzPatrick said at the time that the company was using technology “intensively” and that its “big focus” is to “facilitate the productivity and effectiveness of our advisers”.
The chief executive continues to work on SJP’s culture, having axed its notorious annual London gathering at the O2 Arena this year.
In the past, such gatherings were often fuelled with alcohol with top-performing advisers raucously cheered on stage, glamorising its sales culture. Celebrities ranging from former US prime minister Bill Clinton to footballer David Beckham also spoke at the event.
Instead, FitzPatrick said advisers around the country had convened at a series of gatherings, noting that it was still important to ensure that advisers meet and network.
As the group makes the final touches to internal systems for the new charging structure, FitzPatrick will be hoping that the clearer fee model will prove attractive to the next generation of potential customers.
https://www.ft.com/content/7fdbd91d-6a7e-482a-ab15-aaa25712e60c
