Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
sounds like St James Place. Avoid them like the plaque.
It is, are you able to elaborate at all?
RDR, at the start of 2016, was supposed to get away from initial / front end charging. The "Retail Distribution Review" found that Investment Bonds may have been sold instead of some other product or scheme due to their charges & commission structure. Advisers could earn up to 8% commission where most pension & other plans would be 3%-5%. The idea around RDR was that investment schemes carried little or no charges (a max of around 1%) with the advisor getting his "commission" by charging a fee. Therefore there is no bias as the advisors fee (say 3% ) is the same no matter if he advises a pension, an ISA, an Investment Bond, a Structured Product or a VCT.
However, SJP have gone from a front end charge (initial) to a back end charge (exit fee). I believe its 5% for an investment & 6% for a pension - with SJP keeping 3% & the advisor getting the rest. All the products & schemes I listed above carry no exit fees & you could come out of them after 6 months or 6 years and it makes no difference.
PS - SJP advisors obviously only "advise" on SJP products. Its like the last 20 years hasn't happened.
Hi Golfaddick,
Firstly for transparency I am an SJP Partner and business owner and thus naturally I will have at least some bias! This said I am not your typical arrogant adviser (as an addick I am naturally salt of the earth ;D) I come in peace to challenge some of the misinformation within your comment. I do not believe SJP are perfect and I am happy to engage in any criticism you may have, which will only help me evolve my approach and improve as an adviser. However lets at least make sure that any criticism is based on a factually correct understanding of the product structure.
Furthermore I think to dismiss what I believe to be the biggest provider of financial advice in the UK with 3500+ advisers (about 15% of the total in the UK) is disingenuous, especially given how many of these advisers have attained Chartered status, i.e. they are not merely salesmen. Whilst I accept some clients may be ignorant, I highly doubt that the 600,000 clients of SJP with £100 Billion under management are all imbeciles.
Aside from the specific criticism of SJP, the constant dog fight between different factions of the advisory community only serves to create more barriers to advice at a time when so many families have a clear and obvious advice gap.
Again, for balance to reiterate I do not believe SJP are perfect, nor have I found any investment house or IFA firm who are. In my experience there are some excellent IFA's and some excellent SJP partners. There are some awful and unscrupulous IFA's and some awful and unscrupulous SJP Partners.
I would also add that the constant bashing of what is a UK business success story does seem to be in part due to British mentality.
Onto your comments, I would correct these as follows;
- Firstly I would accept that there may have been occasions prior to me joining SJP in 2013 when product bias occurred, I cannot seek to defend anything that occurred prior to my involvement. This said, i'm not sure where the 8% figure comes from. I suspect the decision to recommend Investment Bonds as opposed to ISA / Unit Trust was driven by how palatable the 2 charging structures were (read below). The important thing is there is no longer a product bias as A - the advisers earnings are the same on all investment products mentioned and B- when the advice is checked centrally you would need a bloody good reason to be recommending an Investment Bond over an ISA or Unit Trust, the advice just would not be allowed.
- "SJP have gone from a front end charge (initial) to a back end charge (exit fee). I believe its 5% for an investment & 6% for a pension - with SJP keeping 3% & the advisor getting the rest. All the products & schemes I listed above carry no exit fees & you could come out of them after 6 months or 6 years and it makes no difference."
This is full of inaccuracies. Lets break it down;
The initial charge on an ISA or Unit Trust is a maximum of 5% . You are wrong regarding an exit penalty, there isn't one. I do not believe that ISA's are even allowed to carry an exit penalty. The split in the case would be 2% SJP & 3% adviser. This said, that is a headline rate, I typically charge a 3% initial charge and thus both splits are reduced by 40% accordingly. This is increasingly common.
The charging structure for Investment Bonds & Pensions is fundamentally different. There is no fee levied at the front end, i.e. 100% of the clients money is invested on day 1, nor does the client pay a separate fee for the advice. There is however an exit penalty which is 6% in year 1, but it reduces by 1% each year and thus 0% after 6 years. You are therefore wrong to assert that these products carry no exit fees and therefore it makes a huge difference if you are with us for 6 months or 6 years.
With regards to the latter I can understand if you do not like this approach. For my clients however, many of whom may have a reasonable pension portfolio but little cash savings, this works perfectly for them.
"SJP advisors obviously only "advise" on SJP products"
This is partially true in that for ISA's, Investment Bonds, Unit Trusts and Personal Pensions the investment approach is Restricted to the SJP funds, because this is the core business model which to date has served them well. For products such as EIS, VCT's, insurance products etc SJP do not manufacture there own products. Instead they make available a panel of providers (not whole of market). This is an area that could be criticized but there are areas to counter. In looking at EIS / VCT for example I would back the due diligence of SJP over the vast majority of small IFA's locally who simply do not have the resource.
I hope this is a useful clarification, happy of course to engage further on other areas, ongoing charges for example.
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
If that is SJP it will be 0% initial charge but the 1.66% pa sounds too low tbh unless the charges have been reduced for a transfer. Its typically roughly 1% product + 0.5% advice + 0.4% for fund managers = 1.9%
The exit penalty will be 6% in Y1, 5% Y2, 4% Y3, 3% Y4, 2% Y5, 1% Y6. 0% thereafter.
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
If that is SJP it will be 0% initial charge but the 1.66% pa sounds too low tbh unless the charges have been reduced for a transfer. Its typically roughly 1% product + 0.5% advice + 0.4% for fund managers = 1.9%
The exit penalty will be 6% in Y1, 5% Y2, 4% Y3, 3% Y4, 2% Y5, 1% Y6. 0% thereafter.
SJP success is based on very effective marketing and attracting salesmen by calling them partners and giving them chunky commission. Attracts the worst kind of salesman in my experience. Keeps costs down and margins up by only offering investments with managers it's done exclusivity deals with for kick backs.
Like all IFAs you only earn a living by moving other people’s money around and taking a cut as it passes through your hands. There is always a “better” investment than the one the last adviser recommended whose commission you need to filch (sorry I forgot, it's called adviser charging now).
When I see a request for information from SJP you know another sucker has been hooked. Had a case a few years back now, of SJP transferring a deferred pension scheme member away from our scheme and into a personal pension/SIPP. Adviser phoned up a few months later and complained we hadn’t warned him that the member only paid investment charges of 0.15%. The wally had unwittingly put him in the same fund with the same manager and charged x times more in investment charges and a valueless advisory fee. The standard request for information is a joke, didn't ask for investment charges, only for the form to process a transfer out before even getting the information. The idea never occurred to the salesman that he might need to check what was currently on offer and advise a client not to take any action - but then an adviser has to earn crust.
One of my daughter's friends is an SJP partner, wonderful company who must wow her clients. Have met with socially and asked how she does so well. I will say no more than that she knows as much about finance as our parrot could learn by rote, but enough to be able to earn a living and send 2 kids to Bedales.
The St James Place Academy is clearly for training people with no previous experience in finance to meet the lowest standards required to be allowed to sell financial products to the public using a decision tree. Mostly multiple choice questions which my 8 year old granddaughter with a good memory and some luck could handle.
Financial Planning is a successful business for those who earn a living from it, but as for adding value for the client, it's not measured and it's non existent. The savings ratio in the UK is below 5%, the average for Europe is over 12%. What's the UK success story? I guess it's the 25%+ profit margin SJP makes. Still a bit thin compared to HGL's 75% profit margin, that's a super success story.
What is a "product" charge that costs 1% in addition to the 0.4% fund charges and the 0.5% advice - no need to tell me, I can guess, it would look a bit off-putting if you called it "profit" instead of "product". It smells like the margin SJP make for getting you to sell stuff to a client?
The SJP business model is simple - you get as many salesmen partners as you can who can sell without screwing up on FCA rules, let them keep most of the commission and charge the profit margin to the client as an add on.
FA's most definitely have their place, but an upfront 5% charge (or 3% you use) on an ISA - by the sounds of it which can only be invested in your own funds is daylight robbery, it's not even independent advice but advice on which or the limited funds available to invest in. Is there also an on going charge on top?
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
If that is SJP it will be 0% initial charge but the 1.66% pa sounds too low tbh unless the charges have been reduced for a transfer. Its typically roughly 1% product + 0.5% advice + 0.4% for fund managers = 1.9%
The exit penalty will be 6% in Y1, 5% Y2, 4% Y3, 3% Y4, 2% Y5, 1% Y6. 0% thereafter.
SJP success is based on very effective marketing and attracting salesmen by calling them partners and giving them chunky commission. Attracts the worst kind of salesman in my experience. Keeps costs down and margins up by only offering investments with managers it's done exclusivity deals with for kick backs.
Like all IFAs you only earn a living by moving other people’s money around and taking a cut as it passes through your hands. There is always a “better” investment than the one the last adviser recommended whose commission you need to filch (sorry I forgot, it's called adviser charging now).
When I see a request for information from SJP you know another sucker has been hooked. Had a case a few years back now, of SJP transferring a deferred pension scheme member away from our scheme and into a personal pension/SIPP. Adviser phoned up a few months later and complained we hadn’t warned him that the member only paid investment charges of 0.15%. The wally had unwittingly put him in the same fund with the same manager and charged x times more in investment charges and a valueless advisory fee. The standard request for information is a joke, didn't ask for investment charges, only for the form to process a transfer out before even getting the information. The idea never occurred to the salesman that he might need to check what was currently on offer and advise a client not to take any action - but then an adviser has to earn crust.
One of my daughter's friends is an SJP partner, wonderful company who must wow her clients. Have met with socially and asked how she does so well. I will say no more than that she knows as much about finance as our parrot could learn by rote, but enough to be able to earn a living and send 2 kids to Bedales.
The St James Place Academy is clearly for training people with no previous experience in finance to meet the lowest standards required to be allowed to sell financial products to the public using a decision tree. Mostly multiple choice questions which my 8 year old granddaughter with a good memory and some luck could handle.
Financial Planning is a successful business for those who earn a living from it, but as for adding value for the client, it's not measured and it's non existent. The savings ratio in the UK is below 5%, the average for Europe is over 12%. What's the UK success story? I guess it's the 25%+ profit margin SJP makes. Still a bit thin compared to HGL's 75% profit margin, that's a super success story.
What is a "product" charge that costs 1% in addition to the 0.4% fund charges and the 0.5% advice - no need to tell me, I can guess, it would look a bit off-putting if you called it "profit" instead of "product". It smells like the margin SJP make for getting you to sell stuff to a client?
The SJP business model is simple - you get as many salesmen partners as you can who can sell without screwing up on FCA rules, let them keep most of the commission and charge the profit margin to the client as an add on.
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
If that is SJP it will be 0% initial charge but the 1.66% pa sounds too low tbh unless the charges have been reduced for a transfer. Its typically roughly 1% product + 0.5% advice + 0.4% for fund managers = 1.9%
The exit penalty will be 6% in Y1, 5% Y2, 4% Y3, 3% Y4, 2% Y5, 1% Y6. 0% thereafter.
SJP success is based on very effective marketing and attracting salesmen by calling them partners and giving them chunky commission. Attracts the worst kind of salesman in my experience. Keeps costs down and margins up by only offering investments with managers it's done exclusivity deals with for kick backs.
Like all IFAs you only earn a living by moving other people’s money around and taking a cut as it passes through your hands. There is always a “better” investment than the one the last adviser recommended whose commission you need to filch (sorry I forgot, it's called adviser charging now).
When I see a request for information from SJP you know another sucker has been hooked. Had a case a few years back now, of SJP transferring a deferred pension scheme member away from our scheme and into a personal pension/SIPP. Adviser phoned up a few months later and complained we hadn’t warned him that the member only paid investment charges of 0.15%. The wally had unwittingly put him in the same fund with the same manager and charged x times more in investment charges and a valueless advisory fee. The standard request for information is a joke, didn't ask for investment charges, only for the form to process a transfer out before even getting the information. The idea never occurred to the salesman that he might need to check what was currently on offer and advise a client not to take any action - but then an adviser has to earn crust.
One of my daughter's friends is an SJP partner, wonderful company who must wow her clients. Have met with socially and asked how she does so well. I will say no more than that she knows as much about finance as our parrot could learn by rote, but enough to be able to earn a living and send 2 kids to Bedales.
The St James Place Academy is clearly for training people with no previous experience in finance to meet the lowest standards required to be allowed to sell financial products to the public using a decision tree. Mostly multiple choice questions which my 8 year old granddaughter with a good memory and some luck could handle.
Financial Planning is a successful business for those who earn a living from it, but as for adding value for the client, it's not measured and it's non existent. The savings ratio in the UK is below 5%, the average for Europe is over 12%. What's the UK success story? I guess it's the 25%+ profit margin SJP makes. Still a bit thin compared to HGL's 75% profit margin, that's a super success story.
What is a "product" charge that costs 1% in addition to the 0.4% fund charges and the 0.5% advice - no need to tell me, I can guess, it would look a bit off-putting if you called it "profit" instead of "product". It smells like the margin SJP make for getting you to sell stuff to a client?
The SJP business model is simple - you get as many salesmen partners as you can who can sell without screwing up on FCA rules, let them keep most of the commission and charge the profit margin to the client as an add on.
FA's most definitely have their place, but an upfront 5% charge (or 3% you use) on an ISA - by the sounds of it which can only be invested in your own funds is daylight robbery, it's not even independent advice but advice on which or the limited funds available to invest in. Is there also an on going charge on top?
What is the on going charge for pensions?
From my recent experience from SJP quoted above which was in pensions it was 0% in, but exit fee of 6% yr one ratcheting by a % each year until 0% yr 6. I could have lived with that as it is a long term investment but the 1.66% of capital fee pa (down from normal 1.9% because I started talking to them about 12 months before so they said they would honour the fee applicable at the start of our talks), seemed excessive.
As they were keen to show me the wonderful average returns they had made in the last 8 years or so I offered to pay 50% of the profit they made me rather than 1.66% of my capital which would have been much better based on their numbers but they were not prepared (allowed?) to back themselves.
the chap I met seemed genuine enough and certainly knew more than I (as he should) but I think I will just stick to my current arrangements.
FA's most definitely have their place, but an upfront 5% charge (or 3% you use) on an ISA - by the sounds of it which can only be invested in your own funds is daylight robbery, it's not even independent advice but advice on which or the limited funds available to invest in. Is there also an on going charge on top?
What is the on going charge for pensions?
From my recent experience from SJP quoted above which was in pensions it was 0% in, but exit fee of 6% yr one ratcheting by a % each year until 0% yr 6. I could have lived with that as it is a long term investment but the 1.66% of capital fee pa (down from normal 1.9% because I started talking to them about 12 months before so they said they would honour the fee applicable at the start of our talks), seemed excessive.
As they were keen to show me the wonderful average returns they had made in the last 8 years or so I offered to pay 50% of the profit they made me rather than 1.66% of my capital which would have been much better based on their numbers but they were not prepared (allowed?) to back themselves.
the chap I met seemed genuine enough and certainly knew more than I (as he should) but I think I will just stick to my current arrangements.
1.66 or 1.9% for them to select from their own funds is ridiculous to be honest. Whole of market maybe but I don’t see the value, sorry @croydon
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
If that is SJP it will be 0% initial charge but the 1.66% pa sounds too low tbh unless the charges have been reduced for a transfer. Its typically roughly 1% product + 0.5% advice + 0.4% for fund managers = 1.9%
The exit penalty will be 6% in Y1, 5% Y2, 4% Y3, 3% Y4, 2% Y5, 1% Y6. 0% thereafter.
SJP success is based on very effective marketing and attracting salesmen by calling them partners and giving them chunky commission. Attracts the worst kind of salesman in my experience. Keeps costs down and margins up by only offering investments with managers it's done exclusivity deals with for kick backs.
Like all IFAs you only earn a living by moving other people’s money around and taking a cut as it passes through your hands. There is always a “better” investment than the one the last adviser recommended whose commission you need to filch (sorry I forgot, it's called adviser charging now).
When I see a request for information from SJP you know another sucker has been hooked. Had a case a few years back now, of SJP transferring a deferred pension scheme member away from our scheme and into a personal pension/SIPP. Adviser phoned up a few months later and complained we hadn’t warned him that the member only paid investment charges of 0.15%. The wally had unwittingly put him in the same fund with the same manager and charged x times more in investment charges and a valueless advisory fee. The standard request for information is a joke, didn't ask for investment charges, only for the form to process a transfer out before even getting the information. The idea never occurred to the salesman that he might need to check what was currently on offer and advise a client not to take any action - but then an adviser has to earn crust.
One of my daughter's friends is an SJP partner, wonderful company who must wow her clients. Have met with socially and asked how she does so well. I will say no more than that she knows as much about finance as our parrot could learn by rote, but enough to be able to earn a living and send 2 kids to Bedales.
The St James Place Academy is clearly for training people with no previous experience in finance to meet the lowest standards required to be allowed to sell financial products to the public using a decision tree. Mostly multiple choice questions which my 8 year old granddaughter with a good memory and some luck could handle.
Financial Planning is a successful business for those who earn a living from it, but as for adding value for the client, it's not measured and it's non existent. The savings ratio in the UK is below 5%, the average for Europe is over 12%. What's the UK success story? I guess it's the 25%+ profit margin SJP makes. Still a bit thin compared to HGL's 75% profit margin, that's a super success story.
What is a "product" charge that costs 1% in addition to the 0.4% fund charges and the 0.5% advice - no need to tell me, I can guess, it would look a bit off-putting if you called it "profit" instead of "product". It smells like the margin SJP make for getting you to sell stuff to a client?
The SJP business model is simple - you get as many salesmen partners as you can who can sell without screwing up on FCA rules, let them keep most of the commission and charge the profit margin to the client as an add on.
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
sounds like St James Place. Avoid them like the plaque.
It is, are you able to elaborate at all?
RDR, at the start of 2016, was supposed to get away from initial / front end charging. The "Retail Distribution Review" found that Investment Bonds may have been sold instead of some other product or scheme due to their charges & commission structure. Advisers could earn up to 8% commission where most pension & other plans would be 3%-5%. The idea around RDR was that investment schemes carried little or no charges (a max of around 1%) with the advisor getting his "commission" by charging a fee. Therefore there is no bias as the advisors fee (say 3% ) is the same no matter if he advises a pension, an ISA, an Investment Bond, a Structured Product or a VCT.
However, SJP have gone from a front end charge (initial) to a back end charge (exit fee). I believe its 5% for an investment & 6% for a pension - with SJP keeping 3% & the advisor getting the rest. All the products & schemes I listed above carry no exit fees & you could come out of them after 6 months or 6 years and it makes no difference.
PS - SJP advisors obviously only "advise" on SJP products. Its like the last 20 years hasn't happened.
Hi Golfaddick,
Firstly for transparency I am an SJP Partner and business owner and thus naturally I will have at least some bias! This said I am not your typical arrogant adviser (as an addick I am naturally salt of the earth ;D) I come in peace to challenge some of the misinformation within your comment. I do not believe SJP are perfect and I am happy to engage in any criticism you may have, which will only help me evolve my approach and improve as an adviser. However lets at least make sure that any criticism is based on a factually correct understanding of the product structure.
Furthermore I think to dismiss what I believe to be the biggest provider of financial advice in the UK with 3500+ advisers (about 15% of the total in the UK) is disingenuous, especially given how many of these advisers have attained Chartered status, i.e. they are not merely salesmen. Whilst I accept some clients may be ignorant, I highly doubt that the 600,000 clients of SJP with £100 Billion under management are all imbeciles.
Aside from the specific criticism of SJP, the constant dog fight between different factions of the advisory community only serves to create more barriers to advice at a time when so many families have a clear and obvious advice gap.
Again, for balance to reiterate I do not believe SJP are perfect, nor have I found any investment house or IFA firm who are. In my experience there are some excellent IFA's and some excellent SJP partners. There are some awful and unscrupulous IFA's and some awful and unscrupulous SJP Partners.
I would also add that the constant bashing of what is a UK business success story does seem to be in part due to British mentality.
Onto your comments, I would correct these as follows;
- Firstly I would accept that there may have been occasions prior to me joining SJP in 2013 when product bias occurred, I cannot seek to defend anything that occurred prior to my involvement. This said, i'm not sure where the 8% figure comes from. I suspect the decision to recommend Investment Bonds as opposed to ISA / Unit Trust was driven by how palatable the 2 charging structures were (read below). The important thing is there is no longer a product bias as A - the advisers earnings are the same on all investment products mentioned and B- when the advice is checked centrally you would need a bloody good reason to be recommending an Investment Bond over an ISA or Unit Trust, the advice just would not be allowed.
- "SJP have gone from a front end charge (initial) to a back end charge (exit fee). I believe its 5% for an investment & 6% for a pension - with SJP keeping 3% & the advisor getting the rest. All the products & schemes I listed above carry no exit fees & you could come out of them after 6 months or 6 years and it makes no difference."
This is full of inaccuracies. Lets break it down;
The initial charge on an ISA or Unit Trust is a maximum of 5% . You are wrong regarding an exit penalty, there isn't one. I do not believe that ISA's are even allowed to carry an exit penalty. The split in the case would be 2% SJP & 3% adviser. This said, that is a headline rate, I typically charge a 3% initial charge and thus both splits are reduced by 40% accordingly. This is increasingly common.
The charging structure for Investment Bonds & Pensions is fundamentally different. There is no fee levied at the front end, i.e. 100% of the clients money is invested on day 1, nor does the client pay a separate fee for the advice. There is however an exit penalty which is 6% in year 1, but it reduces by 1% each year and thus 0% after 6 years. You are therefore wrong to assert that these products carry no exit fees and therefore it makes a huge difference if you are with us for 6 months or 6 years.
With regards to the latter I can understand if you do not like this approach. For my clients however, many of whom may have a reasonable pension portfolio but little cash savings, this works perfectly for them.
"SJP advisors obviously only "advise" on SJP products"
This is partially true in that for ISA's, Investment Bonds, Unit Trusts and Personal Pensions the investment approach is Restricted to the SJP funds, because this is the core business model which to date has served them well. For products such as EIS, VCT's, insurance products etc SJP do not manufacture there own products. Instead they make available a panel of providers (not whole of market). This is an area that could be criticized but there are areas to counter. In looking at EIS / VCT for example I would back the due diligence of SJP over the vast majority of small IFA's locally who simply do not have the resource.
I hope this is a useful clarification, happy of course to engage further on other areas, ongoing charges for example.
All the best
Croydon(ish) Addick
As you addressed me personally I'll have the right to reply, but I think @Dippenhall & @rob7Lee have already nailed some of the main points.......and I cant seem to highlight texts on this new system so I'll just have to take it from here:
Most of what you write is guff. You yourself agree that there is an exit penalty on an Investment Bond ............why ?? are clients not allowed to change their minds after 2 years ?? say one of the children needs some money - are you going to penalise them 4% just so they can access THEIR money. The whole point of RDR was transparency. I can hold me head up high when I go & see a client & can tell them that the surrender value of their Bond is THE value of their Bond.
As I said, I don't know too much about SJP & the structure of their costs & charges - only that 1 client that has over £800k invested via me has inherited a SJP Bond from his late father & has £100k that he wants me to advise him on, but we cant access it otherwise he'll lose over £4k in exit fees. And that on the Charles Derby (The company I work for) advisors extranet there are often posts decrying SJP' charges when we come across some pore sap who has had the unfortunate experience of getting tied to them.
I would ask, if you can reduce the charge down from 5% to 3% who loses out.....SJP or yourself ?? Does that mean you are doing it for a 1% fee, or are SJP not getting their cut ??
I have to add......one of the reasons why us IFA's charge a 3% initial fee is that some of it pays for the research. That is researching the provider & the product.....and then the fund or funds to be used. Can't imagine there is too much research when advising a SJP pension..
As for the specific product & fund charges. Are you aware that a standard platform charges around 0.3%-0.4% and then fund charges can be less than 1%. A very good pension provider (Royal Life) charges just 0.45% on a portfilio in excess of £100k.....and using one of their 9 Governed Portfolios would cost you not a penny more. So, adding on my 0.5% you can get a diverse portfolio, rebalanced quarterly, for less than 1%. With no exit fees.
So Mr tied advisor, don't tell me that your glossy brochures are worth the extra cost.
As for the specific product & fund charges. Are you aware that a standard platform charges around 0.3%-0.4% and then fund charges can be less than 1%. A very good pension provider (Royal Life) charges just 0.45% on a portfilio in excess of £100k.....and using one of their 9 Governed Portfolios would cost you not a penny more. So, adding on my 0.5% you can get a diverse portfolio, rebalanced quarterly, for less than 1%. With no exit fees.
It always amazes me the difference charges funds make, Fidelity and HSBC are one if not the cheapest, from 0.06%, their (HSBC) American Index Fund has had an annualised growth of over 15% the last 5 years, fidelity almost the same performance (only been open 3 years) of 16.71% annualised last 3 years.
Hmmm. For a private pension I was quoted 0% in but 1.66% per annum and a huge exit fee in first 6 years so above has given real food for thought!
If that is SJP it will be 0% initial charge but the 1.66% pa sounds too low tbh unless the charges have been reduced for a transfer. Its typically roughly 1% product + 0.5% advice + 0.4% for fund managers = 1.9%
The exit penalty will be 6% in Y1, 5% Y2, 4% Y3, 3% Y4, 2% Y5, 1% Y6. 0% thereafter.
SJP success is based on very effective marketing and attracting salesmen by calling them partners and giving them chunky commission. Attracts the worst kind of salesman in my experience. Keeps costs down and margins up by only offering investments with managers it's done exclusivity deals with for kick backs.
Like all IFAs you only earn a living by moving other people’s money around and taking a cut as it passes through your hands. There is always a “better” investment than the one the last adviser recommended whose commission you need to filch (sorry I forgot, it's called adviser charging now).
When I see a request for information from SJP you know another sucker has been hooked. Had a case a few years back now, of SJP transferring a deferred pension scheme member away from our scheme and into a personal pension/SIPP. Adviser phoned up a few months later and complained we hadn’t warned him that the member only paid investment charges of 0.15%. The wally had unwittingly put him in the same fund with the same manager and charged x times more in investment charges and a valueless advisory fee. The standard request for information is a joke, didn't ask for investment charges, only for the form to process a transfer out before even getting the information. The idea never occurred to the salesman that he might need to check what was currently on offer and advise a client not to take any action - but then an adviser has to earn crust.
One of my daughter's friends is an SJP partner, wonderful company who must wow her clients. Have met with socially and asked how she does so well. I will say no more than that she knows as much about finance as our parrot could learn by rote, but enough to be able to earn a living and send 2 kids to Bedales.
The St James Place Academy is clearly for training people with no previous experience in finance to meet the lowest standards required to be allowed to sell financial products to the public using a decision tree. Mostly multiple choice questions which my 8 year old granddaughter with a good memory and some luck could handle.
Financial Planning is a successful business for those who earn a living from it, but as for adding value for the client, it's not measured and it's non existent. The savings ratio in the UK is below 5%, the average for Europe is over 12%. What's the UK success story? I guess it's the 25%+ profit margin SJP makes. Still a bit thin compared to HGL's 75% profit margin, that's a super success story.
What is a "product" charge that costs 1% in addition to the 0.4% fund charges and the 0.5% advice - no need to tell me, I can guess, it would look a bit off-putting if you called it "profit" instead of "product". It smells like the margin SJP make for getting you to sell stuff to a client?
The SJP business model is simple - you get as many salesmen partners as you can who can sell without screwing up on FCA rules, let them keep most of the commission and charge the profit margin to the client as an add on.
Cynical about IFAs - moi?
I have seen the types of salesmen you describe, but in my experience these have been the 50 year old + advisers, few of the new breed that i've ever met are like that.
Clearly that's awful, but I've seen anecdotal evidence of this from a lot of the major networks, considering the level of red tape in our industry it is worrying how many terrible advisers there are, i assure you this is not limited to SJP or any other network.
Re the Academy, there are actually 2. You are referring to the shorter one for people changing careers. Whilst there have been a couple of excellent advisers that I have met that have been through this, i totally agree with you that a good portion of those coming through it are of poor quality / purely salespeople. I personally think Chartered should be the necessary standard to be an adviser and no doubt this will be brought in eventually. There is a second academy which is 12 months long, 1 week a month residential training. This is what I attended and whilst this alone cannot deliver a ready to go adviser, it is about as good as you can expect from a training programme in my opinion. It isn't merely a training ground for salespeople either and of the 20 or so individuals that went through this with me, I would say that only a quarter are of poor quality.
I would have to disagree that financial planning does not add value. If you are comparing whether an adviser can add value to a well informed investor that has time on their side then certainly a lot would be better served to do it themselves. I know my clients see the value of the planning we undertake because we ask them regularly.
The success stories are SJP & HL, two successful British businesses whatever you think about them.
Ultimately whatever you call it all parties will wish to earn their bread, I charge what I feel is appropriate and fair, not what I feel I can get away with.
That's a lazy broad-brush view of 3,500 advisers but of course you are welcome to it and no doubt that is based on your considerable experience.
I too am cynical about IFA's, I cannot stand the industry or most of the people in it. Everything that we do as a business is geared to doing the opposite as everyone else, many of whom are quite frankly d*ckheads in my experience.
FA's most definitely have their place, but an upfront 5% charge (or 3% you use) on an ISA - by the sounds of it which can only be invested in your own funds is daylight robbery, it's not even independent advice but advice on which or the limited funds available to invest in. Is there also an on going charge on top?
What is the on going charge for pensions?
It depends on the client situation and what we are doing for them. If for example we have had two comprehensive meetings getting their affairs in order, building a plan, undertaking cashflow modelling, educating them around the various areas of planning / taxation etc and putting them in touch with fellow professionals then I feel very comfortable with what we charge. The investment element is only one part of a much wider, more comprehensive process.
It depends on the portfolio etc but likely 1.5% - 1.9% all in. Yes this is significantly more than doing it yourself through a cheap platform, but that is comparing apples and pears. The criticism of this level of ongoing fees seems to be levied at SJP quite often, but on most occasions we have come up against other IFA's and all charges are taken into account, there are a hell of a lot of providers that charge more. I personally am very, very open with my clients about initial / ongoing charges. I know a lot of SJP Partners and IFAs who aren't.
FA's most definitely have their place, but an upfront 5% charge (or 3% you use) on an ISA - by the sounds of it which can only be invested in your own funds is daylight robbery, it's not even independent advice but advice on which or the limited funds available to invest in. Is there also an on going charge on top?
What is the on going charge for pensions?
It depends on the client situation and what we are doing for them. If for example we have had two comprehensive meetings getting their affairs in order, building a plan, undertaking cashflow modelling, educating them around the various areas of planning / taxation etc and putting them in touch with fellow professionals then I feel very comfortable with what we charge. The investment element is only one part of a much wider, more comprehensive process.
It depends on the portfolio etc but likely 1.5% - 1.9% all in. Yes this is significantly more than doing it yourself through a cheap platform, but that is comparing apples and pears. The criticism of this level of ongoing fees seems to be levied at SJP quite often, but on most occasions we have come up against other IFA's and all charges are taken into account, there are a hell of a lot of providers that charge more. I personally am very, very open with my clients about initial / ongoing charges. I know a lot of SJP Partners and IFAs who aren't
Fair enough, I just can’t see the value in going to an advisor who is tied to a limited amount of funds and only their own companies, I might as well pop down to the advisor of my local bank?
The fees to me are independent advisor level (and some), yet you aren’t, that’s the crux. Would we be able to meet and you review the 20+ funds and shares I have in my ISA/Pension/investment account how would you establish if they are better than what you can offer? Not sure what to make of your reference to cash flow modelling, other professionals or taxation....
For reference I use a cheap platform for my ISA, Pension and investment account, Fidelity. Platform fee is 0.2% plus the fund charge which varies from 0.06% to 0.9%. I’d wager that most outperform SJP funds, are their performance in the public domain?
You are right about apples and pears, but in my view not in the way you believe.
for advice: 4.5% initial charge for you to tell me which funds of yours are best for me?
1.5% initial charge for product
plus minimum of 0.5% ongoing for first 6 years then 1%, or up to 6%
plus fund charges up to 1.26% depending on what ones you advise me to have.
so move £1m and you want £60k plus £5k per annum minimum plus up to £12.6k in fund charge, or when I realise what a mistake it was another £60k to withdraw?
Thats simply madness, nearly 15%....
————————————
Advice Charges
We charge for our initial advice and for our ongoing advice. 4.5% of your initial investment will be used to pay for initial advice and an annual charge of 0.5% will be charged for the ongoing advice and the relationship with your adviser.
Product Charges
There will be an initial product charge of 1.5% of your investment. There will also be an annual product management charge of 1% but this will be waived in the first 6 years for each investment. If you encash within the first 6 years of an investment there will be an early withdrawal charge of 1% of the value of your fund in respect of this investment.
FA's most definitely have their place, but an upfront 5% charge (or 3% you use) on an ISA - by the sounds of it which can only be invested in your own funds is daylight robbery, it's not even independent advice but advice on which or the limited funds available to invest in. Is there also an on going charge on top?
What is the on going charge for pensions?
From my recent experience from SJP quoted above which was in pensions it was 0% in, but exit fee of 6% yr one ratcheting by a % each year until 0% yr 6. I could have lived with that as it is a long term investment but the 1.66% of capital fee pa (down from normal 1.9% because I started talking to them about 12 months before so they said they would honour the fee applicable at the start of our talks), seemed excessive.
As they were keen to show me the wonderful average returns they had made in the last 8 years or so I offered to pay 50% of the profit they made me rather than 1.66% of my capital which would have been much better based on their numbers but they were not prepared (allowed?) to back themselves.
the chap I met seemed genuine enough and certainly knew more than I (as he should) but I think I will just stick to my current arrangements.
1.66 or 1.9% for them to select from their own funds is ridiculous to be honest. Whole of market maybe but I don’t see the value, sorry @croydon
Wrong Croydon!
But my two cents as someone who's in the industry: SJP are crooks and you're better off with a genuine IFA. Not someone heavily restricted to their own, expensive product.
So as a complete novice here is my question to our IFAs on here and one that troubles me despite the fact I think I should use one. It is not meant to be rude, so apologies if it comes across that way;
If IFAs are so excellent at investing money and growing this investment then why are they working and not all themselves minted and living the life of riley?
I kind of get it for the younger ones whom have maybe not built the wealth to invest but surely if you are that finance literate you should be retired by 50 or is it simply the love of the IFA job which motivates to keep going?
So as a complete novice here is my question to our IFAs on here and one that troubles me despite the fact I think I should use one. It is not meant to be rude, so apologies if it comes across that way;
If IFAs are so excellent at investing money and growing this investment then why are they working and not all themselves minted and living the life of riley?
I kind of get it for the younger ones whom have maybe not built the wealth to invest but surely if you are that finance literate you should be retired by 50 or is it simply the love of the IFA job which motivates to keep going?
I think the answer is that if you had the intelligence and judgment to be a great investor, your choice of career probably wouldn’t have been IFA.
My first question would always be,”What’s the track record on your own money and where are you personally invested today?”
Maybe we should set up a virtual investment club, IFA's verses tied FA's v's Joe public, a virtual £100k at the beginning of the tax year and see how much you have by the end. £20 entrance fee, winner takes half, half to the upbeats or similar.
So as a complete novice here is my question to our IFAs on here and one that troubles me despite the fact I think I should use one. It is not meant to be rude, so apologies if it comes across that way;
If IFAs are so excellent at investing money and growing this investment then why are they working and not all themselves minted and living the life of riley?
I kind of get it for the younger ones whom have maybe not built the wealth to invest but surely if you are that finance literate you should be retired by 50 or is it simply the love of the IFA job which motivates to keep going?
Maybe we should set up a virtual investment club, IFA's verses tied FA's v's Joe public, a virtual £100k at the beginning of the tax year and see how much you have by the end. £20 entrance fee, winner takes half, half to the upbeats or similar.
Who's in?
Yes....I'd be up for that. Happy to put my money where my mouth is.
On the subject of charges, I had an interesting client meeting today.......
Client I've known for 18 years. GP who has specialised in Dermotology & is now totally self employed & no longer in the NHS Pension scheme. Income last year was c£185k & the tax year now ending probably in excess of £200k (inc rental income from 3 btls). She is 50 & type 1 diabetic who wants to retire before age 60 - most likely 55. NHS Pension is worth £30k pa.
She has a Private pension with Scottish Widows which I probably "sold" her 15 years ago. Old style. 1% AMC with some additional fund charges that brings it up to 1.2%. No ongoing advisor charges.....which on a fund of £160k is a bit galling, especially as it doesn't pay commission either if she wants to top it up. Currently paying £9750pa so is just below the reduced AA.
I have been talking to her over the last 2 years about switching / transferring to a newer "flexi access drawdown" plan. Main benefits to her are 1) that death benefits before she is 75 are totally tax free. She has a son who will inherit her entire estate (With btls probably over £2m) & put it to her the advantages to him of a totally tax free pension fund upon her death (New rules). And 2) that a new style pension has cheaper charges. Staying with SW would mean an AMC of 0.3% and on a straight like for like switch of funds the additional fund cost of 0.47.....so 0.77% in total. I could then add on my 0.5% ongping fee and make it 1.27%.....or reduce the ongoing fee to 0.4% & bring it in for slightly less than her current plan. Other option (and my preferred one) would be to switch the entire fund to Royal London, where the AMC is 0.45%. No additional fund charges using one of their 9 Governed portfolios (which are reviewed quarterly). Add in my 0.5% and she has a fully flexible, ready for drawdown plan for less than 1%.....and 0.25% less than her current old style plan.
Her concern. Cost. That I was "taking" £800 pa......even though the overall cost was lower. I was also only going to charge her an initial fee of £1500 (yes, a lot of money)....but less than 1% of the fund value....and which I should be charging 3%. And this to someone who earns £200k pa.
I'm pretty certain she will do it......but it will take another meeting & lots more illustrations & number crunching before she agrees. She understands the need to do it (she can't go into drawdown with her current plan) but just has a thing about charges.
After she has made the switch, what ongoing work is there for you to do? On the face of it those ongoing charges seem a total scam as surely its the pension fund doing all the work?
So as a complete novice here is my question to our IFAs on here and one that troubles me despite the fact I think I should use one. It is not meant to be rude, so apologies if it comes across that way;
If IFAs are so excellent at investing money and growing this investment then why are they working and not all themselves minted and living the life of riley?
I kind of get it for the younger ones whom have maybe not built the wealth to invest but surely if you are that finance literate you should be retired by 50 or is it simply the love of the IFA job which motivates to keep going?
We (well certainly I) are not excellent at investing money.....just know the best tax effiecient places & schemes to invest in. Also the weird & wonderful rules & regs around pensions (Reduced Annual Allowance, carry forward etc) and the more esoteric investments ( structured products, VCT's & EIS) that are around. Also, if like me, you don't charge the earth (see above post) then we don't generally have a lot of spare case around to invest.
And to answer a pp. My pension is on the Cofunds platform & I probably trade too much, although one of my better choices was putting last years pension allocation into the Baillie Gifford Global Discovery fund. Turned £6250 into £7500 in just over 6 months.
My answer to anyone seeking advice & not sure if an IFA is worth it is.....what do you know about the Annual & Lifetime Allowance. Will you be subject to a reduced AA and /or can you calculate it for a final salary scheme (note.....it has nothing to do with your actual contributions). If you can answer yes then fine, crack on. If not, I suggest you just might need my help.
The truth is that people are not willing to pay for the service they actually need, which is a fee based service like using a solicitor.
Historically commission worked because it wasn’t a visible cost and looked “free”. Now advisers have to disclose the commission dressed up as a fee it is more difficult to justify added value. You rarely look at a solicitor as adding value, you pay him to do stuff you can’t do yourself and you should pay for his time, not how much is involved in the transaction.
If a professional adviser had the full range of skills and knowledge to cover off tax, pension and investments to provide independent advice, but could earn a 6 figure salary using his skill within a large corporate financial consultancy where the big money is - his career path would unlikely lead him down the path of being an IFA. If he chose to be an IFA he would need to charge at least £300 an hour for his time to give unbiased objective advice that didn’t have to result in churning of investments that released commission.
It costs the same to advise on investing £10k as £100k but the £10k would cost more if the individual had more financial issues to sort out. That’s why taking a % of assets charge is not only unfair but means an adviser cannot afford to “waste” his time advising normal folk with modest wealth and needs to make an excessive margin on large accounts to subsidise his loss making activities.
it also means money has to be churned to free up the cash to fund client charges. How many people would want to pay £2,000 from their wages for advice that might result in not changing investments but was useful in preventing a bad decision.
When I was a fee based consultant I had a client refuse to pay a £1,500 fee for annuity advice and servicing the transfer of a £m+ fund but instead turned to a commission based adviser taking 1.5% commission of £18,000 because it was “free” to use an IFA.
The long established tradition of commission business has conditioned people to think financial advice should be free at the point of delivery, and close our eyes on how the ultimate costs are funded and who is profiting, bit like the NHS.
We have the financial advisory service industry we are prepared to support and pay for, and in many ways I should not be knocking it if the public are not demanding something different.
On the subject of charges, I had an interesting client meeting today.......
Client I've known for 18 years. GP who has specialised in Dermotology & is now totally self employed & no longer in the NHS Pension scheme. Income last year was c£185k & the tax year now ending probably in excess of £200k (inc rental income from 3 btls). She is 50 & type 1 diabetic who wants to retire before age 60 - most likely 55. NHS Pension is worth £30k pa.
She has a Private pension with Scottish Widows which I probably "sold" her 15 years ago. Old style. 1% AMC with some additional fund charges that brings it up to 1.2%. No ongoing advisor charges.....which on a fund of £160k is a bit galling, especially as it doesn't pay commission either if she wants to top it up. Currently paying £9750pa so is just below the reduced AA.
I have been talking to her over the last 2 years about switching / transferring to a newer "flexi access drawdown" plan. Main benefits to her are 1) that death benefits before she is 75 are totally tax free. She has a son who will inherit her entire estate (With btls probably over £2m) & put it to her the advantages to him of a totally tax free pension fund upon her death (New rules). And 2) that a new style pension has cheaper charges. Staying with SW would mean an AMC of 0.3% and on a straight like for like switch of funds the additional fund cost of 0.47.....so 0.77% in total. I could then add on my 0.5% ongping fee and make it 1.27%.....or reduce the ongoing fee to 0.4% & bring it in for slightly less than her current plan. Other option (and my preferred one) would be to switch the entire fund to Royal London, where the AMC is 0.45%. No additional fund charges using one of their 9 Governed portfolios (which are reviewed quarterly). Add in my 0.5% and she has a fully flexible, ready for drawdown plan for less than 1%.....and 0.25% less than her current old style plan.
Her concern. Cost. That I was "taking" £800 pa......even though the overall cost was lower. I was also only going to charge her an initial fee of £1500 (yes, a lot of money)....but less than 1% of the fund value....and which I should be charging 3%. And this to someone who earns £200k pa.
I'm pretty certain she will do it......but it will take another meeting & lots more illustrations & number crunching before she agrees. She understands the need to do it (she can't go into drawdown with her current plan) but just has a thing about charges.
Is it me....or am I just a crap "salesman".
Not always the case, but in my experience the wealthier people are often the tightest!
It's a tough sell I guess, which I sort of get. If it were me, i'd rather pay for your time/advice than a % charge ongoing as that seems an unfair way of charging as @Dippenhall mentions. When I got advice/report on a final salary scheme to transfer to my SIPP I did that, just paid for it.
Problem of course becomes I'm sure if you said to the lady, there you go, thats £1,000 please she'd find that difficult anyway.
I think the ongoing % charge basis needs to change.
Comments
Firstly for transparency I am an SJP Partner and business owner and thus naturally I will have at least some bias! This said I am not your typical arrogant adviser (as an addick I am naturally salt of the earth ;D) I come in peace to challenge some of the misinformation within your comment. I do not believe SJP are perfect and I am happy to engage in any criticism you may have, which will only help me evolve my approach and improve as an adviser. However lets at least make sure that any criticism is based on a factually correct understanding of the product structure.
Furthermore I think to dismiss what I believe to be the biggest provider of financial advice in the UK with 3500+ advisers (about 15% of the total in the UK) is disingenuous, especially given how many of these advisers have attained Chartered status, i.e. they are not merely salesmen. Whilst I accept some clients may be ignorant, I highly doubt that the 600,000 clients of SJP with £100 Billion under management are all imbeciles.
Aside from the specific criticism of SJP, the constant dog fight between different factions of the advisory community only serves to create more barriers to advice at a time when so many families have a clear and obvious advice gap.
Again, for balance to reiterate I do not believe SJP are perfect, nor have I found any investment house or IFA firm who are. In my experience there are some excellent IFA's and some excellent SJP partners. There are some awful and unscrupulous IFA's and some awful and unscrupulous SJP Partners.
I would also add that the constant bashing of what is a UK business success story does seem to be in part due to British mentality.
Onto your comments, I would correct these as follows;
- Firstly I would accept that there may have been occasions prior to me joining SJP in 2013 when product bias occurred, I cannot seek to defend anything that occurred prior to my involvement. This said, i'm not sure where the 8% figure comes from. I suspect the decision to recommend Investment Bonds as opposed to ISA / Unit Trust was driven by how palatable the 2 charging structures were (read below). The important thing is there is no longer a product bias as A - the advisers earnings are the same on all investment products mentioned and B- when the advice is checked centrally you would need a bloody good reason to be recommending an Investment Bond over an ISA or Unit Trust, the advice just would not be allowed.
- "SJP have gone from a front end charge (initial) to a back end charge (exit fee). I believe its 5% for an investment & 6% for a pension - with SJP keeping 3% & the advisor getting the rest. All the products & schemes I listed above carry no exit fees & you could come out of them after 6 months or 6 years and it makes no difference."
This is full of inaccuracies. Lets break it down;
The initial charge on an ISA or Unit Trust is a maximum of 5% . You are wrong regarding an exit penalty, there isn't one. I do not believe that ISA's are even allowed to carry an exit penalty. The split in the case would be 2% SJP & 3% adviser. This said, that is a headline rate, I typically charge a 3% initial charge and thus both splits are reduced by 40% accordingly. This is increasingly common.
The charging structure for Investment Bonds & Pensions is fundamentally different. There is no fee levied at the front end, i.e. 100% of the clients money is invested on day 1, nor does the client pay a separate fee for the advice. There is however an exit penalty which is 6% in year 1, but it reduces by 1% each year and thus 0% after 6 years. You are therefore wrong to assert that these products carry no exit fees and therefore it makes a huge difference if you are with us for 6 months or 6 years.
With regards to the latter I can understand if you do not like this approach. For my clients however, many of whom may have a reasonable pension portfolio but little cash savings, this works perfectly for them.
"SJP advisors obviously only "advise" on SJP products"
This is partially true in that for ISA's, Investment Bonds, Unit Trusts and Personal Pensions the investment approach is Restricted to the SJP funds, because this is the core business model which to date has served them well. For products such as EIS, VCT's, insurance products etc SJP do not manufacture there own products. Instead they make available a panel of providers (not whole of market). This is an area that could be criticized but there are areas to counter. In looking at EIS / VCT for example I would back the due diligence of SJP over the vast majority of small IFA's locally who simply do not have the resource.
I hope this is a useful clarification, happy of course to engage further on other areas, ongoing charges for example.
All the best
Croydon(ish) Addick
If that is SJP it will be 0% initial charge but the 1.66% pa sounds too low tbh unless the charges have been reduced for a transfer. Its typically roughly 1% product + 0.5% advice + 0.4% for fund managers = 1.9%
The exit penalty will be 6% in Y1, 5% Y2, 4% Y3, 3% Y4, 2% Y5, 1% Y6. 0% thereafter.
Like all IFAs you only earn a living by moving other people’s money around and taking a cut as it passes through your hands. There is always a “better” investment than the one the last adviser recommended whose commission you need to filch (sorry I forgot, it's called adviser charging now).
When I see a request for information from SJP you know another sucker has been hooked. Had a case a few years back now, of SJP transferring a deferred pension scheme member away from our scheme and into a personal pension/SIPP. Adviser phoned up a few months later and complained we hadn’t warned him that the member only paid investment charges of 0.15%. The wally had unwittingly put him in the same fund with the same manager and charged x times more in investment charges and a valueless advisory fee. The standard request for information is a joke, didn't ask for investment charges, only for the form to process a transfer out before even getting the information. The idea never occurred to the salesman that he might need to check what was currently on offer and advise a client not to take any action - but then an adviser has to earn crust.
One of my daughter's friends is an SJP partner, wonderful company who must wow her clients. Have met with socially and asked how she does so well. I will say no more than that she knows as much about finance as our parrot could learn by rote, but enough to be able to earn a living and send 2 kids to Bedales.
The St James Place Academy is clearly for training people with no previous experience in finance to meet the lowest standards required to be allowed to sell financial products to the public using a decision tree. Mostly multiple choice questions which my 8 year old granddaughter with a good memory and some luck could handle.
Financial Planning is a successful business for those who earn a living from it, but as for adding value for the client, it's not measured and it's non existent. The savings ratio in the UK is below 5%, the average for Europe is over 12%. What's the UK success story? I guess it's the 25%+ profit margin SJP makes. Still a bit thin compared to HGL's 75% profit margin, that's a super success story.
What is a "product" charge that costs 1% in addition to the 0.4% fund charges and the 0.5% advice - no need to tell me, I can guess, it would look a bit off-putting if you called it "profit" instead of "product". It smells like the margin SJP make for getting you to sell stuff to a client?
The SJP business model is simple - you get as many salesmen partners as you can who can sell without screwing up on FCA rules, let them keep most of the commission and charge the profit margin to the client as an add on.
Cynical about IFAs - moi?
@Croydon(ish)_Addick
FA's most definitely have their place, but an upfront 5% charge (or 3% you use) on an ISA - by the sounds of it which can only be invested in your own funds is daylight robbery, it's not even independent advice but advice on which or the limited funds available to invest in. Is there also an on going charge on top?
What is the on going charge for pensions?
There's only one way to settle this.
As they were keen to show me the wonderful average returns they had made in the last 8 years or so I offered to pay 50% of the profit they made me rather than 1.66% of my capital which would have been much better based on their numbers but they were not prepared (allowed?) to back themselves.
the chap I met seemed genuine enough and certainly knew more than I (as he should) but I think I will just stick to my current arrangements.
As you addressed me personally I'll have the right to reply, but I think @Dippenhall & @rob7Lee have already nailed some of the main points.......and I cant seem to highlight texts on this new system so I'll just have to take it from here:
Most of what you write is guff. You yourself agree that there is an exit penalty on an Investment Bond ............why ?? are clients not allowed to change their minds after 2 years ?? say one of the children needs some money - are you going to penalise them 4% just so they can access THEIR money. The whole point of RDR was transparency. I can hold me head up high when I go & see a client & can tell them that the surrender value of their Bond is THE value of their Bond.
As I said, I don't know too much about SJP & the structure of their costs & charges - only that 1 client that has over £800k invested via me has inherited a SJP Bond from his late father & has £100k that he wants me to advise him on, but we cant access it otherwise he'll lose over £4k in exit fees. And that on the Charles Derby (The company I work for) advisors extranet there are often posts decrying SJP' charges when we come across some pore sap who has had the unfortunate experience of getting tied to them.
I would ask, if you can reduce the charge down from 5% to 3% who loses out.....SJP or yourself ?? Does that mean you are doing it for a 1% fee, or are SJP not getting their cut ??
As for the specific product & fund charges. Are you aware that a standard platform charges around 0.3%-0.4% and then fund charges can be less than 1%. A very good pension provider (Royal Life) charges just 0.45% on a portfilio in excess of £100k.....and using one of their 9 Governed Portfolios would cost you not a penny more. So, adding on my 0.5% you can get a diverse portfolio, rebalanced quarterly, for less than 1%. With no exit fees.
So Mr tied advisor, don't tell me that your glossy brochures are worth the extra cost.
Clearly that's awful, but I've seen anecdotal evidence of this from a lot of the major networks, considering the level of red tape in our industry it is worrying how many terrible advisers there are, i assure you this is not limited to SJP or any other network.
Re the Academy, there are actually 2. You are referring to the shorter one for people changing careers. Whilst there have been a couple of excellent advisers that I have met that have been through this, i totally agree with you that a good portion of those coming through it are of poor quality / purely salespeople. I personally think Chartered should be the necessary standard to be an adviser and no doubt this will be brought in eventually. There is a second academy which is 12 months long, 1 week a month residential training. This is what I attended and whilst this alone cannot deliver a ready to go adviser, it is about as good as you can expect from a training programme in my opinion. It isn't merely a training ground for salespeople either and of the 20 or so individuals that went through this with me, I would say that only a quarter are of poor quality.
I would have to disagree that financial planning does not add value. If you are comparing whether an adviser can add value to a well informed investor that has time on their side then certainly a lot would be better served to do it themselves. I know my clients see the value of the planning we undertake because we ask them regularly.
The success stories are SJP & HL, two successful British businesses whatever you think about them.
Ultimately whatever you call it all parties will wish to earn their bread, I charge what I feel is appropriate and fair, not what I feel I can get away with.
That's a lazy broad-brush view of 3,500 advisers but of course you are welcome to it and no doubt that is based on your considerable experience.
I too am cynical about IFA's, I cannot stand the industry or most of the people in it. Everything that we do as a business is geared to doing the opposite as everyone else, many of whom are quite frankly d*ckheads in my experience.
It depends on the portfolio etc but likely 1.5% - 1.9% all in. Yes this is significantly more than doing it yourself through a cheap platform, but that is comparing apples and pears. The criticism of this level of ongoing fees seems to be levied at SJP quite often, but on most occasions we have come up against other IFA's and all charges are taken into account, there are a hell of a lot of providers that charge more. I personally am very, very open with my clients about initial / ongoing charges. I know a lot of SJP Partners and IFAs who aren't.
Fair enough, I just can’t see the value in going to an advisor who is tied to a limited amount of funds and only their own companies, I might as well pop down to the advisor of my local bank?
The fees to me are independent advisor level (and some), yet you aren’t, that’s the crux. Would we be able to meet and you review the 20+ funds and shares I have in my ISA/Pension/investment account how would you establish if they are better than what you can offer? Not sure what to make of your reference to cash flow modelling, other professionals or taxation....
For reference I use a cheap platform for my ISA, Pension and investment account, Fidelity. Platform fee is 0.2% plus the fund charge which varies from 0.06% to 0.9%. I’d wager that most outperform SJP funds, are their performance in the public domain?
You are right about apples and pears, but in my view not in the way you believe.
From SJP website for a Pension:
for advice: 4.5% initial charge for you to tell me which funds of yours are best for me?
1.5% initial charge for product
plus minimum of 0.5% ongoing for first 6 years then 1%, or up to 6%
plus fund charges up to 1.26% depending on what ones you advise me to have.
so move £1m and you want £60k plus £5k per annum minimum plus up to £12.6k in fund charge, or when I realise what a mistake it was another £60k to withdraw?
Thats simply madness, nearly 15%....
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Advice Charges
We charge for our initial advice and for our ongoing advice. 4.5% of your initial investment will be used to pay for initial advice and an annual charge of 0.5% will be charged for the ongoing advice and the relationship with your adviser.
Product Charges
There will be an initial product charge of 1.5% of your investment. There will also be an annual product management charge of 1% but this will be waived in the first 6 years for each investment. If you encash within the first 6 years of an investment there will be an early withdrawal charge of 1% of the value of your fund in respect of this investment.
But my two cents as someone who's in the industry: SJP are crooks and you're better off with a genuine IFA. Not someone heavily restricted to their own, expensive product.
If IFAs are so excellent at investing money and growing this investment then why are they working and not all themselves minted and living the life of riley?
I kind of get it for the younger ones whom have maybe not built the wealth to invest but surely if you are that finance literate you should be retired by 50 or is it simply the love of the IFA job which motivates to keep going?
My first question would always be,”What’s the track record on your own money and where are you personally invested today?”
Maybe we should set up a virtual investment club, IFA's verses tied FA's v's Joe public, a virtual £100k at the beginning of the tax year and see how much you have by the end. £20 entrance fee, winner takes half, half to the upbeats or similar.
Who's in?
Client I've known for 18 years. GP who has specialised in Dermotology & is now totally self employed & no longer in the NHS Pension scheme. Income last year was c£185k & the tax year now ending probably in excess of £200k (inc rental income from 3 btls). She is 50 & type 1 diabetic who wants to retire before age 60 - most likely 55. NHS Pension is worth £30k pa.
She has a Private pension with Scottish Widows which I probably "sold" her 15 years ago. Old style. 1% AMC with some additional fund charges that brings it up to 1.2%. No ongoing advisor charges.....which on a fund of £160k is a bit galling, especially as it doesn't pay commission either if she wants to top it up. Currently paying £9750pa so is just below the reduced AA.
I have been talking to her over the last 2 years about switching / transferring to a newer "flexi access drawdown" plan. Main benefits to her are 1) that death benefits before she is 75 are totally tax free. She has a son who will inherit her entire estate (With btls probably over £2m) & put it to her the advantages to him of a totally tax free pension fund upon her death (New rules). And 2) that a new style pension has cheaper charges. Staying with SW would mean an AMC of 0.3% and on a straight like for like switch of funds the additional fund cost of 0.47.....so 0.77% in total. I could then add on my 0.5% ongping fee and make it 1.27%.....or reduce the ongoing fee to 0.4% & bring it in for slightly less than her current plan. Other option (and my preferred one) would be to switch the entire fund to Royal London, where the AMC is 0.45%. No additional fund charges using one of their 9 Governed portfolios (which are reviewed quarterly). Add in my 0.5% and she has a fully flexible, ready for drawdown plan for less than 1%.....and 0.25% less than her current old style plan.
Her concern. Cost. That I was "taking" £800 pa......even though the overall cost was lower. I was also only going to charge her an initial fee of £1500 (yes, a lot of money)....but less than 1% of the fund value....and which I should be charging 3%. And this to someone who earns £200k pa.
I'm pretty certain she will do it......but it will take another meeting & lots more illustrations & number crunching before she agrees. She understands the need to do it (she can't go into drawdown with her current plan) but just has a thing about charges.
Is it me....or am I just a crap "salesman".
And to answer a pp. My pension is on the Cofunds platform & I probably trade too much, although one of my better choices was putting last years pension allocation into the Baillie Gifford Global Discovery fund. Turned £6250 into £7500 in just over 6 months.
My answer to anyone seeking advice & not sure if an IFA is worth it is.....what do you know about the Annual & Lifetime Allowance. Will you be subject to a reduced AA and /or can you calculate it for a final salary scheme (note.....it has nothing to do with your actual contributions). If you can answer yes then fine, crack on. If not, I suggest you just might need my help.
Historically commission worked because it wasn’t a visible cost and looked “free”. Now advisers have to disclose the commission dressed up as a fee it is more difficult to justify added value. You rarely look at a solicitor as adding value, you pay him to do stuff you can’t do yourself and you should pay for his time, not how much is involved in the transaction.
If a professional adviser had the full range of skills and knowledge to cover off tax, pension and investments to provide independent advice, but could earn a 6 figure salary using his skill within a large corporate financial consultancy where the big money is - his career path would unlikely lead him down the path of being an IFA. If he chose to be an IFA he would need to charge at least £300 an hour for his time to give unbiased objective advice that didn’t have to result in churning of investments that released commission.
It costs the same to advise on investing £10k as £100k but the £10k would cost more if the individual had more financial issues to sort out. That’s why taking a % of assets charge is not only unfair but means an adviser cannot afford to “waste” his time advising normal folk with modest wealth and needs to make an excessive margin on large accounts to subsidise his loss making activities.
it also means money has to be churned to free up the cash to fund client charges. How many people would want to pay £2,000 from their wages for advice that might result in not changing investments but was useful in preventing a bad decision.
When I was a fee based consultant I had a client refuse to pay a £1,500 fee for annuity advice and servicing the transfer of a £m+ fund but instead turned to a commission based adviser taking 1.5% commission of £18,000 because it was “free” to use an IFA.
The long established tradition of commission business has conditioned people to think financial advice should be free at the point of delivery, and close our eyes on how the ultimate costs are funded and who is profiting, bit like the NHS.
We have the financial advisory service industry we are prepared to support and pay for, and in many ways I should not be knocking it if the public are not demanding something different.
It's a tough sell I guess, which I sort of get. If it were me, i'd rather pay for your time/advice than a % charge ongoing as that seems an unfair way of charging as @Dippenhall mentions. When I got advice/report on a final salary scheme to transfer to my SIPP I did that, just paid for it.
Problem of course becomes I'm sure if you said to the lady, there you go, thats £1,000 please she'd find that difficult anyway.
I think the ongoing % charge basis needs to change.