Large sum to invest, but querying if SJP is good value

Albermarle

OP - You might have seen in the news that SJP are having to fork out nearly half a Billion Pounds in compensation, for poor service, poor advice and excessive fees ( not for all customers but quite a lot) . Plus they have had to modify some of their terms of business.
Such as locking in new clients for 6 years and locking customers into products that are not easy to extract from .

Eyeful

Is SJP good value? I do not think they are.

SJP are Restricted Advisors. 

Some on this forum consider them "Financial Sales Persons"

(a) How did you hear about them? 
(b) How much research into advisors did you do before giving them your business?

I suggest you evaluate other options.

For the amounts of money you mention, you should have consulted 3 local Independent Financial Advisors (IFA's) and chosen the one you liked best. 
This is likely to be much cheaper than what you are paying now.

https://www.moneysavingexpert.com/savings/best-financial-advisers/
https://www.which.co.uk/money/investing/financial-advice/how-to-find-a-financial-adviser-afZ375F6BIiC

Alexland

Grafik said:

Is this a relatively normal scenario?

Sadly it happens all too often.

Grafik said:

I am wondering if I should evaluate other options here.

Yes you are paying crazy high fees for mediocre outcomes.

Albermarle

For the amounts of money you mention, you should have consulted 3 local Independent Financial Advisors (IFA's) and chosen the one you liked best.

From what I understand, if you choose the one you like best, then SJP would probably win out.
Their salespeople seem to be very good at nurturing customer relations ( some of them anyway).
Remembering birthdays, asking about your family, your golf handicap, your hobbies and generally making you feel that they care.
Plus of course there are all the nice glossy brochures
However it all comes at a price........

Dead_keen

Grafik said:

1. The initial investment fee is 1.67% (not sure if that is low or high?)
2. The ongoing management fees vary by product but are significant ~1.8%pa.

There is a so called the safe withdrawal rate concept: you can withdraw 4% of your pot in the first year of retirement (and then increase it by inflation each subsequent year) and almost certainly not run out of money.  It's a bit pessimistic but its a concept. 

The original study to get 4% was done based on a 30 year retirement period.  At 53 you will probably have a longer time horizon.  The longer the period, the lower the rate. People who have repeated the numbers for UK inflation think that the safe withdrawal rate should be a bit less for UK-related reasons.  

Let's pretend that the UK version for you is not 4% but 3.6%.  This is the amount you could withdraw each year (and adjust for inflation) and probably not run out of money.  Of the 3.6%, the first 1.8% is spent on SJP fees.  So that says that they will take half of your first year's pension.  What happens in subsequent years will depend on inflation vs return on your funds (it may be more, it may be less, than half).

Personally, paying half of my pension in fees feels a tadge on the high side.  If you DIY-ed it would be much less. 

By way of example, if you bought £1m of a low-cost diversified tracker fund (e.g. Vanguard's "VEVE") with a well known DIY-focused provider (e.g. Hargreaves Lansdown) you might pay 0.12% pa on going charges and £45 of fees per year for a GIA or £200 for a SIPP.  That's about 7% of what you have said SJP charge.  And I'm sure people will be able to point out cheaper funds and cheaper providers.

Eyeful

Albermarle said:

For the amounts of money you mention, you should have consulted 3 local Independent Financial Advisors (IFA's) and chosen the one you liked best.

From what I understand, if you choose the one you like best, then SJP would probably win out.
Their salespeople seem to be very good at nurturing customer relations ( some of them anyway).
Remembering birthdays, asking about your family, your golf handicap, your hobbies and generally making you feel that they care.
Plus of course there are all the nice glossy brochures
However it all comes at a price........

1. I did say IFA's!
2. SJP are not IFA's and I expect they will be more expensive than an IFA.

Cus

Grafik said:

Hi there.  I am due to retire at the end of the year and in addition to pensions etc. I have a large lump sum I wish to invest.

Current situation

• I am 53 and will have no income from the end of the year
• House is owned outright with no mortgage or debt
• I have apx £1.1m in cash deposits
• I have a further £200k spread in fixed term savings (1/2/3 yrs) to provide income until pension drawdown is possible
• Personal pension investments of apx £1.2m
• Premium bonds £100k (wife and myself)
• ISAs £40k

Proposal

• My pension is invested with SJP and I have been happy with the service/performance
• I intend to invest apx £750k of the cash deposits to provide capital growth and income
• SJP proposed a split of £250k in each of 3 products : a Unit Trust, an Onshore bond and an Offshore bond.  
• I follow the logic of the split and the three products
• My issue is with the growth projections and the impact of fees:-

1. The initial investment fee is 1.67% (not sure if that is low or high?)
2. The ongoing management fees vary by product but are significant ~1.8%pa.
3. The 'intermediate' growth rate used in their illustrations for Polaris 2 is 4.5%, but after fees etc. the annual growth rate is 2.7%

Question

I'm not naive - I realise there are fees attached to these things and that the growth rates used in projections are somewhat governed by the FCA..but on the face of it, I am incurring investment risk & fees for minimal returns (I could get much more than 2.7% growth in deposit accounts without risk).

Is this a relatively normal scenario?  The total fees across 3 products over 10 years are ~£200k!  I have been happy with my SJP pension investment, but I am wondering if I should evaluate other options here.

Grafik said:

Hi there.  I am due to retire at the end of the year and in addition to pensions etc. I have a large lump sum I wish to invest.

Current situation

• I am 53 and will have no income from the end of the year
• House is owned outright with no mortgage or debt
• I have apx £1.1m in cash deposits
• I have a further £200k spread in fixed term savings (1/2/3 yrs) to provide income until pension drawdown is possible
• Personal pension investments of apx £1.2m
• Premium bonds £100k (wife and myself)
• ISAs £40k

Proposal

• My pension is invested with SJP and I have been happy with the service/performance
• I intend to invest apx £750k of the cash deposits to provide capital growth and income
• SJP proposed a split of £250k in each of 3 products : a Unit Trust, an Onshore bond and an Offshore bond.  
• I follow the logic of the split and the three products
• My issue is with the growth projections and the impact of fees:-

1. The initial investment fee is 1.67% (not sure if that is low or high?)
2. The ongoing management fees vary by product but are significant ~1.8%pa.
3. The 'intermediate' growth rate used in their illustrations for Polaris 2 is 4.5%, but after fees etc. the annual growth rate is 2.7%

Question

I'm not naive - I realise there are fees attached to these things and that the growth rates used in projections are somewhat governed by the FCA..but on the face of it, I am incurring investment risk & fees for minimal returns (I could get much more than 2.7% growth in deposit accounts without risk).

Is this a relatively normal scenario?  The total fees across 3 products over 10 years are ~£200k!  I have been happy with my SJP pension investment, but I am wondering if I should evaluate other options here.

You are paying a relatively very high amount of fees for products that you could buy from IFA's or buy yourself.
The fact that you have identified the impact of fees on products that have low risk and therefore predicted lower returns shows that in reality the impact of these fees are the same across higher risk /higher potential return products, it's just that the numbers scream at you more.

If you are happy to accept paying premium fees for products that can be purchased with less fees elsewhere then that's ok.  You will likely have a less comforting relationship with an IFA, and of course no comfort if you DIY.  The advice from an IFA will be equally suitable.  The real deal is whether the difference is worth the extra fees to you. You will not be getting better returns.

london21

Not SJP.

You have too much in cash, not making your money work for you. 

Low cost index funds.

You and wife have not been using your ISA allowance.

Albermarle

Eyeful said:

Albermarle said:

For the amounts of money you mention, you should have consulted 3 local Independent Financial Advisors (IFA's) and chosen the one you liked best.

From what I understand, if you choose the one you like best, then SJP would probably win out.
Their salespeople seem to be very good at nurturing customer relations ( some of them anyway).
Remembering birthdays, asking about your family, your golf handicap, your hobbies and generally making you feel that they care.
Plus of course there are all the nice glossy brochures
However it all comes at a price........

1. I did say IFA's!
2. SJP are not IFA's and I expect they will be more expensive than an IFA.

Yes I know, I was just making the point that a lot ( not all) of SJPs clients are very loyal, because they like their contact and they feel they have a friend, albeit an expensive one.

QrizB

Albermarle said:

Yes I know, I was just making the point that a lot ( not all) of SJPs clients are very loyal, because they like their contact and they feel they have a friend, albeit an expensive one.

If OP brings their entire £2.5M portfolio under SJP control, they'll be paying SJP £45k a year in fees.

That's definitely an expensive friend!