St. James's Place - can I do better?

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  • Malthusian wrote: »

    There is no evidence at all that SJP's charges of (typically) 2 - 2.5% per annum are compensated for by outperformance. SJP's funds are dogs


    Agreed on the first point. On the second, it's my understanding that the SJP funds are quoted net of all costs, so you'd need to be very careful you were making accurate comparisons
  • dunstonh
    dunstonh Posts: 116,040
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    edited 16 June 2018 at 3:47PM
    Not sure how true this is. I believe their average client stays for 14 years. Also not sure how much more expensive they are than a typical IFA when comparing apples with apples.

    I switched a smallish pension away from them a couple of years ago where the effect of charges over the term was £300,000 more with SJP compared to my recommendation.
    I've seen average advice IFA charge between 80 and 90 bps from more than one source. Funds are around 60bps and platform 30bps giving 1.8% all in. Are SJP that much more expensive?

    Yes. IFAs use OCF. SJP appear to use AMC

    Just last month we had a new client what was looking to invest £500k with us or SJP. SJP initial charge was £25,000. Ours was £2,500. The SJP rep dropped the charge once he found out what ours was.

    The SJP rep also told them porkies as we were quoting OCF and transaction charges. They were quoting AMC, not OCF and no transaction charges.

    Platform charge was weighted 0.251% of £500,000 and capped (so could not exceed £1255 pa).
    Adviser was 0.50%
    Fund charge (weighted total) was 0.48% OCF.

    So, that's 1.231% and would become better value with growth due to price cap on platform. And using whole of market funds.

    SJP, when using OCF would have been about 1.9% and only using in-house funds. I cant tell the exact figure as SJP refused to issue charges documentation and would only tell them verbally. However, he named one fund at 1.25% which is how we knew he was giving them the AMC rather than the OCF.
    of course you can argue they should be cheaper due to their restricted nature

    You generally find all the restricted distribution channels are more expensive. Maybe as they dont need to be competitive as that is all their sales reps can offer. Whereas the whole of market distribution sees providers competing to be recommended.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    I switched a smallish pension away from them a couple of years ago where the effect of charges over the term was £300,000 more with SJP compared to my recommendation.



    Yes. IFAs use OCF. SJP appear to use AMC

    Just last month we had a new client what was looking to invest £500k with us or SJP. SJP initial charge was £25,000. Ours was £2,500. The SJP rep dropped the charge once he found out what ours was.

    The SJP rep also told them porkies as we were quoting OCF and transaction charges. They were quoting AMC, not OCF and no transaction charges.

    Platform charge was weighted 0.251% of £500,000 and capped (so could not exceed £1255 pa).
    Adviser was 0.50%
    Fund charge (weighted total) was 0.48% OCF.

    So, that's 1.231% and would become better value with growth due to price cap on platform. And using whole of market funds.

    SJP, when using OCF would have been about 1.9% and only using in-house funds. I cant tell the exact figure as SJP refused to issue charges documentation and would only tell them verbally. However, he named one fund at 1.25% which is how we knew he was giving them the AMC rather than the OCF.



    You generally find all the restricted distribution channels are more expensive. Maybe as they dont need to be competitive as that is all their sales reps can offer. Whereas the whole of market distribution sees providers competing to be recommended.


    If you search for "new model adviser advice fees are going up" you can see the numbers for yourself - although that is for a £250k portfolio rather than the £500k one in your example.


    I recall SJP's average portfolio size is around £120k, and I think at this level they aren't going to be that much more expensive than the average IFA. Better value is more debatable.




    0.48% is pretty cheap for a portfolio of active funds, what was the approx. risk level out of interest?
  • dunstonh
    dunstonh Posts: 116,040
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    If you search for "new model adviser advice fees are going up" you can see the numbers for yourself - although that is for a £250k portfolio rather than the £500k one in your example.

    Dont have to search for anything. The FCA confirmed just recently that the dominant figure is still 0.5%. Small values are more likely to see it rise to 1%.
    I recall SJP's average portfolio size is around £120k, and I think at this level they aren't going to be that much more expensive than the average IFA. Better value is more debatable.

    Cost may not be much different at that value if servicing is in place but its a choice then of independent advice from the whole of market vs tied sale rep offering own product in a manner that is not in keeping with the RDR.

    Small values are often better with transactional advice. Not ongoing. In that scenario, the IFA could provide total ongoing charges around 0.34%.
    0.48% is pretty cheap for a portfolio of active funds, what was the approx. risk level out of interest?

    That was our risk 4 spread.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • dunstonh wrote: »
    Dont have to search for anything. The FCA confirmed just recently that the dominant figure is still 0.5%. Small values are more likely to see it rise to 1%.


    I guess it must be the difference between median and average, as June 2017 FAMR had the average at 0.72%
  • bowlhead99
    bowlhead99 Posts: 12,295
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    I guess it must be the difference between median and average, as June 2017 FAMR had the average at 0.72%
    Yes, it will be down to differences between median and average, and pot size. In the report to which you're referring, 70% of the charges data points were for pot sizes of under £50k and 86% were below £100k. The ongoing charges are inevitably going to be higher percentages on small pots and as it is a weighted average calculation the charges will be dragged upwards by the greedy firms in the 95th percentile who will still be charging a percent or more at £500-£1m+


    The 'average' pot size in the calculation was £90k even though more than two thirds were under £50k and the median pot size was under £25k. When you multiply out that average pot size times the average ongoing fee, you get £90k x 0.72% which is about £650; the survey also noted that where initial / transactional work was done on an hourly fee basis the median rate was £180 ph, so the above would imply about three and a half hours work per year.

    OgKA7sS.png




    But still, these 'averages' skewed by the most expensive firms and the most inefficient pot sizes, might be more than one would reasonably expect to pay when shopping around. Nobody really thinks it makes sense to pay £1k ongoing on £25k invested, nor to pay 1% ongoing on £400k, just because firms exist that would charge that.

    The medians from the Nov 2015 "FCA survey of firms providing financial advice" to inform FAMR did show 0.5% being dominant for larger pot sizes with 0.2% being possible, and at sub-£250k pot sizes the median fee bobbled around the 0.5-0.6% level (much closer to the lower bound than the higher rates of the most expensive firms). Obviously if you took out the more expensive advisers that nobody recommends on cost grounds, the medians would fall further:

    TLjIdkZ.png


    In this particular survey there seems to be a spike in the ongoing charge medians at £100k where the median goes up to 0.75%, halfway between the 5th percentile and 95th of 0.5% and 1% respectively. Perhaps a quirk of where some providers have their cut-off for smaller pots.

    Overall the picture doesn't seem inconsistent with the anecdotes we get here that if you have comfortably over 6 figures to invest you will probably get 0.5% or better at the top end. If your 'over 6 figures' is not much more than 6 figures you may be stuck with 0.75% but can certainly get the 0.5% if you shop around.

    Below 6 figures it's less common to still be able to get 0.5%; if you are paying a median 0.65% on £30k while building your assets it's under a couple of hundred pounds, so if don't have the time or knowledge to keep on top of your investments (and lack of knowledge could easily lose x% of your assets to silly investment choices) it is probably not a ridiculous fee in absolute terms; and commercially it's not worth an adviser getting out of bed (and taking on extra liability) for under £200/yr.

    Any of these numbers will of course vary by region across the country and by firm type.
  • fred246
    fred246 Posts: 3,620
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    My analysis of the FAMR looks like this:
    Consumer to FCA "we are being ripped off by the IFAs. Charges are too high. Please regulate them."
    FCA to IFAs "How much are you charging the customers?"
    IFAs to FCA "not much."
    FCA to consumer "There is no need for regulation. They are not charging much."
    Asking IFAs how much they charge won't really show how much they do charge.
  • bowlhead99
    bowlhead99 Posts: 12,295
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    fred246 wrote: »
    Asking IFAs how much they charge won't really show how much they do charge.
    They should probably go back to the IFAs and ask them how much they really charge :)
  • dunstonh
    dunstonh Posts: 116,040
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    edited 17 June 2018 at 3:17PM
    The FCA collects fee data every 6 months from advice firms.

    it asks the income totals received in various classes. The figures need to be supported with accountants providing the total income during that period. Effectively, the back office software provides the data (income and classes) and the accountants do their bit on total income and they should come out be very similar.

    It also asks the firms minimum fee and maximum fee in percentage terms, hourly rates and fixed fees or a combined charging structure. It doesnt ask the tiers used though.

    It doesn't ask the IFAs whether they feel the fees are too much or too little.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Thanks bowlhead99 for your comprehensive analysis
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