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Will RDR kill the St James's Place threat?
by Danielle Levy on Feb 04, 2013 at 10:08
Wealth management executives are being forced to ask whether advice network St James’s Place (SJP) represents one of the largest threats to their business as we enter 2013.
SJP posted another round of bumper results in the fourth quarter, with new business up 46%, from £152.8 million in 2011 to £223.8 million on an annual premium equivalent (APE) basis, with net inflows of £3.34 billion over the year. The firm took in £106.9 million in new investment business over the last quarter, according to unaudited figures.
But as we enter the 2013 retail distribution review (RDR) world, which brings with it greater transparency on charging and the removal of trail commission, can the company’s upward trajectory continue?
As part of its post-RDR proposition and adviser charging regime, SJP will deduct adviser charges from products rather than through a direct payment. For third party products, the firm charges an explicit initial and ongoing charge for advice, paid by the product providers on top of their factory gate prices.
When the company unveiled the charging structure back in December, it explained that while partners previously received initial and renewal fees, these would be replaced with initial advice fees and ongoing advice fees funded from the advice charges paid by clients.
In a note to partners, chief executive David Bellamy (pictured) explained: ‘Post-RDR the initial adviser charge disclosed on the services and costs disclosure document and illustration will be at 4.5% (compared to the 5% disclosed today).’
The impact of transparency
Like a number of advisory and wealth management firms that have moved to adviser charging, will increased transparency stall growth at SJP due to client attrition or pressure to lower charges?
Alex Wright, who took over the £347 million Fidelity Special Values trust from Sanjeev Shah last year, said that after consideration he had opted not to back SJP on the expectation that its fees may come under pressure.
However, Tony Dunk, investor relations director at SJP, anticipates that greater transparency on charges will not lead to a mass exodus of clients.
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