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Will RDR kill the St James's Place threat?
Markets
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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6 comments so far. Why not have your say?
Neil Shillito
Feb 04, 2013 at 10:51
Although most of us on 'this side of the fence' might be disparaging of SJP and point to their 'commission by any other name' business model, the fact is they are phenomenally succesful and that's all you need to know.
One should never fear one's competitors, it is better to learn from them. What is it that your firm does that SJP can't do? Answer: shed loads. So that's what you promote; not how much 'cheaper' you are.
report thisEX EJ Client Comment
Feb 04, 2013 at 10:58
I welcome the honesty and bold approach of SJP. One has to admire the quality of their operation - they are not perfect but they have great marketing and great support to their partners and a quality image and brand.
I am neither a client nor an employee but in fact a competitor but reluctantly I admire the strong brand and now it is a matter of TRANSPARENT client choice.
Towry would do well to follow their lead with transparency, level of administration and service.
report thisdavid mann
Feb 04, 2013 at 11:22
I think that on their explicit 5% initial charge and 2.3% annual fee, they will be much less of a threat to advisers.
report thisKeith Cobby
Feb 04, 2013 at 12:46
This just goes to show that 'adviser charging' is simply another name for commission. If SJP (more free PR today) and Towry etc are allowed to do this by the FSA good luck to them.
The problem it seems to me is where a wealth manager/adviser have their own funds as well as supposedly offering those from other providers. I am surprised that the RDR has not addressed this properly.
report thisPCIAM
Feb 04, 2013 at 16:13
Threat, what threat? How can you generate a decent return for clients with that sort of fee millstone round your neck? And return is what it's all about. You can't eat low volatility or total returns of nil.
report thisRob Stevenson via mobile
Feb 09, 2013 at 09:07
The continued success of SJP proves that unless financial education is improved, the RDR will have been a bit of a waste of time.
Or, clients really dont care what the fees are, which, however stupid that sounds, could well be the case.
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