Investors should use a reduction in yield comparison to compare total charges from advisory firms with each other, St James’s Place has said, warning that purely focusing on the adviser charge does not give an accurate comparison.
In an interview with FTAdviser, Tony Dunk, marketing director at SJP, said the firm uses this comparison to see how it sits with other adviser firms as it is a “relatively fair way” of comparing charges against each other.
Mr Dunk said: “The focus has been on the adviser charging and it is important to understand that but it’s a little bit unfair as, from a client’s and a firm’s perspective, everybody has their own costs and charges and those have to be locked back together to compare like with like.”
By using a reduction in yield, SPJ said that, regardless of market perceptions, although it is not the cheapest service to use, “we are by far and away not the most expensive, so we kind of sit in the middle of the pack”.
Mr Dunk said: “We sit right in the middle of the pack with a 2.3/2.4 per cent reduction in yield, versus the lowest that we can see which is 2 per cent and the highest is almost 4 per cent. It is [a massive difference] but from a client’s perspective that is only one aspect as it is the returns that provide the value for money.”
Mr Dunk said said that this was an industry standard that used to be used and would examine total charges over a period of time of five to 10 years. The total charges would include advice, the platform charge, the fund manager’s charge, and transaction cost. These would all be added up and taken away from the initial investment, so the outcome would be that the yield has reduced by a certain percentage per year.
Mr Dunk said: “Around 90 per cent of the business that St James’s Place does is either with existing clients taking more investments with us or it is referred business from existing clients.
“When an adviser sits in front of a potential client and is qualified with a big company and a massive brand, the client feels safe and that is the ‘starting point’.
“The adviser gives advice and proves their worth as to how they conduct themselves and the thoroughness of the review, the comprehensiveness of the advice, the ability to get hold of the adviser on the phone, the ability of getting the information quickly...all that kind of stuff comes in to the overall buying and the advice process. And what sits behind that is, year on year, SJP retains about 95 per cent of funds under management so that says our clients must be happy with what we are doing or they would take it away.”
This follows today’s news that SJP has seen a rise of total new business on an annual premium equivalent basis of 16 per cent to £743.3m.
