SJP defends ‘unique’ charging structure

St James’s Place agreed with the regulator how its “unique” pricing structuring needed to be adapted to be compliant with Retail Distribution Review standards, according to a divisional director at the firm who dismissed questions from the wider adviser sector.

Tony Mudd, divisional director for development and technical consultancy, told FTAdviser at least a year before implementation of the RDR the firm’s directors sat down with the previous regulator and agreed how its pricing could work.

“We did need to make some changes in relation to the way we set out the charges and fees to the client, but fundamentally the way we charge for our products hasn’t changed that much. I believe it is entirely complaint with what the FCA in principle and in spirit wanted.

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“Clients are happy, I’m not aware that the FCA are not happy, certainly IFAs sometimes moan about it [and] not everyone loves us; but sometimes we put that down to jealousy.”

Following the RDR several advisers and industry figures questioned St James’s Place’s charging structure in the light of new remuneration rules, which explicitly preclude vertically integrated firms ‘cross-subsiding’ advice costs.

The rules also forbid advice firms from soliciting fees from third parties which “are paid out or advanced by another party over a materially different time period, or on a materially different basis, from that in or on which the adviser charges are recovered”.

SJP products are instead based around in-house funds, with all elements of the process including advice fees, back office support and investment function included in a single annual management fee.

Mr Mudd described the firm’s charges as “unique” and said the nature of the charges is made clear to clients.

Another director, Tony Dunk, last year said the firm’s charges were clearer for clients to understand than many other advice models as they total cost of advice was disclosed in one figure from the outset.

The FCA has previously declined to comment on SJP’s charging structure. Sector analysts have frequently cited the firm’s model as being ideally suited to the post-RDR world and it has consistently emerged as a key winner from the rule changes.

Mr Mudd said described the SJP proposition as “restricted whole of market”, with a vertically integrated model that provides its advisers with in-house investment funds, but using third party products for all other areas.

Mr Mudd explained that this gives control over the quality of advice and helps from a compliance aspect by making sure the buck stops with the firm.

“If things go wrong, our guarantee means that we will put clients back in the position that they should have been.

“I’m not saying that means the IFA model is redundant or wrong, it’s just different. There’s nothing an IFA can do that we can’t and we get better deals because we do loads of business with third parties.”