Lessons to be learnt from SJP and Sesame

For many years it was the size of Sesame Bankhall’s network and the sheer number of advisers it had which helped it stay at the number one spot of Financial Adviser’s Top 100 Financial Adviser list for most of the 2000s. 

However, by the time Stephen Gazard stepped down as managing director of Sesame Bankhall Group on Tuesday (28 February) those days of dominating the top of Financial Adviser’s Top 100 Financial Adviser list were long gone. 

During Mr Gazard’s four years at the helm of the business he had to help it adapt to the new post-Retail Distribution Review world and make sense of how what was the money maker for the business before he joined had begun to result in fines.

In 2013 the Financial Conduct Authority fined Sesame Limited (Sesame) £6.03m for failing to ensure that investment advice given to its customers was suitable and failings in the systems and controls that governed the oversight of its appointed representatives (ARs).

The network was fined a further £1.6m in 2014 for setting up what the FCA called a ‘pay-to-play scheme’ that “undermined the ban on commission payments brought in by the Retail Distribution Review (RDR)”.

These fines meant it was hardly surprising when in March 2015, Sesame Bankhall Group confirmed it would no longer be offering an appointed representative network option for wealth firms, with wealth firms becoming directly authorised with the support of Bankhall.

Following this, FTAdviser reported Intrinsic – which Mr Gazard later in the week announced he was joining as managing director - had been selected as the preferred network partner by Sesame Bankhall Group.

More advisers and more clients equalled more money, was the message I was told back then.

By August 2015 Sesame Bankhall Group had lost almost 60 per cent of its network’s member firms following a decision to kill-off its investment advice business.

It was therefore hardly surprising when in October 2016, Sesame Bankhall Group reported a loss for the financial year ended 31 December 2015 of £11.6m.

When I reflected on the change of fortunes at Sesame Bankhall earlier this week it seemed like a lifetime ago since I was sat in Monaco (it is in fact little more than a decade ago) as a news reporter covering events at a Bankhall conference.

Then I was told by the gathered experts how important it was to attract new clients in order to boost your bottom line.

More advisers and more clients equalled more money, was the message I was told back then.

This was a message that was widely believed back in the mid to late 2000s despite the demise of networks such as Millfield and Berkeley Berry Birch earlier in the decade suggesting that may not be the case.

What made me reflect on how the world has shifted was also on Tuesday St James’s Place chief executive David Bellamy announced he would step down at the end of this year.

The same year I went to Monaco with Bankhall I spent half a day in St James’s Place’s offices in London.

Here there was no push to get extra client bottoms on seats. The management of that day talked all about focus on fewer clients with greater wealth.

Back then – and still today - the St James's Place Wealth Management Group stated it specialised in delivering face-to-face wealth management advice to individuals, trustees and businesses.

Many of you may have raised your distaste for the way it charges clients in the comment section of FTAdviser but the thing is those clients are paying those fees.

According to the SJP website their advisers will look to build and preserve capital, manage cash and borrowings, protect clients against financial risk and assist them to manage their business more effectively.

This is why – as much as many advisers seem to hate it - St James’s Place Wealth Management has been the top of Financial Adviser’s Top 100 Financial Adviser list for several years and is a FTSE 100 company with £75.3bn of client funds under management.

SJP’s results for 2016 showed record gross fund inflows of £11.4bn for the year and profits before shareholder tax down slightly to £140m from £151m in the previous year.

So what can we take from this tale of two intermediaries and their fortunes?

The lesson we can learn from these two companies is what made you top dog in the past isn’t necessarily what will keep you on top in the future.

Know your clients, meet their needs and don’t get stupid when you get busy is my advice to any intermediary firm wishing to thrive in these turbulent times.

emma.hughes@ft.com