I’m not going to defend everything St Jame’s Place does. Many planners feel their fees are way too high, there’s too much ‘salesmanship’ going on and the company deserves a kicking for over-incentivising its advisers.
There is no doubt, however, that it remains one of the UK’s most successful wealth managers with more than 4,000 advisers and rapid growth in recent years. Many rivals are envious of its expansion.
SJP reviews incentives after ‘cruises and watches’ storm
Has all this come at the cost of ripping off clients? I don’t think so.
If the Financial Planning sector is to move on from its ‘cottage industry’ approach, models like St James’s Place will be one of the ways to do it.
I’m not going to deal with the substance of the criticisms in detail as they have been well rehearsed. There has been talk of ‘lavish incentives’ including cruises, expensive watches and cufflinks. I’m not sure a set of cufflinks, unless they are diamond-encrusted, is a huge incentive but perhaps it is for some.
Many older readers will recognise some of the incentives from the bad old days of the 1980s and 1990s when sales at all cost was the mantra in financial services. Commission-hungry advisers did indeed flog any old financial tat to win themselves an all expenses paid trip to Thailand or wherever, sometimes accompanied I might add by personal finance journalists who also enjoyed plenty of corporate hospitality.
For the sake of relevant disclosure, while I didn’t attend any advice company sales incentive trips as a guest (that I can remember) I have certainly been on several lavish press trips in my 20 years as a financial journalist - and many other personal finance journalists can say the same.
There are indeed few businesses or professions without some form of incentive whether it be for sales or profit-related bonuses or whatever. Many advice firms are the same. It’s common in many smaller Financial Planning firms for senior staff to have a stake in the business’s success and much of that success will be based around fee growth or other targets.
Some planners will rightly argue that sales incentives that come at the detriment of clients are wrong, and I would agree. The solution here, though, is clear rules about how the incentives work and clarity that they must not encourage poor advice simply to hit a target. There’s nothing wrong with incentives, it is how they are structured that is key.
One of the most profound changes in the financial advice sector over the past 20 years has been the move away from a sales culture towards a fiduciary, client-centric model and this is one of the best things to happen to advice in the UK.
SJP will need to go back to the drawing board in terms of its own incentives and the company has said it will review practices. SJP is mainly guilty, it appears to me, however, of leaving in place some old incentive schemes that should have been ditched years ago.
It is not, though, part of an evil empire, just a successful business trying to incentivise growth and making some mistakes.
Are SJP’s charges too high: probably. Are the incentives schemes excessive: probably. Is the average SJP adviser out to cheat their clients out of their their life savings just to go on a cruise: I don’t think so.
Compared to the scams, rip offs and collapsed adviser and SIPP firms we report on every week, SJP is not in the same league by a very long way.
Kevin O’Donnell is editor of Financial Planning Today and a financial journalist with 30 years experience. This topical comment on the Financial Planning news appears most weeks.