The shock announcement the firm would set aside £426m to deal with potential client refunds of ongoing fees, where the promised service may not have been delivered, shook the industry.

It’s not quite curtains yet for SJP, far from it for reasons I’ll explain, but other wealth managers may also have been unnerved by SJP's crashing share price and potentially huge bill. It's been a sobering week.

There are good reasons for the size of the reserve and some of these have to do with the Consumer Duty and the direction it is nudging the industry in. Some may have under-estimated the impact of the Duty, particularly as it will apply to legacy products from July when it is extended.

One of the reasons SJP has been forced to set aside nearly half a billion pounds is to do with the potential cost of refunds, which could be massive. This is related to recent claims (and potential claims), likely from claims management companies, that ongoing service was paid for by clients but was not delivered by partners, at least to the level expected or agreed. In other words annual management fees were being charged but there was very little annual management going on, or at least proof it was going on.

SJP says only a very small number of clients are potentially affected, maybe as little as 2%, but this is still a lot of clients. At the end of 2023 SJP had 958,000 clients so 2% would equate to nearly 20,000 cases and of course ongoing fees could go back 10, 20 or 30 years. That's a lot of refunds - potentially.

While only 2% of clients may be directly affected, to be prudent SJP will need to consider reviewing all clients so it could be a major operation.

SJP will halve its dividend for the next two to three years to help meet the cost. This is sensible but will not please shareholders. It expects to have everything sorted by 2027, fingers crossed.

At the heart of this issue is a bigger issue, and it affects all wealth managers, Financial Planners, IFAs and indeed all types of adviser. It relates to annual management charges. If you have an annual management charge what do you charge? Is it fair and how do you prove you have delivered an annual or half yearly review service to the agreed level expected by the client? Simply sending a portfolio statement may not be enough.

SJP’s failing here, seemingly, was to have failed to document fully what service clients were actually receiving as part of their annual review and whether it was fair value. I understand that the organisation was so busy focusing on new business that some partners perhaps lost sight of their duty to look after existing clients, at least to the level they expected.

So is it the end for a firm some advisers see as the ‘evil empire?’ Far from it. Funds are up to a record £168.2bn, SJP's number of advisers is very close a record 5,000 and with nearly 1m clients the business flows seem unimpaired. It could well be that clients are just not that bothered with the seemingly endless stream of bad news. There seems little rush for the door, at least not yet.

If I were SJP though, I would see all this a golden opportunity to reset its business model forever and be more open and transparent, and fairer on fees, particularly explaining to clients what they get in terms of annual servicing and advice.

It will be a bumpy ride at times and more change is needed but the company continues to have a promising future if it can prove itself capable of reform. It is by far the biggest employer of Chartered Financial Planners in the UK and has done huge amounts to foster new talent and encourage higher professional standards.

The 'empire' can strike back but it will need to prove it can and has changed.

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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days.  Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin