Robin writes:
There’s one story dominating the financial pages in the UK right now — the changes at SJP, the country’s biggest financial advice chain.
As I explained the other day, on the face of it, last week’s announcement that St James’s Place is revising its charging structure was in many ways rather unremarkable. But there are reasons to believe that this might just be a watershed moment in financial advice.
SJP is one of the most powerful companies in UK financial services. Because of its sheer size, it has been exposed to far more scrutiny about fees and transparency than any of its rivals. And where SJP leads, the rest of the advice profession is likely to follow.
In the latest episode of The Investing Show, financial entrepreneur JASON BUTLER explains why, in his view, the changes at SJP announced are just the start. He’s expecting more major developments in the months ahead. My co-presenter Abraham Okusanya agrees.
But although Jason and Abraham have welcomed this change of direction, they are both frustrated at how long it has taken for SJP to accept the need for reform. To maintain its market dominance, they say, the company will need to be bold and not keep dragging its feet.
For anyone interested in SJP and the future of financial advice, this is an episode that’s not be missed.
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TRANSCRIPT
Robin Powell: Hello and welcome to a special edition of The Investing Show, in which we’re focusing on recent events at St. James’s Place, the UK’s largest financial advice chain.
As well as advice, SJP also provides asset management and life insurance. It has more than 900,000 clients and more than 4,600 advisers. At the last count, it had more than £150 billion under management.
Despite its success, SJP has long been criticised for its high and often opaque fees. Its share price has fallen by more than 40% in 2023, mostly in anticipation of reforms to its charging structure. The company has now announced that it’s scrapping exit fees, which were particularly controversial from the end of 2025.
I’ve been speaking to Jason Butler about the changes at SJP. Jason used to be a financial planner and is now an entrepreneur. He’s an author and a columnist for the FT. I started by asking for his reaction to the news that SJP is scrapping exit fees.
Jason Butler: Well, first of all, I think it’s a welcome development. But sadly, about 11, 10, or 12 years too late. They’re just catching up with the rest of the profession, as it were. But there we go. If you can get away with making abnormal profits, or having a way of stopping your clients leaving you, and making it difficult for them to shop around; then you will, won’t you? It’s as simple as that. So I think it’s a welcome development, but I think it’s just the first in a number of changes to their business – some of which will be forced on them, some of which they’ll just have to do to keep up. It’s almost like the breaking of the dam. I don’t think it’s all done yet.
Robin Powell: A question many are asking is whether SJP made this decision on exit fees on its own, or whether it was forced to do so by the regulator – the FCA. Jason Butler says he doesn’t know for certain, but he suspects it’s the latter.
Jason Butler: I think actually what happened is, “the game is up, boys. This is not a case of whether you want to. This is a case of how and when.” So I think it was actually driven by the regulator and I think the regulator – if I can use the vernacular – has grown some, has started to flex their muscles, and has decided that actually their job is to regulate. Not to cajole, and just be nice guys. I think they laid it on the law with them. I really do. Perhaps some people listening or watching might be thinking I’m giving the regulator a bit too much credence. I actually think it’s changed. Consumer duty is a sea change in the way that financial services companies interact with, market to, deal with, charge, price, deliver value in what is a very difficult to measure business with far reaching implications. And I just think it was untenable, from the regulator’s point of view, to continue post-consumer duty; and I think SJP’s senior management were dragged kicking and screaming into the 21st century.
Robin Powell: Another reform Jason would particularly like to see is an end to asset-based entry fees. Not just at SJP, but across the whole industry.
Jason Butler: Having an asset-based fee going in on what is meant to be a lifetime or long term relationship seems a bit strange. Although, like if you’re building a house, of course, you have certain costs and then you have maintenance costs. But it’s not quite the same, is it? Because actually the biggest economic value for both SJP and presumably their customers – their clients – is done over a lifetime. So: 15, 20, 25, 30 years. Certainly that’s how the exit fees were pitched: as this is a long term relationship. And obviously it’s very difficult to know if you’re getting value until years down the line. So having a big slice upfront of someone’s investment seems completely at odds with the way that the financial services sector has developed. You know, the idea of massive on costs. I mean, people going up in arms about having stamp duty at half a percent, but it seems that nearly a million people don’t seem to mind losing 6% of their hard earned money for setting up what is – well, it’s the price of a Picasso, which is painting by numbers. It just doesn’t make sense.
Robin Powell: Speaking to analysts after the fees announcement, SJP’s outgoing CEO Andrew Croft dropped a hint that SJP will soon provide passively managed funds. My understanding is the company will have a passive offering in place within the next nine months or so, and it will be competitively priced. If it does happen, that will be a very significant move.
Jason Butler: As you know, we’ve got a long history, Robin, of being what we call evidence-based. Not saying it’s perfect-based, but it is evidence-based. We know that returns are variable, they’re not certain. We’ve got balance of probability over time; we’re going to get hopefully better returns on inflation if we take risk with our money. But the point is: that’s all uncertain, whereas costs are definite. So, all other things being equal, if you can reduce costs for things that don’t add value or that are hard to get for paying extra – which is alpha, outperforming the market – then I think it’s, again, another realisation of SJP coming away from their product selling days of believing the baloney that the Tim-Nice-But-Dim investment managers told them. Who basically were just salesmen with a posh accent, and believing that the emperor’s got new clothes on. We’ve now realised he’s got no clothes on, and I think what you’ll find is – it’s a bit like a cigarette smoker. They don’t actually stop smoking. They don’t stop smoking – what they do is they’re not smoking today; and they like the idea of not smoking, and they might vape a bit and they may have the occasional social fag. But they will always be a smoker. And I think SJP will always be an investment smoker, I think: but what they will do is probably be kind of like a born again Christian – where they want to mend their ways, but they can’t throw the baby out with the bathwater, and the thought of never having a fag or a vape probably will be anathema to them. So I think what you’ll find is they will restructure their portfolios such that their core will be the lowest cost they can get, and they will still add some financial pornography or sizzle, if you will, around the edge to sort of make it look like the Tim-Nice-But-Dims in the investment committee are adding some value.
Robin Powell: As the fall in its share price suggests, SJP is having a difficult time. So, I asked Jason, what would he be doing if he were the company’s new CEO?
Jason Butler: I would be saying probably a number of things. I would say, all other things being equal, we must ruthlessly drive out costs of the business. We must drive out costs. And that means we have to drive down the cost of delivering advice. We have to drive down the cost of delivering product infrastructure. We have to drive down the cost of risk control, or bad business, or supervising people who might have a penchant to go off and do other things. We know there are SJP franchises that do other things that are not regulated that sometimes bring them into disrepute, or they’re running other businesses and stuff. So I think I would be saying: “look, everyone is going to have to take a bit of a haircut. Everyone’s got to reduce their costs. Everyone.” Secondly, I think I would be looking very carefully at developing pathways to advice that are not all about shiny suited men or women getting you to attend a seminar and then selling you an investment bond for an estate planning thing that you’re going to be stuck in for 25 years that you may or may not want. And it may be suitable, you might be able to get it through sustainability, but what we really have to do is we have to focus on different ways of engaging with the younger population, different ways of engaging with people with more modest wealth, and different ways of engaging with people who are in decumulation for whom a full service business may not be suitable.
Robin Powell: As for consumers, Jason recommends shopping around to get a good deal. Financial planning, he says, is highly valuable, but you shouldn’t pay too much for it.
Jason Butler: In my opinion, you need some kind of financial buddy, some kind of financial coach, someone to help build you a kind of a context to your plan. And whether you need ongoing help with that every year, or every three years, or every five years: that’s the thing that you need to be buying. And things like investment – they’re almost irrelevant. So, I would favour people, at any level of wealth, engaging in financial planning services – whether that’s virtual, whether that’s in person, whether that’s hybrid – but a financial planning service, which is a fixed fee – whether that’s a one off, or whether that’s ongoing, whether that’s every three years, or every ten years – from someone who is focused on planning, delivering it in the way that makes sense for you, that’s economic, and where I pay a fixed fee – whether that’s £200 or £20,000; whether that’s one-off or whether that’s annual. That’s where I think the future of planning is; and the investment solution and the product solution is almost like a commodity. I think there’s no value to be delivered in that. You have to have those things – they’re bricks, they’re wood, they’re plaster, they’re nails – but the idea of paying a premium for a whole load of materials is almost irrelevant. What I need is an architect and then someone to help me build it.
Robin Powell: Abraham, we’ll discuss Jason’s comments in a moment. First of all though, what are your thoughts on events at SJP?
Abraham Okusanya: Well, two things. One is that, let’s just be clear, SJP is not removing these early withdrawal fees for existing clients. So, of the £158 billion it manages, something like £53 billion of that is in products that have been with SJP for less than six years. And for those clients, or for that pot of money, it’s not removing the early withdrawal charge. The second thing is: I cannot believe why the FCA has not only allowed SJP to carry on, for more than ten years after the retail distribution review, with obscuring its fees. You know, the rest of the industry have had to make these changes; they made these changes 10 years ago. So, to me, this is yet another evidence that the FCA is treating SJP – a large firm – very, very differently than it treats the small guys and girls, the independent financial advisers. And final point: these changes that SJP is proposing – they aren’t going to come into effect for at least another two years or so. Again, these changes have been made off the back of consumer duty – a new set of regulation or rules that are already in place now. And, you know, what is the FCA going to do? It’s going to give SJP another two years to implement these changes. It’s just unacceptable in my view.
Robin Powell: Jason seems pretty sure that getting rid of exit fees is the first of several changes we’ll see at SJP in the coming months. I am too. What are you expecting to see?
Abraham Okusanya: I hope there are more changes to come. You’ve written about this in other media, but the one change that looks like it’s on the horizon is the use of index funds within their investment process, which is going to – if they adopt some of those ideas – reduce costs even further for the investor and is going to improve the performance and the outcome relative to what SJP currently offers.
Robin Powell: I must say I do have sympathy with SJP advisers. Most of those I have contact with are very professional and want the best for their clients. Many have told me how pleased they are that things are finally changing. This is good for the profession as well as clients, isn’t it?
Abraham Okusanya: Yeah, I think that – if you see what the corporate machine is proposing right now – it’s actually slightly better for the SJP advisers than what they currently have. In terms of the share of the fees that the SJP advisors keep, it’s slightly higher. And, overall – maybe not immediately, but in the medium term – it actually gives them a framework, if they do want to leave the SJP corporate apparatus, for them to to do so. And I should say: ex-SJP advisers – when they leave this corporate machine, they are amongst some of the best IFAs that I know out there. But you need the corporate apparatus to get on with implementing these changes. The advisers, for the most part, just want to serve their clients.
Robin Powell: One last question, Abraham. Do you agree with Jason that the advice profession needs to adapt and find new ways of helping more people, and more efficiently?
Abraham Okusanya: As a profession, we need to help more people. But the reality of all this is that you have insane amounts of regulation for financial advisers to deal with. So that’s one hindrance I see to democratising advice and making it available to more and more people. Because, you know, the minute you say: I want to give somebody advice relating to their money, there’s a whole raft of regulations that you have to take account of. It’s not easy to say I’m going to just deal with one aspect of advice and come back to the rest. You have to account for everything. So that’s one area. That’s one barrier. What I’m hoping is that we’re going to start to see technology that takes the burden of administrative and some regulatory work off the human adviser and, and frees them up to actually be able to spend more time with clients and overall reduce cost. That’s my hope in the coming months and years.
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