Editor’s Comment: Time for a stiff Scotch for SJP investors

At one point today the company’s share price was down by 21% today to 640p, rallying slightly at the end to close down 18.5%.

This year to date the share price is down by 40%.

It all sounds like panicked investors are dumping stock and getting out but perhaps there is just the hint of light at the end of the tunnel.

The problems emerged this week after an FT story – and stories elsewhere – suggested SJP was being cajoled by the regulator to review its fees and charges, particularly in light of the Consumer Duty.

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Most companies hate to respond to “media speculation” but SJP, one of the UK’s biggest wealth managers, was forced to respond in a statement this morning. It confirmed that a review, or “evaluation” as the company called it, of fees and charges would be carried out. The evaluation will include an “assessment” of the fees and charges the firm levies, it said.

The news of the fee review rattled shareholders and the City. Lower fees, if they are introduced, may be good news for clients but will potentially mean lower profits and these were already depressed in the first half.

Certainly there are issues to face. There is little doubt the while it is a highly successful outfit, as I’ve written many times before, there have been concerns about the opaqueness of charges, exit fees, the model it operates and fund performance. A few too many in-house ‘dog’ funds for the liking of many too.

And yet SJP itself is a success story in many ways. Funds under management are nearly £160bn and rising, it has more than 4,700 financial advisers, a successful training academy and many thousands of clients who seem to value the service they receive. SJP is one of the most committed wealth managers to training and thousands of its advisers are Chartered Financial Planners or training to be one.

Indeed, even when it comes to charges the firm is open on its website about what it levies, indeed there is a link to charges right on its homepage – not always the case with many wealth managers.

For ISA and unit trust investments it says charges are 5% of the initial investment and an ongoing charge for a typical portfolio is between 1.6% and 1.9%. Of course, many will argue this is on the higher side but these are not outrageous. Still the view persists that some exit charges are not clear, although the company has waived some exit charges on older pension plans in recent years.

So it’s not all doom and gloom, far from it, but the company will need to work hard to “evaluate” its charges and come up with a solution and quick. It mentions in its statement today a desire for a “simpler and scalable” charging structure and I’m sure many would welcome that. A 5% initial charge seems more than a bit ‘old-fashioned’ and steep these days, to me.

I don’t think we’ll ever see SJP becoming a bargain basement investment provider but giving clients a much simpler fee and charging system, and perhaps dropping some of the less transparent charges, would be no bad thing. With new CEO, Mark FitzPatrick, just getting his feet under the desk the time is ripe for this sort of change.

There is no doubt that SJP has huge influence in the wealth management sector and I suspect many advisers benchmark their fees to some extent against SJP. Of course, if SJP does lower its fees materially that will have repercussions for the whole advice sector and the fees it charges.

SJP will be unsettled by the spotlight on its fees but it may emerge a better, stronger and more transparent company. It does a lot of things right and the fact it has accepted that it must review its charges is an important step forward. It has, at last, admitted there is a problem.

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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. Follow @FPT_Kevin 

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