Informed Decisions are one of Ireland’s only remaining independent financial advice firms. We specialise in retirement & investment planning for successful individuals, so that our clients only have to retire once.
Retire successfully with Informed Decisions.
4th March 2024
Woodford’s relationship with St James’s Place went on too long (ft.com)
Over charging pension and financial advice fees, this is the latest scandal to come to light from Saint James’ Place.
Saint James’ Place is a monstrous financial advice and investment firm regulated by the FCA in the UK. It has been marred by scandals over the past few years. They’ve been accused of it all; from ‘rogue‘ investment managers (whose clients are still trying to get their money back), to recent over-charging claims. Is there a lesson for us to learn here about it? Lets take a quick look.
A: Firstly, there’s the apparent turmoil within SJP, with much changing of the leadership, ousting certain investment managers and a large re-organisation. Secondly, there’s the small matter of them setting aside £426 million for client fee refunds!
It all sounds familiar to us here and the Mortgage Interest Rate refunds doesn’t it! This obviously has implications for SJP themselves (their share price is down 60% in the past 12 months) but the reputational damage on the profession of financial advice is severe. Is this a warning shot to all firms in the UK, and indeed in Ireland?
A: The core issue appears to have revolved around SJP charging clients for ongoing services without proper documentation or evidence of having actually given these services. Now, with refunds and fee adjustments underway, I guess they are striving to reassure clients and prospective clients that it has turned a corner and will prevent a recurrence of over charging pension and financial advice fees issues again.
A: One would imagine that this situation at SJP is just the tip of the iceberg for the financial advice sector at large. For many UK (and Irish) advisors and firm, this marks the beginning of a potentially disruptive period.
According to research, ongoing advisory fees constitute 77% of the sector’s revenue. As a result, any regulatory pushback will have significant implications. The FCA’s recent implementations signal an increased scrutiny over the on-going services that firms provide to clients, and the fees they pay in return!
A: The concerns boil down to two key aspects. If firms fail to deliver or document services, it could prompt regulatory enforcement to prevent issues such as over charging pension and financial advice fees. The second revolves around the concept of ‘fair value.’ The FCA are very hot on ‘fair value‘ in recent times, and ensuring that investors are getting value for the money they spend on fees.
It seems, in the UK at least, it’s no longer sufficient to just provide a service; firms must also demonstrate that these services are worth their fees, challenging the sector to justify the value of what they offer beyond simple service delivery.
If you are paying fees to an investment firm of say 2% of your €500,000 investment, that’s €10,000 fees per year. If all you are getting is a statement and a phone call each year, the firm might have a difficult time justifying that 2%, irrespective of the performance.
‘Value’ is subjective of course. Who decides what is or is not ‘good’ value for money!? It is a difficult route to navigate for regulators and for the advisory sector. Based on my experience, clients value impartial advice, clarity on their financial future plans, transparency and peace of mind.
If you are an advice firm that proactively works to deliver that to your clients – is that sufficient proof of delivering value commensurate to the fee you have been paid? Who knows!
My gut tells me that it will be the firms that proactively serve their clients with the intent of delivering those core values will be OK, from a commercial and regulatory perspective;
Of course, not every client wants those things – and is merely with a firm because they liked the look of it or were told about it by a friend or colleague.
Ultimately, if you are a client of an advice firm, you are most likely to be paying for services. Therefore, if you have not been offered services, perhaps ask what services they can provide you? If they can’t or don’t help you with one of the 4 values above, consider taking your business elsewhere?
In blog 226 I talk about Challenges of Independent Investment Advice in Ireland.
Of course, there is nothing (yet) launched here in Ireland by the Central Bank of Ireland around ‘Fair Value’, but one can be as sure as god made little apples that if it has happened across the pond it will happen in some guise here in Ireland too.
On balance, it should root out some of the gougers that exist here that have a tendency to over charging pension and financial advice fees, and further improve the outcomes that clients get across the board. And that can only be a good thing. Watch this space!
Paddy Delaney QFA RPA APA
Disclaimer
___
The content of this site including blogs and podcasts is for information purposes only. Everybody’s financial situation is different and the content we share on our site and through podcasts may not be applicable to you.
The articles, blogs and podcasts are not investment advice. They do not take account of your individual circumstances, including your knowledge and experience and attitude to risk. Informed Decisions can’t be held responsible for the consequences if you pursue a course of action based on the information we share.
Informed Decisions are one of Ireland’s only remaining independent financial advice firms. We specialise in retirement & investment planning for successful individuals, so that our clients only have to retire once.
Privacy Policy | Cookies | Disclaimer
Receive informed financial advice straight to your inbox every week with my newsletter.