The Sunday Times vs St James’s Place

The Sunday Times have run a series of articles on St James’s Place, largely focussing on the lack of transparency over their charges. And quite rightly so in my opinion.

Below is the article from the front page of the Money section from 8 September 2019. It’s a damning insight into the life of an SJP adviser and how they make money at their clients’ expense.

Champers and safaris: the secret diary of an SJP adviser

St James’s Place, Britain’s biggest financial advice firm, is on the rack over charges. An ex-partner reveals its high-pressure tactics — and huge rewards — to Ali Hussain

Anonymous

From my first day as a St James’s Place adviser, I was under pressure to sell its products. I had gone from being a financial adviser, able to offer customers a range of investments and pensions, to suddenly selling only St James’s Place funds. I had to meet the firm’s targets every year or risk losing the lifestyle I had quickly become accustomed to — and what a lifestyle it was! St James’s Place (SJP) advisers exist in a different world. At the peak of my earnings, I was making £250,000 a year — and that was before bonuses. I looked after about £70m for around 700 clients. From this, SJP made about £1m a year in fees.

You were treated like a star if you brought in new money. I owned a large house and put my children through private schools. I drove a Porsche and had a Mercedes as my second car.

And then there were the perks, such as Montblanc pens and Mulberry bags, for hitting sales targets. After 10 years you became a senior partner — as long as you reached targets.

Advisers who do well are rewarded with cufflinks (women get brooches) with winged lions on them. They go from blue to green to gold, depending on the level at the company you get to.

It’s a real status symbol among advisers and something we all prided ourselves on. Principal partners can get 18-carat white gold, diamond-encrusted cufflinks worth about £1,200.

Every year the firm held a conference in London, usually at the Royal Albert Hall or the O2. It was like something out of The Wolf of Wall Street, with the 10 top achievers up on stage and the sales director, Ian Gascoigne, working the crowd before awarding prizes. Later there would be a dinner, and we would stay at five-star London hotels with our spouses — all paid for, of course.

Every SJP adviser gets to go, and we were treated to guest speakers such as Bill Clinton, David Beckham and Lance Armstrong (before the Tour de France cycling champion’s fall from grace). Politicians came too: Vince Cable, Tony Blair and David Cameron before he was prime minister. The events were hosted by the likes of Fiona Bruce and Jonathan Ross.

The ultimate prize, however, was a place at one of the company’s annual, week-long overseas conferences. These were extravagant beyond words.

SJP would charter planes to take its people out to where an entire luxury cruise liner would be at the company’s disposal. All expenses were paid, the wine and cocktails were free-flowing, and there were plenty of day-trips and black tie events, complete with all-you-could drink champagne.

I was on several of these trips, including to South Africa and Zambia, where we went on safari. 0n other jaunts, advisers travelled to Egypt and Jordan and rode camels past the pyramids, or went to see sumo wrestling in Japan. All flights were business-class — if you made the grade.

Most memorably, in America we visited the Ram’s Gate Winery in Sonoma, California. We were treated like celebrities and there were people paid to act as paparazzi photographing us as we went in. It all built up this aura that we were special and above everyone else.

It was all about the charges

I had left my previous firm to join St James’s Place because I could see its business was growing rapidly — and I wanted to be part of it.

The firm has a distinct model. Advisers basically run their own business, but they can only sell SJP funds and pensions. In exchange, SJP lets advisers use its brand, lends them money and provides insurance and help with regulatory red tape.

We were encouraged to present a respectable but well-to-do face; to project an air of success and wealth.

You are given incentives to hit sales targets. The idea is that you move any existing customers you have into SJP funds — and the more money you bring in to the firm, the bigger your rewards.

SJP makes its money from the fees charged to customers, with a proportion paid to the adviser. The reason why it’s so profitable is the scale of these fees. Customers don’t pay one-off fees; instead, all the charges for the advice we gave was taken from their savings.

For example, there is a 5% fee for each new investment you make outside a pension. Then there are annual charges of around 2%. You can also be hit by exit penalties if you move your money away from St James’s Place.

The beauty of all this is that customers never really understand how much they are paying. Of course, we presented everything to them — but I never really believed they knew the full impact.

Over time, because of the compounding effect of these charges, we could take almost half their profits.

Hit sales targets and we’d take a trip

After a while at SJP, you got hooked on trying to earn a place on its trips — and you had to build up what the firm calls “credits” through the sale of more products.

It was a points-based system: you got roughly one credit for each £1 you drew in from an investor. About 150,000 credits — broadly equivalent to £150,000 of new funds into the business — would get you and your wife a guaranteed place on the trips, although the flights would be in economy class. Earning more points meant you could take more people and fly business class.

These trips were portrayed as business conferences, but really they were just allexpenses-paid holidays. They took place over several weeks, as there were so many who qualified to attend, including managers, directors and heads of departments. If, by racking up the credits, you were promoted to the level of “triple partner” or above, you got to go on two trips a year and would be able to take your kids or a couple of friends.

You also got a ceramic pill box inscribed with details of the trip to commemorate your attendance. I have a drawer full.

When I get old and need somewhere to keep my pills, they’ll come in handy.

Keeping Up Appearances

At all times, it was important to keep up appearances. If I thought a client was particularly lucrative, I would pay for their lunch at an exclusive country house or a restaurant. I took some to cricket and rugby matches. Other advisers arranged private tours of Buckingham Palace. I would send my customers magnums of champagne to keep them sweet.

This all gives the impression that by joining the firm, you have joined an exclusive club.

We would win over new customers with dazzling marketing and free advice seminars booked at country houses. A few SJP colleagues would arrive in chauffeur-driven cars to meet clients.

I got to a level where I qualified as a “double partner”, which meant I could attend an annual conference

at the Grove hotel in Watford in Hertfordshire.
One year, Top Gear’s Richard Hammond was the guest speaker. He said his supercar didn’t look out of

place in the car park, as there were more Bentleys and Ferraris, belonging to SJP advisers, than you’d find at a classic car show.

I could not keep up the pretence

Eventually the pressure — and my conscience — got the better of me.

When you go and see a client, if they don’t buy, you go back again and keep asking. We were encouraged to make sure clients did not leave the company.

If someone wanted advice about withdrawing their funds, I would make it as difficult as possible to arrange a meeting. The longer I could delay a withdrawal, the more money SJP and I made in fees.

There were networks of managers who would call advisers almost every day. They said they did this to check you were happy, but really they wanted to know what business you were bringing in.

Despite the rewards, I grew to hate the job. I found I couldn’t keep pretending to customers that they were getting the best value. I felt we were not advisers; we were sales people, and I felt I was not acting in their best interests.

It was clear many investors simply had no understanding of the long-term impact of the charges they paid — or how lucrative they could be for the likes of me and SJP. I left the company by mutual agreement following a customer complaint and we came to a settlement.

SJP acts like a hyena when you leave, trying to strip away your clients.

You can say this is all sour grapes, and no doubt the company will explain it has changed since I left. However, its system of remunerating advisers is still broadly the same, and regional managers still give advisers the same targets.

Advisers still display the same signs of opulence, still hold their overseas conference and are still making millions.

Remember, the next time you attend an SJP seminar at your local country house, that free lunch you will be given is not free at all. If you join, you’ll end up paying for it one way or another.

St James’s Place responds

A spokesman for St James’s Place said: “Delivering great client outcomes sits at the heart of our culture and underpins all parts of our business, including our remuneration policies and recognition schemes. Partners take great pride in their professionalism and dedication to serve clients, who value the high standards of advice and service they receive, and this is reflected in marketleading client satisfaction and suitability levels.

“With over 2,400 partner practices across the UK, operating as independent

businesses under the SJP umbrella, our remuneration policies understandably reflect this structure while also maintaining excellent professional standards.

“We value the success partners achieve on behalf of clients. It would be wrong to imply our recognition schemes are predicated on anything other than the quality of advice provided, with ongoing client servicing, quality measures and other factors sitting alongside new business.

“We continue to review and evolve such schemes appropriately over time.”

James Coney – SJP seems culturally bankrupt

There is nothing wrong with being successful. There is nothing wrong with being rich. If you’ve earned it, flaunt it — you’ll get no beef from me. But there is quite a lot wrong, and I have quite a big problem, with ostentatious displays of wealth if your success is being funded by clients who may have little understanding of the true cost of what you’re charging them.

This is my core issue with St James’s Place, the financial advice giant that has been at the centre of a series of Money investigations.

Every luxury cruise, each set of gold cufflinks, those Montblanc pens, the meals down the golf club, the magnums of champagne . . . all this showing-off comes out of the nest-eggs of savers who invested with SJP in order to put money aside for their retirement, or to look after their loved ones.

Something seems culturally bankrupt at SJP. In a video we’ve seen of one of the firm’s foreign trips, an adviser on a kayaking trip boasts of being saved from drowning by “the buoyancy of my wallet”.

It is probably because SJP’s roots are with Allied Dunbar, which earned the nickname Allied Crowbar in the 1980s because of its hard-sell tactics. When SJP started out, it mimicked those sales targets, giving advisers the chance to gain points to win prizes.

If you look back on the recent history of financial products, badly designed incentives and sales targets lead to disastrous outcomes for consumers. It’s why independent advisers are banned from earning commission and why contingent charging on pension transfers is now under threat.

Hard selling is particularly worrying when it is combined with a limited range of poor products — and SJP advisers can only sell the firm’s own funds. Analysis of these for The Sunday Times by the financial research firm Morningstar shows that, over 10 years, 23 of 38 St James’s Place funds have underperformed their peers.

There is no doubt in my mind that SJP could operate just as successfully, and just as profitably, if it lowered its fees and axed the perks.

Shareholders may not be happy. The firm’s own 4,000 advisers would probably be very angry. But every one of the firm’s 682,000 customers would be much, much richer, and would enjoy a much better retirement.

Isn’t that what this company should really be about?

Ali Hussain – Investor Pay for fun afloat

St James’s Place advisers have to bring in £150,000 from clients this year to win a place on the company’s next annual jaunt, described as a “business trip”: a cruise around the Balearic islands on a luxury liner chartered for the exclusive use of SJP’s star performers.

Internal documents, seen by The Sunday Times, show that advisers will fly to conferences in economy class, but they can take their spouse or partner with them.

The more they rake in, the bigger the perks. Those who persuade clients to invest £300,000-plus into

SJP’s funds may be entitled to businessclass flights. The company uses a system of credits to determine the pay and perks — including the chance to join the annual overseas conference — earned by its advisers, who are known as partners.

One credit is broadly equivalent to £1 of new money brought into the business in a calendar year. Other wealth managers tend to pay a fixed salary plus a bonus.

SJP advisers who achieve the top level of 1.95m credits can bring a spouse or partner with them in business class, as well as up to 12 other people who will travel in economy.

Attendance at the conference, understood to be in spring 2020, also depends on meeting the customer service criteria set out in the firm’s “quality gateway”.

Videos of previous SJP cruises, seen by Money, reveal lavish entertainment and tours of some of the world’s most glamorous locations.

For many trips, SJP charters an entire cruise ship. The Seabourn Odyssey is a 10-deck luxury liner that can accommodate 460 passengers and boasts a large pool, four dining rooms, a gym and a spa.

A trip to Tokyo and Kyoto in 2012 included watching sumo wrestling, visiting a monastery and making sushi. In 2011, advisers went to Russia and saw a ballet and a folk show. A visit to Egypt and Jordan in 2010 featured a trip to Petra as well as the pyramids, and an outing on a glass-bottomed boat.

On all the trips, advisers were treated to activities on board the cruise ship, black-tie events, fancy-dress evenings and freeflowing wine and cocktails.