As readers of the Times know,  James Coney has been exposing St James’s Place as a high pressure sales outfit that rewards its “advisers” with diamond cufflinks, overseas conventions and a lot of money for bringing client’s money under SJP management.

We need to be aware of what SJP is and how it works, but we don’t need to close it down of even force it to provide a different service than it does.

There is nothing particularly shocking about the revelations, what Coney is doing, which he does brilliantly ,is excite our admiration for SJP’s chutzpah and our outrage that we let this kind of thing go on , on our doorstop. For every Times reader knows an SJP adviser, SJP – like Rotary or a Livery Company  – is a club for the successful.

Reason one – a rich person’s club

We have SJP because it is a rich person’s club – which allows us to aspire to the lifestyle of Polo ponies and diamond cufflinks and private jets and chartered cruise ships. If SJP didn’t exist, it would be replaced by another place serving the same purpose. Indeed SJP is simply a remake of the Hambro Life/Allied Dunbar aspirational model. As a Hambro/Dunbar man of the eighties I recognise SJP for what it is – a rich person’s club.

Reason two – a competitive arena

For the sales people who are the blue-bloods of  SJP’s business model, competition is fierce. They play against each other for peer-group recognition. The conventions are away to flaunt individual success and to maintain a hierarchy of achievement. Everyone in SJP will know their level of attainment and recognise that they are only as good as their last month. Conversely, those on the way up can aspire to the recognition of peers, which eggs them on.

Reason three; clients love this

Rational thinking would lead rational investors to run a mile. But SJP clients are not investing rationally, they are in part – investing in the dreams of their advisers. They want a bit of the gold dust to sprinkle onto them and SJP salespeople have the sense to include rather than exclude their clients. If your advisor isn’t driving a Porsche, he can’t be much good!

Reason four; the 80/20 rule

Pareto’s 80/20 rule teaches salespeople they make 80% of their money from 20% of their clients, ditch the 80% of clients who make you 20% of your money and you do a whole lot better.

This kind of client cull or cleansing means that SJP do not end up servicing what the FCA call vulnerable clients (people who can’t afford to have their savings denuded by SJP’s rapacious charging structure).

So by and large, the only people who pay for the conventions/cufflinks/Porsches are those who can afford to and they are buying lifestyle, not financial management.

Although it sounds heretical, SJP employs a progressive business model which rewards the big punters and spits out the vulnerable.

Reason five – the pyramid

SJP is a collection of sales pyramids within an overarching pyramid which is SJP itself. Each individual pyramid- or partnership – is an ecosystem which as it grows, allows the founding partner to live on the earnings of others. SJP partners quickly find that their day to day financial needs are taken care of by the recurring fees that arise from having brought money to SJP management and that leaves SJP partners to indulge in vanity projects such as entrepreneur clubs where they can teach their clients to be entrepreneurs like them.

And of course this creates a much larger eco-system of entrepreneurship which is gently milked by the SJP management for the benefit of shareholders. The shareholders have seen their investments rise and rise for the five reasons outlined in this blog. They should not be worried by the Times publicity – it reinforces what everyone likes about SJP.

A pyramid structure does not have to be a Ponzi, it can be stable and sustainable.

Dark clouds ahead?

I wouldn’t bet on it. SJP are smart – look how they have managed the Woodford debacle – teflon. SJP flirt with DB transfers and use a contingent charging model but they can point to their 80/20 model to show the FCA that the people who transfer with them know exactly what they are doing.

As a result of the publicity from the Times, we hear that SJP’s CEO has instigated a review of the incentives on offer to the salesforce. He says he is doing this because times have changed. Well they have, but the incentives look exactly like they did back when I was going on those conventions 35 years ago! The reason nothing changes is that the model is perfect, there may be a little tinkering but SJP are not going to break up a good thing.

And as for the Regulators, are they really concerned? What have they got to be concerned about. The SJP customers are consenting adults, they are not (by and large) vulnerable and SJP’s 80/20 philosophy means that their system is self-cleansing.

Nobody loses money at SJP that they can’t afford to lose and so long as the client/partner relationship is maintained, clients are part of the success story.

SJP is a brilliant wealth-tax which clients willingly pay for the privileges of membership of the club. The club is staffed by people who share the values of their clients and SJP provides a super pyramid which keeps everything in place and rewards the shareholders. I sense that this is what Paul Lewis is picking up on in this recent article in the FT

SJP are not alone in levying a wealth tax toll and in so doing, we get a strong and stable business that is relatively little trouble to the FCA.

So I don’t see dark clouds ahead for SJP. It will not sink into the mess that Allied Dunbar sank into so long as it keeps on doing what it is doing. Would I be an SJP customer? Not in a million years, nor would most of the people who read this blog. But that is not the point.