Whatever advisers may think of SJP, policyholders believe they get value for money. As it is quite obvious that they could get better outcomes for their money elsewhere, we must assume that VFM for SJP policyholders is a matter of financial well-being rather than cash in, cash out.
Is this mini IGC effective?
What is worrying , reading Keith Lewis’ annual report as Chair of the SJP Governance Advisory Arrangement, is that nobody can actually tell him what is really going on!
The GAA also sees a variety of frequency of interface between policyholders and their SJP Partners and an incomplete picture of rebalancing portfolios over time. The GAA has requested data to evidence this, the information provided to date suggests that potential risk exists for these policyholders and therefore, the GAA is concerned that some policyholders may not benefit fully from the model portfolio constructions and advice process
Policyholders pay for advice but don’t always seem to get it, the suspicion is that many portfolios are “furloughed ” and as the people managing the portfolios are self-employed “partners”, Pitmans Trustees are unlikely to ever get the management information they need to tell if the high charges they talk of are worth it.
We are told that there are five charging models and that St. James’s Place have disclosed a sample reduction in yield figure of 1.4% per annum in its marketing material. However the GAA report
Whilst agreeing that additional value of benefit is provided compared against providers who do not offer advice, the GAA has not seen sufficient evidence to quantify the additional benefit compared with what may be achieved without advice.
The SJP staff – using SHP’s own workplace pension, have charges capped at 0.75%. But whether that cap includes transaction charges is unclear and since those charges can be extremely high, I suspect the answer is “no”. Here is the first page of the transaction cost disclosures – by way of example
While it was possible to get to the transaction costs following links through various pages on SJP’s website, it was a long journey and not one I imagine many policyholders will follow.
The GAA does not have to ask whether the policyholders are “vulnerable”, they are all advised. But it is far from clear that when these transaction costs are layered on top of fund charges and further policy charges, much progress can be made in what Pitmans call “a low growth environment”.
The GAA appears to have got considerable change to the costs of the plans and is clearly working hard to understand what is going on with advice. I give the report a green for effectiveness.
The Value for Money Assessment
The GAA’s report gives us a valuable insight into the murkiness that is created when advice is bundled into the price people pay for their funds and the Chair’s final assessment is that it’s pot luck as to whether you get value from your pot.
Given that “value for money” inevitably assesses all the benefits received in the context of the charges levied, the GAA’s opinion is that the value for money varies from good to poor.
Here is the assessment
Clearly the level of charges has created sufficient concern to drag the overall score from green to the second worst score possible. I suspect that the level of charges is more properly “red”. There is unfortunately insufficient transparency in the VFM scoring process for savers to properly understand the assessment.
Within the constraints of the GAA’s (limited resource). I give this carefully worded VFM assessment an amber mark
Tone and structure
GAAs do not get funded to the level of IGCs and cannot afford the high production values in their reports as found in the reports of the big IGCs.
This is a decidedly low budget report and this may surprise people who see St James Place as Britain’s major advisory wealth manager.
The answer to this seeming anomaly is that SJP is not a workplace orientated financial services company. This is why SJP doe not have a full IGC.
To describe what’s going on , the report has to become technical.
The GAA have been given a schedule of charges for each of the four series of pension plans which fall within the scope of the review.
Historically the Series 1 to 3 included a range of fees such as initial charges, bid offer spreads and varying initial allocations, and annual management charges which include advice. Series 4 and Retirement Accounts have early withdrawal charges which diminish over time and a level AMC with no bid offer spread. In addition, “External Manager Charges” are levied on a “look through” basis and range from 0.11% per annum to 1% per annum with a mean of 0.52% per annum.
Series 1 to 3 had an additional “administration fee” which varies by plan type. In the last year further charges were reduced, these include: – Remove bid / offer spread on Series 1 to 3 – Remove all member charges – Remove all allocation charges on contributions. These changes have simplified the charging structure and help to protect policyholders previously impacted by this charging structure.
That SJP has such an incomprehensible series of workplace pensions shows just how chaotic our pension world would be had Government created order first through stakeholder pensions and more recently through the workplace pensions we use for auto-enrolment.
In order to make sense of this chaotic picture within the limitations of a relatively frugal GAA, Keith Lewis has adopted a tone that can best be described as functional.
It is hardly likely to make the GAA chair statement a likely read for SJP’s 30,000 or so relevant customers. Nor are the extensions of the GAA’s remit in 2021 to include Investment Pathways and ESG, going to trouble Keith Lewis greatly. The investment pathways are for non-advised customers while ESG seems a rather alien concept.
While I think Keith Lewis is faced with an almost possible task, I think that the report’s tone and structure demonstrates that it needs to be an IGC. It needs twice the space to say what it needs, so to the layman, the report must often become incomprehensible. I give it an amber for its tone and structure
