Rob Garner, principal architect of SJP’s Value Assessment Statement (VAS) ,over the past three years

The investor’s choice for wealth management

Speaking with Rob Gardner following the publication of SJP’s third Value Assessment Statement , we discussed where SJP found themselves on the fee spectrum.

Here’s the conclusion we came to; When it comes to advice and charging you have seven choices

⁃ (1) Do Nothing: 0.0%

⁃ (2) DIY on a platform with passive management : 0.45% (platform, admittedly reduces a bit on bigger numbers) + c 0.15% EMC (for passive management) = c 0.60%

⁃ (3) DIY on a platform with active management : 0.45% (platform, admittedly reduces a bit on bigger numbers) + c 0.80% EMC (for active management – figure published by Which in a previous study) = c1.25%

⁃ (4) IFA with Passive  = 0.3% Platform + 0.15% funds + 0.75% OAF = 1.2%

⁃ (5) IFA with Active : 0.3% platform + 0.80% EMC for active (no SJP negotiated discounts) + 0.75% for OAF = c1.85%

⁃ (6)DFM Approach (No planning) Using Active Funds : 0.3% for platform + c0.8% for DFM + 0.8% for funds = 1.90% ( which is the ARC benchmark)

⁃ (7) DFM with Planning & Active Funds : As above + 0.75% OAF = 2.65%

Where are SJP?

SJP positions itself on this fee spectrum at  c 1.7% for UT (0.5% advice, 0.75% platform, c0.15% misc c 0.3% Active Funds)

SJP are positioned around 4.5 on this spectrum with typical client costs of 1.7% of funds under management.

As a benchmark, PensionBee estimate their average client charge at 0.64%, meaning SJP clients are paying 1% pa for what has justify itself as a superior service with advice being the main “value add”. It should be noted that SJP does not offer fee reductions for larger clients but negotiates fee reductions from managers which are passed on equally to all. These have been falling.

I am sure that many IFAs and journalists will point out that SJP become a lot more expensive if you keep your money with them for less than five years and that is true. But despite all the negative publicity (principally in 2019), SJP continues to attract and keep customers – numbers rising from 730,000 in 2019 to 860,000 today.

As a measure of value, customer growth and customer retention rank pretty high. SJP are the commoditised wealth management solution against which IFAs  and self-managed SIPPs compete. They are by far the biggest source of financial comfort for the mass affluent, a financial club where the safety is in the numbers.

Safety in the numbers

This year’s statement  is less flamboyant and isn’t selling itself so hard (note the sombre cover at the pictured at the bottom of this article). The tone is less pressing and consequently more authoritative, suggesting SJP are more confident in their job (marking its own homework) and in its own skin.

SJP has enjoyed a good run since the disastrous association with Neil Woodford, long may it continue.

This statement is well structured and revolves around one page of the 75 page assessment

Page 6

In the context of the document of the VAS, this page is the gateway to individual value statements for each of the funds available to investors. Value is assed by return – risk taken to get the return and ESG, these are compared to the fees to indicate value for money. Of the three funds on “watch”, only one is of appreciable size. The reason for it being shown in red are obvious when clicking through

This matter of fact reporting is demonstrated throughout the report which has the authority of a firm that is currently on top of its game.

• 41 out of SJP’s 47 funds are providing good or broadly delivering value for clients – representing 79% of AUM
• Over the past three years, SJP has made 30 changes to its portfolios and funds with over £100bn of AUM developed, and used its size and scale to reduce external fund manager fees for clients. The average weighted fee for external fund managers has reduced from 0.36% to 0.3%.

Safety in diversification, safety in decumulation

SJP places importance in spreading assets across a wide range of classes. 80% of clients hold funds in a portfolio created either by SJP or individually by one of its Partners. It claims diversification as a key benefit of investing in a portfolio, giving a smoother exposure to the ups and downs of the market.

It’s good to see that the retirement income portfolios, created for SJP’s 300,000 clients in retirement, have so far done well. New products (Polaris) are being launched in the autumn. These investment strategies are important to thinking on decumulation, I hope that SJP will share its thinking on portfolio design for those in drawdown with the DWP as it carries out is consultation on decumulation.

Safety from good stewardship

Since 2017 , SJP’s corporate rating for ESG has risen from BB to AAA.

This consistent progression should put investors in good heart, as should the breakdown below on how that AAA rating was achieved.

The importance of good governance

In the three years I have been reporting on SJP’s Value Assessments, I have seen an improvement not just in the value achieved but in the presentation of information.

SJP sets the pace on Value Assessments and clearly this is part of a wider improvement in governance which has driven the improvement in the ESG rating.

And we should be grateful that SJP takes steps not just to report, but to get news of its reporting out to the public – including contacting me for an explanation of how the report works.

Frankly, that explanation wasn’t needed, but I’m grateful for the discussion with Robert on fees, ESG and on the morale within SJP, which had been rocked by exposure of some bad practice within SJP by the Times and others.

I think this excellent report, vindication for the FCA’s insistence on Value Assessments and hope that other firms , required to provide similar information to clients, will look to emulate and even improve on this work

https://www.sjp.co.uk/sites/sjp-corp/files/SJP-Corp/documents/sjp-annual-value-assessment-statement-march2022.pdf