The new structure won’t come into effect till 2025. SJP will need to recode much of their systems in the meantime at a cost it estimates will be north of £120m.
Existing customers will not get the new charging structure which will present advisers with some interesting questions to ask about their consumer duty,
As the changes only come into effect in the second half of 2025, any new customer who signs up before then will still face an exit fee and the existing product charges.
When asked if this will mean clients won’t sign up before the new charging structure is introduced in 2025, CEO Andrew Croft told Citywire ‘we remain very comfortable with the current charges’. He still expects new clients to sign up as they will still need advice.
‘The changes announced today create a revised charging structure for the vast majority of new investment bonds and pensions,’ SJP said in a statement.
‘These will operate with an initial charge and ongoing charges applicable from the outset, and without any early withdrawal charges (EWC) or gestation period.’
In addition, SJP has reduced its initial advice charge to a maximum of 450 basis points, and has removed the initial product charge.
This will be of major advantage to policyholders. It suggests a new and more transparent approach to charges by SJP which can only be of benefit to them in the longer term.
This looks a major victory for the FCA’s Consumer Duty and a good day for regulation in general. It remains to be seen how St James’ Place business model will adapt or how shareholders will react to this news.
Currently SJP’s advisers, or partners, keep all of SJP’s advice fees. However SJP’s CEO Andrew Croft said the firm will also begin retaining around 25bps of ongoing advice fees for the first time. However the firm has also increased its maximum ongoing advice fees from 50 to 80bps.
Upfront initial advice fees are remaining at 450bps, while SJP is introducing a tiered model for its ongoing product charges, which will be lower for bigger investments and lower than the current 100bps pension fee. It is also scrapping its initial product fee which is currently 150bps for pensions.
SJP said the fees could be as below.
|Fee component||New investment bond and pension account|
|Initial advice charge||Max of 450 bps|
|Total initial charge||Max of 450 bps|
|Ongoing advice charge||Max of 80 bps|
|Ongoing product charge||Max of 35 bps|
|Ongoing fund charge||52 bps|
|Total ongoing charge||Max of 167 bps|
The changes will also have a significant impact on SJP’s self-employed planners.
When asked by analysts Croft said the business did not have the opportunity to consult its partners before the changes were announced, as they were market sensitive. But he said partners will be pleased that ‘uncertainty has been lifted’ around the firm’s fees.
He also said partners’ remuneration will take a different form after the changes but ‘broadly speaking we will see [partner] renumeration staying the same’.
The initial market reaction appears to be positive , the bad news appears to be priced in and shareholders can be relieved that the pain will not arrive for some time. Al lunchtime, the share price was more or less unchanged.