Undercover investigation found charges disclosure varied and restricted advice was not clearly explained
An undercover investigation has revealed some advisers from St James’s Place are not disclosing their charges clearly or stating they are restricted.
In an investigation by consumer champion Which?, undercover researchers saw 12 SJP advisers over a two-week period in May. The researchers were seeking independent advice on investing £100,000 and all were offered free introductory meetings.
Which? was interested in what the advisers told the researchers about charges and also how clearly they highlighted they are restricted not independent.
The investigation showed four out of 12 advisers did not describe in detail what their charges were.
The advisers who did give information about charging, gave varying information.
Some said the initial charge was 4.5 per cent, while others said it was 5 per cent. Estimates for annual ongoing charges ranged from 1.25 per cent to 2.3 per cent and only seven of the advisers mentioned ongoing charges.
Which? said the advisers who gave information on charges did so as part of a “sales pitch”, which it said could confuse potential clients about how much they would pay.
According to Which? SJP said some of the advisers might have quoted advice fees, which are 4.5 per cent of the initial investment, while others quoted 5 per cent, which includes other fees.
Which? was told by SJP that the discrepancies in ongoing charges might have been because some advisers quoted the annual management charge, while others quoted an estimate for all charges.
Three of the 12 advisers did not say they were restricted and Which? said some of the advisers who did confirm their status made the distinction between being independent and restricted sound like a “technicality” rather than a fundamental difference.
According to the Which? report, one adviser said he did not need to be independent because SJP is, which it claimed gives the client the impression it “was about the size of the operation not the nature of the service”.
SJP told Which? it does not believe “being restricted is in any way inferior to being independent”. It also said its advisers were trying to explain its “distinct approach to investment management” and that if advisers’ explanations dismissed the value of independent advice it was “regrettable”.
According to the investigation, three of the 12 advisers “grossly exaggerated” the potential returns of a “cautiously managed” SJP portfolio. They highlighted past double-digit performance, when the recommended funds were more likely to achieve 3 per cent to 5 per cent per year.
Which? said when it spoke to SJP about this, it agreed that past performance is not an indicator of future performance but that it stood by its recent figures.
Which? has shared its findings with the FCA.