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Britain’s biggest wealth manager St James’s Place accused of not being clear on costs and restricted advice by Which? investigation

Advisers working for St James’s Place, the UK’s biggest wealth manager, have come under fire after an undercover probe by consumer group Which?

The clandestine investigation, involving 12 meetings with different financial advisers from the FTSE 100 firm, unveiled failings in how the cost of advice is communicated to clients.

Advisers are also alleged to have failed to explain that they are only able to recommend investment solutions from a limited pool of products, with Which? claiming they ‘were highly skilled at saying just enough to be within the rules’.

Which? alleges that a quarter of advisers sample in its uncover probe were unable to properly explain the firm’s charge structure or the nature of advice offered

The Which? investigation involved researchers claiming they had £100,000 to invest and wanted to know what advice would cost and whether it was independent or restricted.

Which? deemed that four out of 10 advisers sampled did not adequately explore the likely cost of investment in general.

Even where advisers did provide information, there were discrepancies in the information mystery shoppers were given.

Some said there were initial charges of 4.5 per cent of the money invested while others put the upfront cost at 5 per cent.

What is more, five advisers failed to mention annual fees which is an aggregate of the levy for advice and investments they recommend.

The seven who did gave estimates ranged from 1.25 per cent to 2.3 per cent.

Which? concedes the varying costs of investment propositions is a legitimate reason as to why costs quotations are not uniform, but countered by stating that when SJP advisers did disclose these charges, estimates tended to be on the low side.

Going on analysis based on the charges levied on SJP’s funds, and the fund splits suggested in the firm’s marketing literature, Which? estimates that an SJP client would pay 1.59 per cent a year in charges as well as an initial 5 per cent for a low-risk portfolio of funds.

The figure rises to more than 2 per cent for more adventurous portfolios.

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Are you getting independent or restricted advice?

The probe also sought to establish how well SJP advisers explained the firm’s ‘restricted advice’ status. This is where clients are recommended a solution from a limited pool of products and/or providers.

The alternative is independent advice where the adviser can provide advice and provide solutions on products and services from the whole of the market.

They would need to provide ‘unbiased and unrestricted’ advice based on a ‘comprehensive and fair’ analysis of the market.

Under the Retail Distribution Review, which came into force in 2012, intermediaries are required to explicitly tell clients whether they offer restricted or independent advice, but a quarter of SJP advisers sample failed to do so, Which? said.

It added: ‘The broader problem we found in this area was that SJP’s advisers were highly skilled at saying just enough to be within the rules, but using carefully selected facts to give a very misleading picture – that their restricted advice would be better, or cheaper, than independent advice.’

Which? said it has shared its findings with the FCA.

A spokesman for SJP said that clients services and cost disclosure document, together with a bespoke suitability letter prior to any investment, which outlines the services being offered and provided, all advice that has been given and the status of the advice – whether restricted or across the whole market.

David Bellamy, outgoing chief executive of SJP, said: ‘St. James’s Place offers high quality, face-to-face, financial advice, evidenced by 98 per cent of clients who said our services represent reasonable, good or excellent value-for-money – with 81 per cent good or excellent.

‘Our advisers are committed to putting clients’ interests first and we will continue to provide the excellent service to clients that has underpinned our growth over the past 25 years.’