Is St James’s Place, the UK’s biggest wealth manager, really worth the fees?

With £148bn in assets under management, more than 900,000 clients, and over 4,600 advisers, St James’s Place is the biggest wealth manager in the UK. It is therefore often the first company that comes to mind when people search for an established firm to help them manage their money.

There are a number of reasons why St James’s Place appeals to potential investors. Unlike some wealth managers, which only accept clients with a minimum portfolio of £1m, St James’s Place has a relatively low barrier to entry, and takes on clients with pots worth at least £50,000. 

Client retention rates are also very high at 96.5pc, signalling a strong vote of confidence in the firm. 

However, there is no shortage of controversy around the 32-year-old company. St James’s Place has been embroiled in numerous scandals throughout the years in relation to how its advisers are remunerated, as well as its divisive exit fees.

Here, we lay bare the firm’s charging structure and the long-term performance of its funds to help you determine whether the wealth manager is worth the fees.  

How much does SJP cost? 

St James’s Place charges a fee of 4.5pc for initial advice and then a recurring 0.5pc fee for ongoing advice.

On top of these advice fees, you will then pay separate initial and ongoing product fees for your investment, as well as any transaction charges.

For Isas and unit trusts, the initial product charge is 0.5pc. The ongoing charge varies depending on the funds you invest in. St James’s Place said the ongoing charge for a typical portfolio ranges between 1.6pc and 1.9pc, with initial and ongoing advice, product, fund manager and administration fees added in.

For a £1m portfolio, £50,000 would be immediately lost to that initial charge (4.5pc plus 0.5pc). This means it can take years before your investment delivers returns high enough for you to recover your loss.

The initial product charge is even higher for investment bonds and pensions, at 1.5pc. There is then a 1pc annual management charge, waived for each of the first six years after your investment.

St James’s Place also charges an early withdrawal charge of 1pc for bonds and pensions. There are no exit fees on its Isas and Unit Trusts. Such early withdrawal charges are virtually unheard of in the wealth management industry. 

Justin Modray of Candid Financial Advice, a financial adviser, said exit fees were “outdated practices that most of the industry scrapped years ago”.

St James’s Place said independent research has shown that the total charge its clients pay is below the market average. However, the research was produced by an external consultancy for use by St James’s Place.  

The introduction of the FCA’s Consumer Duty in July 2022 could change things for St James’s Place. This regulation is meant to strengthen consumer protection and ensure products are offered at fair value. The firm has said that the Duty will require it to make changes to the way it operates “to meet regulatory expectations”. 

However, it is unclear whether it will change its charging structure; it has previously said that it would not scrap exit fees in the wake of the Consumer Duty. 

How do St James’s Place funds perform? 

High charges drag on investment returns. Of the 29 funds available to UK clients with a track record going back over 10 years, only five have performed better than their Investment Association peer group, according to analysis carried out by the investment research firm Morningstar. 

They are the SJP Global Equity, Corporate Bond, North America, Property and Strategic Managed funds. All of the others have underperformed within this timeframe. 

The best performer – SJP Global Equity Income – has delivered excess returns of only 1pc. Meanwhile, the worst performer, Global Growth, was down 9pc. 

St James’s Place said it has made changes to its investment funds over the past three years with the aim of improving long-term performance. 

“This includes changing the [external] investment managers that run our funds, bringing down fees and embedding responsible investment principles across everything we do.”

However, a look at its Value Assessment Reports shows that not all funds have become cheaper (during the three year period between 2019-22 the average weighted fee for external fund managers reduced from 0.36pc to 0.3pc saving clients over £90m). 

In fact, a handful have become more expensive, like the Alternative Assets fund (this fund no longer exists and was merged into Global Absolute Return fund), which saw its Ongoing Charges Figures go up from 1.78pc to 1.96pc between 2020 and 2022.

What are the other options? 

If you are mainly looking to invest, then it is probably not worth paying extra for a wealth manager. DIY investment platforms such as Interactive Investor and AJ Bell offer a wide range of funds at a fraction of the cost.

The main advantage of getting a wealth manager like St James’s Place is getting access to full financial planning. A financial planner can not only help you invest, but also plan for retirement and find the best strategies to avoid inheritance tax. 

St James’s Place seems to be well-received by its clients. It has 4.9 stars on average on the financial adviser review website VouchedFor, from over 24,000 reviewers. 

A spokesman for St James’s Place said: “On average, clients invest with SJP for 14 years and our solutions are designed to build wealth over the long-term. 

“Clients typically invest in a diversified portfolio, with performance being one of several factors considered in its construction.”

There are more than 5,000 financial advice firms in the UK, and it is important to weigh up your options before you choose one. 

Other wealth managers include Rathbones and RBC Brewin Dolphin. You can use findawealthmanager.com to find managers who have been in business for at least five years, and who manage at least £500m in assets. This may be a good option if you have a bigger portfolio and you want the security of going with a business that has stood the test of time. 

Alternatively, you could go with a local financial adviser. Most financial advisers and wealth managers will offer you an initial meeting free of charge, so it is worth setting up meetings with several in order to work out whether the adviser – and their charges – are right for you.