SJP’s fees: bad for you, great for shareholders

Wealth manager St James’s Place (SJP) has taken a kicking as a light has been shone on the extortionate fees it charges customers. But those who are determined to make money with Britain’s biggest wealth manager could do better buying its shares rather than investing via its funds.

While the high management costs may be detrimental to the returns of its customers, they have led to outstanding results for shareholders. Data compiled for Telegraph Money by fund shop AJ Bell show that a pension pot of £500,000 with SJP would have incurred costs of £100,783 over the past decade just for advice, not including additional fund fees. It is an incredibly high hurdle to have to overcome before making a positive return on an investment.

The picture is quite different for shareholders. Over the past decade, the stock has made a total return, which includes share price appreciation as well as dividend payments received, of 363pc. This is more than three times the 103.1pc return from the FTSE 100 index of Britain’s largest companies. It would have turned £500,000 into £2.3m.

Job Curtis, manager of the City of London Investment Trust, bought the FTSE 100 company six months ago and believes it can produce strong returns for investors, despite continuing scrutiny of its fees.

The dividend of 5pc, based on the current share price of £9.33, is an attractive starting point for investors, but more important is the growth potential of the business. Despite ongoing calls to cut fees, which would push margins lower and reduce the available cash used to pay dividends. Mr Curtis said the outlook for growth remained positive.

He highlighted the “savings revolution” under way in Britain, which has been driven by pension reforms. Businesses have moved away from offering employees gold-plated defined benefit (DB) schemes, or final salary schemes, which pay an income throughout retirement. Instead, defined contribution (DC) schemes, which build up large cash pots that people use to fund their income in retirement, have become the norm.

Mr Curtis said: “A decade ago, most people would be in a DB scheme but that is dwindling and most pensions are now DC, which will need managing.” Aruna Karunathilake, of fund house Fidelity International, said that these pension reforms had spurred demand for financial advice, given the increased complexity and large choice available to investors. He added: “This is especially true at the more affluent end of the spectrum where SJP focuses.” The firm’s average customer has more than £100,000 invested, he said. In addition, SJP’s academy programme of training the next generation of financial advisers will give it a competitive edge, ensuring it grows faster than its rivals.

These two factors have contributed to SJP’s 20pc annual growth in funds under management over the past 10 years, which is now more than £100bn.

Barring regulatory intervention, SJP should grow for years to come. The amount an SJP customer will be charged in their first year, based on a £500,000 pension pot