Last week I talked about the impact of risk on your investments and pensions but failed to mention one of the biggest risks I see within an investor’s (or pension investor’s) hard earned money.
That is - Apathy.
Just as on a bright sunny day in a hot air balloon, no-one checks for parachutes, when a stock market is rising few people check to see if they are receiving their money’s worth, or are indeed in for turmoil if a storm arrives.
It’s all a bit tardy when poor piloting uses up your gas (high charges) and flies you into a storm, just in time to notice the oncoming electrical hazards.
Balloon rides are often chosen on convenience and price (or perceived price as you will find out) and most pilots agree it’s the weather that dictates the safety, but in difficult times the pilot earns their wage.
As we move into volatile geo political times, how’s your pilot and gas usage for your investments?
St James Place (or SJP) manages £83bn of client money and is often on the receiving end of Independent Financial Adviser’s wrath.
Justifiably?
Whilst I know, and respect, a number of people who work for SJP, my research shows customers are not receiving value for money, and you might expect me, in the interests of fairness, to point out these shocking matters.
Indeed ‘Which’, the consumer watchdog showed them for exactly that. In a report they shared directly with the Financial Regulator, twelve undercover ‘customers’ asked SJP for advice.
SJP cannot give independent advice as they are not independent, but instead operate from a small selection of funds they have chosen to be the ‘better’ funds.
As a ‘non independent’ they won’t charge a fee and therefore will only be paid if you invest with them. This assumes you should be invested, rather than receiving advice which you pay for, which may lead you away from investing in the first place.
This makes me consider further the document leaked to the Sunday Times which warned that advisers’ income and ‘standard of living’ would drop if they struggle to get clients to part with money.
SJP sales representatives, (or partners as they are referred to) are paid from the huge upfront fees on the funds they place your money into. The financial website ‘This is Money’’ exposed the incentives given to the representatives such as Asprey cufflinks and trips to St Moritz. Indeed George Osborne was paid £40,000 to attend their last annual trip and make a speech.
We could argue that success has to be rewarded, but success for who?
Which pointed out SJP’s fees were 40% greater than an IFA and indeed are more than 40% greater than ours as a specialist Independent Financial Adviser in investments.
And so we might expect their performance to be better as they talk of their best of breed.
Ten minutes of analysis tells you to look a lot further.
I compared just three funds in a short time and the results were horrifying:
In each of the three, the returns by the better funds in the same comparable group/sector were over 90% better.
For example:
Their SJP UK and International Income fund produced 61.96% but the Artemis Global Income fund was more than double over the same five-year period at 124.14%.
Their Strategic Managed fund produced 44.99%, whereas the consistent Premier Multi-Asset Growth and Income fund produced over 90% better at 86.18% return.
The biggest percentage difference was in the star fund manager Neil Woodford whose Woodford Equity Income fund outperformed his own SJP UK High Income fund by over 200%, with a return of 28.67% versus 9.07%.
Which also pointed out the discrepancies between the ‘white labeling’ that SJP claim. It showed that investors buying George Luckcraft’s fund direct through an independent rather than through SJP would save you £1,000 in fees initially and £340 ongoing based on just £50,000 investing (£2,000 and £680 for £100,000 for etc).
That is indeed uncomfortable and as uncomfortable reading as it is, conformation bias (again) should not set in where either the adviser or customer convinces themselves that it isn’t as it seems.
There were numerous other points that came up but space prohibits….
If you would like your investments reviewed call Worldwide Financial Planning on 0800 0112825, email info@wwfp.net or visit us on www.wwfp.net.
Peter McGahan is the owner of Independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority.
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