Concerned about my managed fund. Should I use an independent financial adviser?

12 July 2018

Question by Glyn

I was left some money in 2016, and was advised by my bank to get in touch with SOLA, The Society of Later Life Advisers. They put me in touch with a financial adviser, who turned out to be a St James's Place partner. Being a bit naive, I took their advice and invested my money in a St James's Place managed fund, split into ISAs and bonds. That was in December 2016. I have since been reading disturbing reports about St James's Place. e.g. the Which report! My investments have done reasonably well, about 5%. However if I were to encash it would not have gained anything. Should I have concerns about St James's Place? My accountant says they are ok. Should I have found an independent financial adviser, rather than a St James's Place partner?

Answered by Holly Mackay

My personal experience when talking to St James's Place about fees and charges is that it is a very blurry conversation, and it is ridiculously hard to get clarity on this. One email exchange saw them tell me that they weren’t allowed to disclose fees and charges, or tell me what the costs were “for security reasons”.

For ISAs and bonds, I suspect you paid a 5% initial fee which will have already been deducted. This is very high. You are probably paying about 1.85% on an ongoing basis. Again this is quite high.

My personal view is that their investment funds are run by a very experienced team and can be good. They are a mixed bag though - last report I read, about 40% of the funds had done better than the comparative benchmark since inception. The service is probably OK (depends on your adviser but if you like them and they are responsive, that’s a good start!) But they are pointlessly and needlessly dodgy (a personal view) when it comes to being upfront, clear and honest about fees.

If I were you, I would ask your adviser to give you a clear statement which shows what initial charges you have already paid. Ask them what your ongoing fees are for the funds, ISA and bonds (all-in). And ask them to tell you what any exit charges would be. Don’t accept fudge. Get it worked out for you in £s and pence.

If there are any exit charges, then leaving probably makes no financial sense. (I think they only charge exit fees for pensions, but check). If there are no exit fees, but you have already effectively lost 5% through account set-up – then again, leaving may be a protest vote which comes too late.

Good financial advice can save people a lot of money in the long-run, and protect you from costly errors. Your money is also being monitored and invested by a broadly decent team. So although I think they charge too much and are shifty about disclosure, don’t feel too despondent. But I think you and every single SJP client, has a right to feel bloody angry about the poor disclosure.

Get back to me once you have clarified the fees, and I’ll help you to have a dispassionate look at the alternatives. Ongoing fees of up to 2% are chunky.

For anyone else reading this, I would always tend to suggest an Independent Financial Adviser, and do ask them about initial fees, ongoing fees and any exit charges. That said, it’s also a question of who they use to actually run the investments. If you are paying high fees for investment managers who aren’t returning, that is equally bad news.

Jargon Buster:
'Restricted financial advice'
Danny Cox from HL explains the difference between restricted advice and independent advice
There are two types of adviser, independent financial advisers (IFAs) and restricted financial advisers. Independent financial advisers can choose the best product or service available to you from any available in the market. A restricted adviser recommends products and services from a range of providers and not necessarily from all that are available. As with any profession or industry, there are lots of very good practitioners to choose from, whether IFAs or restricted financial advisers. Choosing a financial adviser can be tricky, and it's worth trying to get a personal recommendation. The cost of advice and investments varies, and you should be clear on the services offered, and the cost of these so you can assess the value to you.

A good financial adviser will be able to add value to your situation: this could be by saving you tax, helping you to understand your goals and how to achieve them, helping you to invest according to your needs and attitude to risk, simplify your affairs – perhaps all of these and more.

They will also be able to clearly explain what they recommend and why, the benefits of taking action, the risks, and how much their recommendations cost, before you decide to proceed.

If you are unclear on any of these points or are concerned in any way, in the first instance you should go back to the adviser who arranged your investments for you.

Answered by

Holly Mackay

Founder and CEO of Boring Money

I’ve worked in investment markets for over 20 years. I started out at Merrill Lynch Investment Management and worked at a few big names before setting up my first business in 2008.