The plans set out will see the wealth management giant replace its highly criticised ‘early withdrawal charge’, with an explicit initial charge on new investment bond and pension investments.
Charges will also be separated into components – advice, product/platform and fund – to simplify the structure and make them easier to understand for clients.
Mark Polson, principal of the lang cat, said the overhaul was “very much Consumer Duty in action”, following reports that SJP was receiving regulatory pressure to go further with amendments to its fee structure.
“Whiplash is never pleasant, and their reverse on exit fees will certainly have caused some,” he added.
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Polson, however, criticised the timeline of the changes, which will not come into full force until the second half of 2025 and will only apply to new clients.
“This is bizarre and seems to me to be against both the letter and spirit of the new Consumer Duty rules – if something is not right, it should be fixed for both new and existing clients, and as quickly as possible. That does not sound like two years and new-customers-only to me,” he said.
SJP explained to Investment Week the changes will apply to all UK clients – both existing and new. However, there are caveats.
While new clients will be able to take advantage of the simplified charging structure, if they join SJP after the effective date, existing clients will see these benefits once their ‘early withdrawal charge’ period expires, after which point they will be transferred under the simplified model.
However, as sister publication International Investment noted, the changes will not apply to products in Asia and the Middle East.
Polson suggested the changes “might lead to some difficult conversations” between the wealth giant and its advisers and clients, and called on the Financial Conduct Authority to “double down and get SJP to accelerate its timeline for all customers”.
Ben Yearsley, investment consultant at Fairview Investing, echoed Polson, noting how SJP’s charges were “outdated and ripe for change”, leading to the “inevitable” overhaul.
Boring Money CEO Holly Mackay said SJP had “backed itself into a corner on their ‘exit fees which were not exit fees'”, but argued that the company’s focus will now need to shift to evidencing “continued client retention to the stock market”.
SJP will also need to continue to proving “strong margins” and the “delivery of superior client outcomes to satisfy the regulator and consumers”, she said.
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“Whilst the identification of charges at product, platform and advice level may appease the regulator, the truth is that for most customers transparency is not the same as clarity and so the art will be aggregated disclosure for most, and granular disclosure for those who want to dig,” she added.
“Today has been a long time coming. The business has bowed to the inevitable and it will be interesting to monitor the stock market reaction as the implications are digested and customer behaviours tracked.”
Darius McDermott, managing director of FundCalibre, welcomed the move: “It is good that the charges from SJP will be structured in a way that is more consistent with the industry standard. Its clients will be able to see a clear break down of charges, making comparison easier.”
Yearsley also noted the changes to SJP’s fund fees – set to take become effective in 2024 – “would be neutral on revenue”, and wondered whether clients will be better off in the end.
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But analysts at Jefferies forecast a 25% drop to SJP cash result estimates for the next two financial years, currently at £480m and £575m, respectively.
They added that SJP’s board expects to maintain its 70% payout ratio, although they argued shareholders are taking most of the financial impact through the “cash profit and losses”.
Overall, the Jefferies analysts said there will be a “material impact in profitability”, but SJP will remain profitable. Its advisers and partners are likely not going to suffer from the move as the weighting of their income will shift to ongoing fees from initial charges.
“We do not expect further significant regulatory impacts on the business, these changes deal with the question of SJP’s fees for the foreseeable future,” they added.
