17-07-2025
It's no longer a rip-off, but I'd still never give my money to St James's Place
The two questions I get asked the most, once people realise what I do for a living, are 'Do you think I should invest in crypto?' and 'Can you recommend any financial advisers?'.
My answer to the first question is, of course, that cryptocurrency is not an investment – but if you fancy a flutter, go for it, or stick a tenner on the horses.
Paying for financial advice is anathema to a financial journalist. Avid readers of The Telegraph are well-armed to tackle the major personal finance questions: how much to save into a pension; what to invest your Isa in; where to find the best mortgage and savings rates; and how to cut your tax bill.
There are some areas where you must, under the City watchdog's rules, speak to a regulated financial adviser – equity release, transferring a defined benefit pension and so on.
But for other decisions, many people, perhaps the majority, don't have the time or inclination to work everything out themselves. The more complicated your finances, the more likely you would benefit from some hand-holding.
Tax advice, in particular, can be invaluable, and a good adviser can save a client thousands of pounds quite easily.
Which brings us to St James's Place, Britain's biggest wealth manager. It claims to have more than one million customers, and manages a record £190bn. Its target is the 'mass affluent', those with decent pensions and savings, but not the mega-wealthy.
However, for years, it has been dogged by claims that its fees were high and opaque. It also operated a controversial 'early withdrawal charge', which could be as high as 6pc.
In countless articles, it defended this charge, and claimed it wasn't an exit penalty, but simply a way of recouping fees it would otherwise forgo. St James's Place also claimed the charges offered 'strong client value', and that customers understood it (which was total nonsense – I could barely get my head around it).
The issue came to a head last year when the wealth manager was forced to set aside £426m for compensation when it discovered some clients had not been receiving annual reviews from their 'partners', the name for its army of self-employed advisers.
Clearly, it needed to change. This week, St James's Place finally confirmed a new charging model from August 26 that splits out the costs of advice, the product (pensions, bonds, Isas and so on) and fund management.
This should make it far easier to compare St James's Place with other wealth management firms. The exit charge has been abolished for new customers.
It has also lowered its initial fee, the charge applied when you first become a client. Previously, customers paid a whopping 4.5pc of the wealth they were handing over, plus an ongoing charge of 0.5pc.
This has been replaced with a tiered initial fee of 3pc on the first £250,000, 2pc on the next £250,000 and 1pc above £500,000. The ongoing charge has risen to 0.8pc.
St James's Place says a new client with £400,000 to invest would pay £10,500 as an initial advice fee, plus around £3,000 each year for ongoing financial advice. Product and fund fees are charged on top.
Under the old model, the same £400,000 in a pension would have been charged £18,000 initially (but spread over six years) plus £1,900 ongoing each year.
While the new charges are roughly in line with the rest of the industry, it still feels like a huge chunk of change to be handing over.
And remember, with the kind of percentage fees commonly used by wealth managers and stockbrokers, if your investment grows, you pay more in fees. This is despite the fact that in many cases, your wealth is being inflated by global markets, not the skill of an adviser or fund manager.
St James's Place is also what is known as a 'restricted' adviser, meaning it will only ever recommend certain solutions or investments. A true independent financial adviser can, in theory, recommend anything under the sun.
My financial needs are simple. A stocks and shares Isa filled with passive tracker funds that cost pennies per year, and a company pension where I put in as much as I can afford.
Increasingly, the cost of investing is coming down. Brokers such as Interactive Investor charge fixed fees, which can be incredibly cheap depending on how much you have saved.
But there will always be people who need more help. The Financial Conduct Authority has finally recognised this, and is changing its rules to allow pension and Isa providers to offer basic advice to help people avoid the biggest mistakes. Currently, DIY platforms have been too scared of compensation claims to give so much as a nudge to customers.
If you do want fully-fledged advice or wealth management, make sure you wholly understand what you're paying for in pounds and pence. Ask how many reviews you will get, and whether you should be in passive funds rather than expensive active ones.
Lastly, haggle on the fees. The more money you have, the harder you can squeeze.
