Britain’s biggest wealth manager recently revealed it had set aside £426m in refunds for clients who had paid for a service they did not receive.
St James’s Place has grown into Britain’s biggest wealth manager in just three decades, and now looks after billions of pounds for more than 900,000 clients.
But over the past year the FTSE 100 company has been at the centre of a regulatory crackdown.
Increased scrutiny over fees and services has driven the firm to completely overhaul its charging structure, and later announced refunds for potentially thousands of overcharged clients.
This comes following a Telegraph investigation last September, which revealed that some clients had been charged annual fees despite not having seen their adviser for years.
Financial advisers are supposed to review their clients’ plans and investments on a regular basis in case their circumstances change.
In its full year results the wealth manager said it had seen a “marked increase” in complaints regarding ongoing advice, and had therefore switched off the annual fee for 2pc of its clients.
Wealth managers have been re-examining their charges ever since the Financial Conduct Authority (FCA), the City watchdog, introduced new rules aimed at giving consumers “fair value”.
But clients too should be taking another look at how much they pay their financial adviser – and asking whether the costs are truly justified.
You may be eligible for compensation from St James’s Place if you have not had a review meeting with your adviser for several years.
However, even if you are perfectly happy with the advice you are receiving, you may also be able to save thousands of pounds by negotiating your fees.
Lee Goggin, of the website Find a Wealth Manager, said: “In my experience most, but not all, wealth managers will offer some kind of discounted fee – either initial or ongoing.”
Justin Modray, of Candid Financial Advice, said: “Many financial advisers have effectively doubled their annual fee since sales commission was abolished at the end of 2012, so there should be ample room to negotiate. Under the commission system advisers typically received 0.5pc a year, whereas many now charge 1pc a year.”
How much could you save on fees?
Wealth managers’ charging structures can be complex so before you try to negotiate, take time to understand all of their fees and exactly how a discount could apply.
Mr Goggin said: “The wealth manager could realistically have a relationship with a client for decades so it’s common to discount the fee for initial advice around pension consolidation or the creation of a self-invested personal pension (Sipp).”
Some wealth managers will offer a payment holiday, where they discount or remove the annual management fee for a couple of quarters, Mr Goggin continued.
Alternatively they might discount the fee for several years – “but this is usually only for clients with significant funds to invest,” he said.
A spokesman for St James’s Place said it does sometimes adjust charges, but this will depend on a number of factors “such as the complexity of the advice being provided, the needs and objectives of the client, and the size of investment.” They added: “We seek to ensure fair value is provided to all clients.”
St James’s Place will be introducing a new charging structure, set to come into effect in the second half of 2025. After that it will charge up to 4.5pc in initial advice fees. This is down from 5pc for funds and 6pc for pensions.
It then charges ongoing fees of up to 1.59pc for funds and 1.67pc for pensions. This includes a 0.8pc advice charge.
Securing a discounted fee could potentially save thousands. For example, a client with a £500,000 investment pot could save themselves £7,599 in upfront costs by negotiating the initial advice fee down to 3pc.
The same client could save nearly £19,000 over the course of 10 years if they managed to negotiate a 0.25 percentage point discount on their annual fees – paying 1.34pc instead of the standard 1.59pc.
Assuming yearly returns of 6pc, the pot with an annual fee discount would grow to £788,455, compared to £769,823 if they paid the full rate.
The Telegraph heard from one reader, Clive Thomas, based in Shropshire, who negotiated his annual charges down when he first joined St James’s Place eight years ago. He estimates the fee cut has saved him thousands of pounds on his £300,000 portfolio.
“A solicitor friend of mine recommended St James’s Place as she knew the partner and his business was less than five miles away. I did a lot of homework before I met him and he took away all the information he needed about my circumstances. We met again and he laid out his proposal. St James’s Place would take all my investments under their umbrella.
“We then discussed their overall fees structure and we discussed some options. If my memory serves me correctly I think I negotiated a 1.75pc to 2pc discount on their published rates which was acceptable to me.”
He added: “Partners must be reluctant to offer a discount on fees because it ultimately hits their – and St James’s Place’s – bottom line. Perhaps I was just fortunate with the investment partner I have, and the relationship he anticipated with me.”
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Those with simpler needs will likely find it easier to negotiate the fee price down, said Holly Mackay of Boring Money.
“If you have a very large portfolio, but you’re pre-retirement, and not doing anything dramatic, then you have a good case to argue for a lower percentage fee,” she said. “If however you are setting up trusts, doing complex things with pensions, or setting up new accounts, you should expect to pay a bit more.”
It could be worth asking if your wealth manager would cap fees for larger portfolios or charge a fixed fee for a specific job, she added. “Not all of them can – but you should at least feel comfortable to have a frank conversation and make the connection between the scope of the work you need doing – and the size of the fee you would pay.”
Do you use St James’s Place or another adviser? What have your experiences been, good or bad? Let us know at moeny@telegraph.co.uk or in the comments below.
