Ah, the age-old debate of Marmite; you either love it, or you loathe it. But when it comes to St James's Place (SJP), my taste buds are crystal clear. I simply cannot get behind the flavour of their business model.
SJP: A Business Model Raising Eyebrows
It's no revelation that the business model of SJP appears contrary to the best interests of investors. And recent scrutiny from the Financial Conduct Authority (FCA), pushing SJP to amend its fee structure, only seems to validate such concerns. Yet, what leaves many bewildered is the fact that this hasn't been addressed sooner.
To truly comprehend the intricacies of SJP's proposition, let's dissect it:
SJP Returns: Not Worth the Price?
If SJP funds were outperforming the market and delivering extraordinary returns, some might argue the fees could be justified. However, the evidence suggests otherwise.
Recent data from Yodelar (March '23) unveils that a staggering 75% of SJP funds lagged behind their sector average over a half-decade span. More concerning, 15% of all SJP funds incurred losses over ten years.
Bestinvest's "Spot the Dog" report from August flagged six of SJP’s funds, which manage a combined £29 billion, for their subpar performance over three years. Astonishingly, these funds represented a massive 63% of the total underperforming fund assets listed in the report.
The Catch of Exiting SJP
Considering pulling out? Think twice.
SJP enforces exit fees that can linger for up to 11 years. Some clients could face cumulative charges soaring to 7.5% if they retract within the initial year. With such punitive measures in place, it's hardly surprising SJP boasts an impressive client retention rate of 95.6%.
SJP's Share Price Impact
The market knows that something will need to change at SJP and is getting nervous. Back in July, after SJP revealed plans to cap charges in line with the Consumer Duty, the share price plummeted 16% in just 24 hours. Since then, its valuation on the London Stock Exchange has dwindled by nearly 40%, with a single-day 20% slump last Friday.
A Ticking Clock for SJP?
The question that nags at the back of many minds is clear: How has SJP sustained such a model for so long?
As the FCA sharpens its focus and the market reacts, SJP’s day of reckoning may be on the horizon. As for investors, it's always wise to be vigilant, well-researched, and critical of where you place your hard-earned money.
by Neil Edwards, 4 minute read
by Neil Edwards, 3 minute read