How to switch from St James’s Place Wealth Management

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This week’s news that the UK’s largest wealth manager St. James’s Place, was removing exit fees from its range of pensions and investment bonds raises the possibility of clients being able to switch wealth managers without penalty if they are unhappy with the service and performance they are currently receiving.

Switching from St James’s Place

Switching wealth managers from St. James’s Place has become viable with the news that the firm has bowed to regulatory pressure over its steep exit fees, which the FCA believes did not comply with its new consumer duty rules.

St James’s Places has 900,000 clients and almost £160.0 billion of their money under management. Early withdrawal penalties or exit fees were designed to dissuade customers from moving their money elsewhere and they proved to be an effective retention tool.

However, it’s one that drew criticism from others in the wealth management industry who felt that SJP clients were effectively being blackmailed into staying with the firm as the fees could reach as high as 6.0% of the value of assets managed by SJP for new clients and scaling down the longer you kept your money with the firm.

When do the exit fees stop?

St James Place will no longer apply exit fees to new purchases of pensions and investment bonds and will also scrap, or dramatically reduce, the initial fees charged to clients.

At the same time, the firm has raised some of its ongoing charges.

Overall the changes to its fee structure are expected to cost the firm somewhere around £140 to £160 million over the next two years. Shareholders will have to swallow those costs and not the firm’s self-employed sales team, the so-called “ partners” of the firm of which there are 5,000.

St James’s Place will also unbundle its fees in the future breaking down its charges item by item so that clients can get a clear idea of what exactly they are paying for a move that is in line with obligations imposed by the consumer duty rules.

The unbundling of charges will become effective in 2025 and come after what St James’s Place called “engagement with our key regulators”.

Some might consider the new fees to still be excessive with clients expected to pay around 1.67% per annum for investment bonds and 1.59% for pensions.

Pros and cons of switching wealth managers?

Picking a firm to manage your money is a very personal decision and also quite a complicated one.

Before they pick a wealth manager investors need to consider exactly what they want from the firm will they make their own investment decisions, act on the firm’s advice or leave the wealth manager to manage their money on a discretionary basis?

Each of these services will have a different set of costs associated with it.

Some decisions may be made for you simply because advisory and discretionary services often have a portfolio threshold, though the new breed of digital wealth managers have lowered some of these barriers.

Why consider switching?

Ask yourself a few questions before you do so it can be a time-consuming process and you will need to be sure that you are moving for the right reasons.

If, for example, you want to switch managers because of poor performance, think about who chose the investment strategy and over what time horizon was it intended to play out.

If, for example, you are three years into a 10-year plan you might not be comparing apples with apples.

Cost of moving wealth managers

If you are invested in a manager’s in-house funds they may not be easily transferable and your new manager may want to start with a clean slate, so you will need to discover what the bid-offer spreads on those funds are.

There may also be fees for the transfer of third-party funds, listed stocks, ETFs and bonds between managers, and or commissions to pay if you choose to sell your existing holdings and transfer cash.

You should also take into account what your new wealth manager will charge you as and when they reinvest or reallocate your portfolio.

The alternative to switching wealth managers could be to take on the management of the portfolio yourself, using one of the UK’s D2C or direct-to-consumer platforms Such as Hargreaves Lansdown or AJ Bell, investing in low-cost tracker funds and ETFs, but of course, not everyone will feel comfortable with, or capable of doing this.

If you are thinking of switching from St James’s Place or any other wealth manager then the Good Money Guide can help via its dedicated Wealth Management comparison.

Pages that are packed full of reviews and ratings of both traditional and digital wealth managers.

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