“You don’t need to worry about a thing,” a perfect set of pearly white teeth smiles at me. “I’ve never lost a client money.”
I’m sitting in a trendy west London coffee shop, where I’m meeting an adviser from Britain’s largest wealth manager. St James’s Place handles more than £100bn of clients’ money – and this man is bidding for mine.
“We find the best of the best of the world’s fund managers to invest your money,” he tells me. “If they’re not good enough, they’ll be sacked immediately.”
Best or not I’d have little say in my choice of investments, as St James’s Place only allows its “partners” to sell the firm’s own range of funds. “We constantly compare our performance against competitors,” he goes on, “and usually outperform all of the time over three or more years.”
I bite my tongue, having checked just hours earlier the performance of St James’s Place’s 10 most popular funds – which hold more than £52bn – over the past three years and found that only one had beaten at least three quarters of its rivals.
There have been other reports suggesting the firm’s funds fail to outperform, and each time it has defended itself by saying its returns also take into account charges not usually included by others, such as platform fees and ongoing advice.
However, if you invested £100,000 a year ago through a worldwide tracker fund, such as the HSBC MSCI World ETF, even when you deduct 0.5pc for advice fees – what St James’s Place charges – and platform fees of around 0.45pc from its performance, you would still be almost £2,000 better off now than if you’d had put the money into St James’s Place’s largest fund: its Global Equity fund – although this may not be representative over the long term.
My adviser smiles again, looking ready to wrap up, and I realise there’s been no mention at all of what I’ll be charged for all these “unique” services.
Then begins a convoluted and baffling explanation of how much I’d pay in fees, starting with an initial fee of up to 4.5pc on any money I hand over – “although I usually only charge 3pc as I think that’s too expensive,” I’m told – plus a charge of 0.5pc for ongoing advice.
A long pause ensues. “Anything else?” I query. “Ah well, of course, you pay around 1pc to St James’s Place too, separately to what you pay me as an adviser,” he adds. This is in addition to the 1.5pc cut the firm takes from his initial fee.
When I ask if that is all, I’m reassured that it is. “What about the funds? Do I pay fees on those too?” I ask. “Oh, yes, that too... but these are the levels of fees you’ll find everywhere,” he informs me. I’m not convinced.
According to The Lang Cat, an analyst, the average initial charge to invest through a financial adviser is around 1.5pc – a third of St James’s Place's. If I invested £100,000 with the latter I’d have lost £4,500 straight away. At least he offered to pay for the coffee.
St James’s Place said it guarantees the advice its advisers give is suitable for each client. It also said most of its clients’ money is put into its portfolios, which outperform 81pc of the time over three years, and it regularly collects clients’ feedback, most of whom are happy with its service.
So why do I leave feeling uncomfortable at the size of fees and confused as to why I should pay them?
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