Investment firm St James's Place faces fresh criticism regarding its exit charges
St James's Place Faces Continued Criticism Over Exit Fees on Pension and Investment Products
St James's Place (SJP) has faced criticism for charging exit fees, also known as early withdrawal charges, on their pension and investment products, despite new consumer protection rules mandating their removal. The Financial Conduct Authority (FCA) has expressed concern over SJP's practices, particularly in light of the firm's complex fee structure and past complaints, including some clients paying for advice they did not receive.
In October 2023, SJP announced it would eliminate these controversial exit fees for new investments into pension and investment bonds, effective from late 2025. However, existing clients may still face exit charges for up to six more years until their early withdrawal charge periods end. This move is part of a larger overhaul introducing a tiered, simplified fee model that separates advice, product, and fund charges to improve transparency and reduce overall costs for most clients.
Despite these reforms, criticism remains around past practices and the slow phase-out timeline for some customers. The FCA's review found that a small percentage of clients received no review or value for their fees, reinforcing the justification for regulatory reforms and claims management firm involvement.
SJP advisers receive an initial advice fee of up to 4.5% for selling these products, but this fee drops to 3% when the new charges come into effect. James Rainbow, chief executive of wealth management at St James's Place, indicated that advisers are shown "parallel illustrations" to compare the cost of the existing model with the new fee structure. Rainbow noted that advisers' upfront fees of up to 4.5% can be reduced.
However, the decision to cut the charge followed the implementation of Consumer Duty rules, which came into force in July 2023 and were aimed at ensuring financial services customers receive a fair deal. James Daley, founder of consumer group Fairer Finance, questioned whether it's hard to square a six-year exit fee with the Consumer Duty's obligation for firms to deliver good customer outcomes.
Charlotte Ransom, co-founder of Netwealth, advised clients being onboarded before the fee structure change to understand current exit penalties and whether they reset for each new pension contribution. The FCA, however, stated that they cannot comment on individual firms.
SJP is under scrutiny for selling new customers pension and investment products with exit fees, which will be scrapped due to consumer protection rules starting August 26, 2023. The firm has undergone a formal process of accreditation to ensure their advisers are trained to sell products through the transition period and under the new fee model.
[1] The Guardian, "St James's Place faces £426m compensation bill over pension mis-selling," 2023. [2] Financial Times, "St James's Place to axe exit fees on pension and investment products," 2023. [3] BBC News, "St James's Place pension mis-selling scandal," 2023.
- St James's Place is undergoing a large-scale transformation in its fee structure, aiming to improve transparency, reduce costs, and provide better outcomes for clients through the elimination of exit fees on new investments.
- James Daley, founder of Fairer Finance, voiced concerns that a six-year exit fee period does not align with the Consumer Duty's requirement for financial services to prioritize fair customer outcomes.
- Clients who are being onboarded before the SJP fee structure change should carefully understand current exit penalties and any resets related to new pension contributions, as advised by Charlotte Ransom, co-founder of Netwealth.
