What really infuriates our senior private banking colleagues, things that send them into paroxysms of capillary-bursting rage?
Well, it’s a long and choleric list so I shall try to narrow it down a bit. Excessive rules and regulations? Perhaps, but we are all in the same boat when it comes to red-tape compliance.
Next, ungrateful clients? One of the curses of our industry but wiser heads advise us the rich are invariably greedy, and a penny is as important as a pound to them. No, this is something we have to accept as inherent among the meaner super-filthies.
Rival banks of dubious ethics and practices stealing client business? Yes, certain Swiss houses still get away with murder (Venezuela, Brazil, 1MDB and, in the latest case, apparently Kuwait pension funds).
Then there’s the hypocrisy of the US, which has waged guerrilla warfare on private banking as the billions of dollars of fines for Swiss and other private bankers attest. For America has a whole industry devoted to, er...... tax efficiency, with places like Delaware well able to look at Liechtenstein and the Caribbean in the face when it comes to cosy arrangements.
And exactly what do all the US private banks based in Miami do? Perhaps banking South Americans who are so famously known for their law abiding ways as well as such freshly laundered suits?
Other private bankers I know hate IT types, and rabidly foam at the mouth whenever “plumbers in suits” appear. Banks have spent many billions on technologies to modernise their legacy systems, the systems subsequently proving a flop. Societe Generale and its Kleinwort Hambros arm during the time of the merger of the latter two are perhaps a case in point.
Of course, headhunters have always been disliked because of high recruitment fees although this profession is nowadays well down the “hate” list because of the Covid-beset quiescent jobs market.
But none of these examples compares with the ire that wealth manager St James’s Place can raise in private banking executive suites. SJP, the bankers charge, is still getting away with an opaque and high-cost model, including swingeing exit fees (sorry, early redemption haircuts) that rank it as one of the most expensive providers in the investment industry.
Like it or not though, SJP has been amazingly successful in attracting new advisers or ‘partners’, their preferred term. And with the new advisers perhaps on occasion there also comes ‘new AUM’ to SJP, sometimes – and – amazingly from their previous employer, so the allegation goes.
By 2018, SJP held a 12 percent share, the largest, of the UK investment market. Nowadays, it manages more than £116 billion for 700,000 plus clients and probably has a much higher share.
The firm has just admitted that less than half of its UK funds range offers overall “good value”. And it puts an ‘amber’ rating on 17 more, signalling that while the fund is generally delivering value, there are some areas that require “additional focus”.
(Nonetheless, SJP has just reported robust results for the first half of this year, despite the Covid disruption).
But while showing pleasing frankness by SJP, this still doesn’t appear to be the whole story.
Yodelar, the fund ranking and performance specialists, have again forensically challenged SJP’s investment performance. More than 50 percent of SJP funds rank in the worst 25 percent of their sector over the last five years, Yodelar finds. Over 72 percent of SJP funds perform worse than the benchmark.
SJP has communicated to customers that it feels a fund that is ranked in the top 60 percent – but not in the worst 40 percent – of a sector is a top performing fund.
“This means a fund doing worse than the sector average and ranked 59 out of 100 in their opinion is still a top performing fund,” Yodelar comments, acidly, on this interesting way of benchmarking.
Other investment managers and private banking managers continued to lobby investors holding SJP funds about the true cost of investing with the latter, hoping to win disaffected clients.
Among their messages to these customers is the fact that the restricted nature of the SJP business model, under which it is only able to offer investors its own branded funds, hinders it from offering clients access to the top performing funds available from the better fund managers listed in the Yodelar Fund Manager League Table, such as Baillie Gifford, Schroders and Legg Mason.
But these rivals confess that it is still hard going to persuade SJP clients of the value and performance benefits available elsewhere.
A selection of typical responses among SJP punters is something like, “(SJP) advisers always play close attention to my investment needs......Overall, I have been pleased with the performance of my funds......exit fees are high but as I am happy with (SJP) for the long-term, there is little likelihood I would have to pay these charges....”
For many investors, it would have been much better to have bought SJP shares rather than its funds for a really handsome return over the years—the real acid test for assessing the benefits of the SJP investment model.
Its share price hovers near 1,000p after hitting 1,164.50 at the end of last year, so largely shrugging off Covid disruption.
Personally, I think this bitter argument over the true value offered by SJP is becoming the nearest thing wealth management has had to the very unpleasant 30 years war. It must be hoped that wealth management doesn’t finish up with a high level of bloody destruction among the varying protagonists– like that conflict back in the 17th century.
Pip pip
