Yahoo Finance How to get your share of St James’s Place £426m compensation
Clients of Britain’s biggest wealth manager who overpaid for financial advice could be due a share of the £426m that has been put aside by St James’s Place for refunds.
The FTSE 100 company has grown in three decades to become the largest advice firm in the country, with more than 4,800 advisers, known as “partners, looking after the pensions and Isas of more than 900,000 clients”.
But after it revealed this week that it had set aside nearly half a billion pounds to pay back customers, its share price plummeted.
So, what went wrong – and can you make a claim, if you think you might have lost out?
St James’s Place has long been criticised for what many regard as high and hard-to-understand fees.
After pressure from the financial watchdog, the Financial Conduct Authority (FCA), it changed its fees last October. It announced that it was scrapping its controversial exit fees on new pension and bond investments, which customers paid when exiting products early, and capped advice fees and fund charges.
The full implementation of its new “simpler” charging model will take until the second half of 2025 to fully implement, and will cost up to £160m, the firm said in results published yesterday.
Claims management firms began to target St James’s Place last year, suggesting that clients had been charged annual fees despite not having spoken to an adviser for, in some cases, years.
Earlier this month, the FCA wrote to 20 wealth management firms demanding to know how many of their clients had been refunded for advice they did not receive.
On Wednesday, the company confirmed that it would be allocating £426m to pay refunds to affected clients, who had been paying for advice without getting a full service.
Who was affected? Am I eligible?
Customers of St James’s Place who have not received advice in the past 18 months should look into whether they have been overpaying advice fees.
Because the wealth manager charged an “all-inclusive” fee, which was not separated into its different components, clients often did not realise they were paying for advice that they weren’t getting.
The fees will be more clearly laid out – into advice, product or platform, and fund charges – under the new charging structure.
Chief executive Mark FitzPatrick urged any customers who think they might be eligible for a refund to get in touch directly with St James’s Place.
He said: “We are setting up infrastructure and support to help clients understand what it is they should be expecting from their adviser.”
The wealth manager said it would be writing to investors to let them know if they might have a claim. Further advice will be made available on their website and more details on exactly how to claim will be included in the letter that is sent to eligible customers by St James’s Place.
How were clients overcharged?
St James’s Place advisers began sending letters to clients last year warning them that they could not be kept on the books unless they received the advice that they had been paying for.
This was because the firm realised it could have a problem after the FCA introduced its new “consumer duty” rules.
On top of the fees that they were paying for management and administration of their funds, clients who were signed up for ongoing advice were paying an 0.5pc annual charge.
On a pot of £200,000, this works out to £1,000 each year – money that investors could now be owed by St James’s Place.
How was it decided how much to pay out?
It might seem at first glance, that the company would look at how many customers have complained and how much they have overpaid, and then multiply those figures to come to the total refund bill.
But Mr FitzPatrick said this method was likely to underestimate how much would need to be paid out. He said that after a detailed review, the board and executive extrapolated to reach the £426m figure.
He said: “We’ve taken this statistically significant sample that has been worked on, and we’ve applied that to the overall population. It’s been done in a statistically pure way to say, ‘This is what we think the scale of the element of provision needs to be.’”
On an individual level, refunds will likely be based on how many years a customer had not spoken to an adviser.
If you think this includes you, you should attempt to calculate how much contact you have had with your adviser over the years. In some cases, you may have been offered a meeting but turned it down or cancelled it. It is unclear how St James’s Place would regard that when it works out if any compensation is owed.
Is it easier to use a claims management firm?
Claims managers offer to handle refunds for customers – but they will also take a cut of whatever they win. They often offer “no win, no fee” deals.
But Mr Fitzpatrick warned against St James’s Place clients using third parties to claim their money back.
“What is absolutely crucial is that clients – if they feel that they have been affected by this, if they feel that they haven’t been serviced by their adviser or partner – should contact us. They should not go through a claims management company,” Mr FitzPatrick said.
He warned that clients could lose out on up to 50pc of the refunds they are due by going through third parties, rather than going straight to the wealth manager.
“You are not going to get paid earlier by going through a claims management company.”
The FCA also warned customers not to use third parties. An FCA spokesman said: “St James’s Place has said it will contact those affected. As a result, there is no need for people to use claims management companies.
“We would also encourage people to be alert to the possibility of scams. If you are contacted out of the blue, you can end the call and contact St James’s Place using the information on our register.”
Have you been overcharged by St James’s Place? Email money@telegraph.co.uk
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