St James’s Place’s (SJP) outgoing CEO Andrew Croft said upcoming changes to the adviser’s fee structure will make it “easier” to incorporate passive funds into its range.
The changes announced on Tuesday revealed SJP would remove early withdrawal penalties for new clients but also the six-year gestation period – or waiver – on management fees.
The new fee structure is set to be implemented in H2 2025, with SJP chief financial officer Craig Gentle stating the overhaul will cost the firm between £140m and £160m between 2023 and 2025.
Croft told analysts following the announcement: “One of the benefits of doing what we are doing is that it is going to give us greater agility in the future.
“It will be easier to do something with passives than it would be today with the current [fee] structure.”
SJP did not comment when asked about plans to expand its index-tracking offering following the fee changes.
The UK wealth manager – which has made its name in managed segregated mandates – has already delved into passives with mandates including the SJP Index Linked Gilts fund and its “passive plus” offering following Vanguard’s entry into the UK advice market.
However, with the largest fee overhaul in SJP’s 31-year history expected to reduce the margin it makes on its funds from 0.56% to 0.11%, a Redburn Atlantic analyst questioned whether a shift towards greater passive adoption would threaten its margin from management fees.
Earlier this month, Numis Securities analyst Dan McCann called on the UK’s largest wealth manager to switch to providing 80% passive funds, alongside overhauling its fee structure.
McCann said: “Given ongoing consumer duty, an opportunity for more radical change under the new CEO and to keep the business scalable and competitive in the future, we present a proposal for a new fee structure and an investment management model of the future.”
The Numis report added a swing in favour of passive management would “likely” result in more consistent outcomes for clients.
“This approach would emphasise that the most important part of the relationship with SJP is not about fund selection/trying to outperform, but rather the advice of how much to invest, how to invest it and for how”, the report said.
Despite the upcoming fee overhaul and potential incorporation of more index-tracking vehicles, a number of SJP’s fee tiers remain in place for the time being including its 4.5% entry fee and 1.35% annual management charge for long-term pension clients.