St James’s Place (SJP) CIO Justin Onuekwusi said the wealth manager will make a big push into low-cost passive investing in a bid to give “more choice” to its customers.
Onuekwusi told Financial News the move is part of an investment strategy revamp but is largely seen by the industry as unavoidable following pressure from the Financial Conduct Authority (FCA) after its Consumer Duty crackdown.
SJP earmarked its move into passives last October when its CEO announced a fee overhaul that aimed to make it “easier” to incorporate passive funds into its range.
The implementation of the FCA’s Consumer Duty – which came into effect on 31 July 2023 – means products and services offered to customers should offer fair value, alongside customers receiving understandable information from providers.
Further compounding reasons for the shift to passive is the ever-worsening struggle active managers have been facing while attempting to beat the market.
European ETFs saw €180bn more inflows than active mutual funds in the first 11 months of 2023 active mutual funds booked €91.9bn net redemptions, according to data from Refinitiv.
Meanwhile, 77% of Eurozone Equity funds underperformed the S&P Eurozone BMI in H1 2023, S&P Dow Jones Indices latest Europe SPIVA report found.
Under its planned changes, SJP would remove early withdrawal penalties for new clients but also the six-year gestation period – or waiver – on management fees.
The fee overhaul is expected to reduce the margin SJP makes on its funds from 0.56% to 0.11%.
Despite the fee overhaul and potential incorporation of more index-tracking vehicles, a number of SJP’s fee tiers remained in place including its 4.5% entry fee and 1.35% annual management charge for long-term pension clients.