{"id":1318,"date":"2023-10-29T07:22:02","date_gmt":"2023-10-29T07:22:02","guid":{"rendered":"https:\/\/robdix.com\/?p=1318"},"modified":"2023-10-29T07:22:05","modified_gmt":"2023-10-29T07:22:05","slug":"fees","status":"publish","type":"post","link":"https:\/\/robdix.com\/fees\/","title":{"rendered":"Two reasons to be careful who you give your money to"},"content":{"rendered":"\n

The other week, shares in the UK\u2019s biggest wealth manager (holding \u00a3150 billion of client funds) fell by more than 20% in a single day. Why? <\/p>\n\n\n\n

Suspected fraud? Accounting scandal? No\u2026 a report that the UK regulator might force it to scrap the exit fees it charges its customers. <\/p>\n\n\n\n

People have complained about the fees of St James\u2019 Place (SJP) for years, and this latest drop prompted me to take a closer look. <\/p>\n\n\n\n

I\u2019m far from an expert. But I quickly found 2 reasons I wouldn\u2019t give them my money\u2026 <\/p>\n\n\n\n

1: Actively underperforming<\/strong> <\/h2>\n\n\n\n

SJP only invests client money in actively managed funds. These are funds where clever people pick shares that they believe will perform better than average, rather than following the \u201cpassive\u201d approach of just owning a bit of everything. <\/p>\n\n\n\n

Problem is\u2026 they mostly don\u2019t. In fact, 85% of US large cap equity funds under-perform just owning the entire S&P 500 over a 10 year period<\/a>. Other categories are even worse.<\/p>\n\n\n\n

SJP doesn\u2019t even have access to every single fund: their range is \u201crestricted\u201d to certain fund managers. So it\u2019s even less likely they\u2019ll pick one that ends up beating the average. <\/p>\n\n\n\n

2: Reassuringly expensive?<\/strong> <\/h2>\n\n\n\n

If you invest with SJP, you\u2019ll immediately pay 5% of your investment in fees. You\u2019ll then pay a further 1.6% \u2013 1.9% every single year (not including fund transaction costs, which are extra). <\/p>\n\n\n\n

(This is for general investments rather than pensions, which have a wildly complicated but seemingly no cheaper fee structure.) <\/p>\n\n\n\n

If that doesn\u2019t sound expensive\u2026 it will once you work through an example.<\/strong> <\/p>\n\n\n\n

Let\u2019s say that 10 years ago you\u2019d let \u00a3100,000 build up in a savings account, and you decided to do something with it. You invested it in a passive global equities fund (Vanguard\u2019s VWRL<\/a>), which went on to achieve an average compounded performance of 7.55%. <\/p>\n\n\n\n

That would have turned your \u00a3100,000 into \u00a3207,721 over 10 years. From that you\u2019d pay a 0.33% annual fee (Vanguard\u2019s account fee plus fund charges), meaning you\u2019d pay \u00a36,420 in fees and end up with \u00a3200,079. <\/p>\n\n\n\n

OK \u2013 rewind the tape, but this time say you decided to let SJP invest the money for you instead.<\/em> <\/p>\n\n\n\n

Well, 5% would vanish in initial fees on day 1 \u2013 so you\u2019d only invest \u00a395,000. Then assume that they invested in funds that exactly matched the performance of VWRL, even though there\u2019s something like an 8\/10 chance they wouldn\u2019t have done (see Point 1). <\/p>\n\n\n\n

Taking the low end of the annual fee estimate \u2013 1.6% \u2013 and ignoring transaction fees \u2013 you would have paid an extra \u00a330,749 in fees <\/strong>and ended up with \u00a3169,330. <\/p>\n\n\n\n

But shouldn\u2019t advice cost money?<\/strong> <\/h2>\n\n\n\n

What about the advice that SJP provides? After all, lumping everything into a global tracker fund is unlikely to be the right choice \u2013 so isn\u2019t it right that you should pay fees for professional guidance? <\/p>\n\n\n\n

Well, for a fraction of that \u00a330,749 difference in fees, you could have paid for a comprehensive piece of advice from another Independent Financial Advisor \u2013 allowing you to manage your own investments based on a plan you\u2019d put together with a professional. <\/p>\n\n\n\n

You could go on to pay for an annual catch-up and occasional reviews, and still have tens of thousands of pounds left over. <\/p>\n\n\n\n

(Alternatively you could still have an IFA manage your investments for you and save money: I\u2019ve just quickly Googled 6 advisors\u2019 fees and they were all significantly cheaper than SJP.) <\/p>\n\n\n\n

Use the experts, but invest in your own knowledge too<\/strong> <\/h2>\n\n\n\n

SJP is a pretty major offender, but you need to look out for the same two drawbacks whenever anyone manages your money:<\/p>\n\n\n\n

    \n
  1. Fees make a huge difference over time, even if it looks like a small percentage<\/li>\n\n\n\n
  2. If they only use actively managed funds, they have a high likelihood of underperforming (and charging you a lot for the privilege)<\/li>\n<\/ol>\n\n\n\n

    Above all, this emphasises the importance of educating yourself about money. Just reading a book or two can help you pick the right professionals to work with, and give you confidence that they\u2019re making the right decisions on your behalf.<\/p>\n","protected":false},"excerpt":{"rendered":"

    The other week, shares in the UK\u2019s biggest wealth manager (holding \u00a3150 billion of client funds) fell by more than 20% in a single day. Why? Suspected fraud? Accounting scandal? No\u2026 a report that the UK regulator might force it to scrap the exit fees it charges its customers. People have complained about the fees<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"\nTwo reasons to be careful who you give your money to - Rob Dix<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/robdix.com\/fees\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Two reasons to be careful who you give your money to - Rob Dix\" \/>\n<meta property=\"og:description\" content=\"The other week, shares in the UK\u2019s biggest wealth manager (holding \u00a3150 billion of client funds) fell by more than 20% in a single day. Why? Suspected fraud? Accounting scandal? 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