St James’s Place takes on Vanguard, but charges 350 per cent more
St James’s Place is no stranger to high fees.
Britain’s largest wealth manager has been pilloried for its high costs, from its controversial exit fee (now being phased out) to the high fees on its pension funds.
Now, St James’s Place has earned a new accolade and a new issue with fees.
The group’s Polaris range has become the largest multi-asset fund range in the country, surpassing Vanguard’s Lifestrategy range of funds.
The four-fund range grew by £9bn in just two months, taking assets to more than £44bn, compared to £37bn for Vanguard’s Lifestrategy range.
However, ISA fees on the four Polaris funds average a whopping 1.63 per cent a year, with the most popular, Polaris 3, costing 1.67 per cent a year.
This is on top of an initial five per cent entry fee charge, though this would not apply to existing SJP customers who transferred into Polaris.
“For new clients, they would receive a full initial review with their SJP adviser, which includes developing a personal financial plan that helps them build a well-diversified portfolio to achieve their long-term goals,” said an SJP spokesperson.
For pensions, the price is even steeper – a 1.5 per cent fee across all four funds, along with an average 0.46 per cent management and maintenance fee for an overall fee of just under two per cent.
A St James’s Place spokesperson said that the 1.67 per cent figure “includes the cost of the external fund managers, administration and advice”.
However, even when stripping out the 0.5 per cent that SJP charges for advice, fees still averaged 1.09 across the funds, significantly above any other funds range CityAM could track down.
When you compare this to Vanguard’s Lifestrategy range of funds, which charge 0.22 per cent a year and no entry fee, the fact that the American giant has been overtaken seems unbelievable.
Even once Vanguard’s 0.15 per cent platform fee is taken into account, this is still three times less than what it would cost to buy an SJP fund without the advice.
Ben Yearsley, director of Fairview Investing, said St James’s Place’s funds seemed especially expensive even compared to other active funds. The Columbia Threadneedle’s Universal Multi Asset has a charge of just 0.29 per cent.
Even the pricier funds, such as the Baillie Gifford Multi Asset Growth fund, charge only 0.65 per cent a year.
When accounting for platform fees, with a company like AJ Bell charging a maximum of 0.25 per cent annually for the fees, these other funds are still significantly below what is charged by St James’s Place.
“Unless the SJP range is doing something very different with the underlying asset allocation, or their performance is markedly superior over long periods, then why would you use it?” asked Yearsley.
So, has performance been “markedly superior”? Not quite.
St James’s Place Polaris performance
Over the last year, the four Polaris funds have returned an average of 7.9 per cent, compared to a specialist life fund sector average of 7.5 per cent, according to data from FE fundinfo.
Polaris 1 and 2 are in the third quartile of performance in their sector, while 3 and 4 sit in the second quartile.
This compares to an 11.3 per cent growth in the Vanguard Lifestrategy 60 per cent fund, though this will be slightly lower when including platform fees.
Ultimately, Yearsley said the massive success of St James’s Place was “merely down to the ability of their sales people in getting new clients.”
“Fees always seem high at SJP but it doesn’t seem to stop them asset gathering,” he added.
While St James’s Place has not disclosed the split between new money invested in the Polaris funds and that moved from other SJP funds, it is widely understood that existing customers account for a substantial portion of the cash in the range.
Net inflows in the first six quarters of the fund’s launch totalled only £7.9bn, while even gross inflows failed to make up the whopping £41bn currently housed in the funds, suggesting a significant transfer must have taken place within SJP to bring the range to the number one spot.
It remains to be seen whether the Polaris funds will be able to maintain their top spot as money to transfer from around the company dries up.
An SJP spokesperson added: “The Polaris range has attracted a significant pace of inflows since its launch in November 2022. It was designed and launched to satisfy demand for a multi asset fund-of-funds range, primarily utilising the broader SJP fund range.
“Its performance, AuM and inflows demonstrate that our clients and Partners believe in SJP’s asset allocation process and investment management approach, and highlight the value of and demand for trusted financial advice.”
This article has been updated to include the platform fees included in buying other funds.