Investor Event

Wealth Management Advice versus DIY investing

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

This article reflects the opinions of its author and not necessarily those of ShareSoc.

£300 or £3,400 of fees (i.e. costs) you pay each year?

£300 or £3,400 of costs/advice fees is the choice that an investor with a £170,000 portfolio would face if he/she invested in a Vanguard passive fund with interactive investor or sought individual financial advice from one of the UK’s leading firms of advisers.

£170,000 is the average portfolio of a St James’s Place client so is a useful benchmark for comparison purposes. The current furore about St James’s Place fees and value for money made me think it was time to write up some of the facts about the charges you have to pay for advice.

A Google search of St James’s Place fund management fees very quickly found this piece of research .

I also found this very useful article in the Sunday Times by Ali Hussain October 20, 2023 “Victory as SJP finally agrees to cut its fees.

The data for various platforms/firms mentioned in this article was sourced from a survey in 2019 by Numis:

St. James’s Place 2%
Quilter 2.8%
RBC Brewer Dolphin 2.65%
Rathbones 2.43%
Hargreaves Lansdown 2.28%
Interactive Investor 0.2% (source: my own arithmetic).

In contrast, a DIY investor who invests in a Vanguard global tracker or S&P 500 tracker will only pay £12.99 per month fixed fee for an interactive investor SIPP account plus 0.15% fees for the Vanguard tracker. For a £170,000 fund, this is £311 per year, c. 0.2% p.a.

Passives versus wealth managers – are the fees worth it?

I may not be comparing apples with apples, as the wealth management firms may be giving broader tax management and wealth strategy advice. However, increasingly AI can outline the choices and seeking advice from a specific expert for key aspects, e.g. writing a will is often better and more cost effective than generalist advice from a generalist financial adviser.

The new charging structure for St James’s Place has a 4.5% initial fee and annual fees of 1.67%p.a. So, in year 1 a new customer is charged a whopping 6.17% fee and thereafter 1.67% p.a. Of course, a sensible person will be considering a long-term relationship so might wish to consider total costs over say 10 or 20 years, so the average fees equate to around 2% a year. That equates to an approximate 30% reduction in the final value of an investment portfolio over 20 years compared to 0.2% fees being charged. However, with 958,000 clients and 4,834 partners, the average St James’s Place partner has around 200 clients. So, each partner can only spend a few hours a year on each client, and the incentives are strongly geared towards selling new business.

My own view (and it is generic guidance) is that learning a bit about investing is time well spent. The DIY approach will greatly reward this time spent.

Cliff Weight (ShareSoc Member and Policy Committee Member)
Disclaimer: These are the personal views of Cliff Weight and should not be viewed as financial advice. Financial advice requires the analysis of a person’s individual circumstances and the payment of a fee. Publication of this article by ShareSoc does not imply it agrees with its contents.

Cliff Weight does not own shares in St James’s Place. He owns a few in Hargreaves.

Some of the firms mentioned in this article disputed the data in the Sunday Times article, which also quoted the firms’ own data.

  1. Amin Mohammed says:

    I agree strongly with Cliff. I would put it more bluntly. If you pay for a wealth manager (unless you are a billionaire who sets up a family office) you are a mug and just burning money.

    I appreciate that I have a somewhat privileged perspective, being a chartered accountant and chartered tax adviser. However the real thing that makes a difference is just being willing to put in the time to read some books on investing.

    The time you spend doing that earns an enormous hourly return if you compare it with the fees you will be avoiding paying.

  2. robert hulme says:

    Fred Schwed’s question in 1955, “Where are the customers yachts?” remains true today.

  3. P Harvey says:

    I am a DIY investor with Hargreaves Lansdown who charge me just under 1% pa for their services of my SIPP. I could save more if I were to hive off the ” Funds ” from my mixed investments of shares, investment trusts and bonds. H-L do provide a lot of information for this however.

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