Behind the Headlines: SJP’s ‘bombshell’ results could kick-start a ‘whole new era’ for advice

Have you ever checked your bank statement and realised that, for months, you’ve been paying for a subscription to something you never use?

Perhaps you signed up to something you didn’t realise was subscription-based. Or perhaps you meant to cancel a subscription, but life got in the way and you never got around to it.

It’s easy to do and there are varying views on whether it’s the responsibility of the company or the consumer to keep an eye on these things.

The best firms, in my opinion, are the ones that notify you if you aren’t using your subscription. Or, at the very least, let you know by email before they charge you for the next month.

This is something that is currently playing out in financial advice. Two weeks ago, the Financial Conduct Authority wrote to 20 of the largest advice firms in the space, requesting information about their delivery of ongoing services to clients.

The letter laid out the regulator’s concerns that clients continue to be charged after advice has been given, and that they may not be receiving value.

Already, the UK’s largest wealth manager St James’s Place, which presumably received the letter, has said it has experienced a “marked increase” in clients registering complaints relating to whether they have received ongoing servicing historically.

The business published its financial results for 2023 yesterday (28 February), in which it reported a big swing to a loss of £9.9m – down from a profit of £407.2m the previous year.

SJP said a large reason for the loss was that it had needed to set aside £426m in case it had to refund clients for an ongoing service that has not been evidenced.

The announcement hit the company’s share price, which plunged to what Reuters described as its “lowest level in 11 years”.

Other large wealth managers are due to release their financial results imminently, so it will be interesting to see if they have experienced the same.

Breaking away

Off the back of SJP’s results, many smaller advice firms took to social-media platforms to promote their own advice offerings, which they claim provide better value.

Timeline founder and chief executive Abraham Okusanya suggests SJP’s announcement is the “starting gun for a whole new era of financial advice”.

“In particular, large firms (50+ advisers), consolidators and vertically integrated models are about to face a serious shake-up,” he wrote in a post on LinkedIn.

“The ‘breakaway adviser’ trend will accelerate. The top advisers at SJP and other larger firms will likely break free and set up new independent firms.”

He says the net effect is that we will see a surge in vibrant, smaller, nimbler owner-managed independent advice firms “taking centre stage”.

Comments underneath his post showed a deluge of support for this trend.

Steve Conley, founder of support service Planning My Life, said the announcement indeed signals a “pivotal shift” towards more independent, agile financial advisory practices.

This, he suggested, could “energise the landscape” with a fresh wave of breakaway advisers keen on delivering “client-centric advice without the cumbersome layers big firms often entail”.

“It’s a compelling reminder that smaller, owner-managed firms often provide more tailored, accountable services.

“The move away from ‘big is better’ could mark a return to genuine, impactful financial guidance where client outcomes are directly linked to adviser integrity and dedication.”

Dominic McLoughney, a chartered financial planner at Becketts, wrote: “Exciting time for the quality independents out there.

“Often great advisers at ‘big’ firms don’t know any different – you don’t know what you don’t know scenario.

“I have no doubt this can only improve the outcomes for clients and hopefully improve the work and options for great advisers at the likes of SJP who are ready to make the leap.”

Is bigger better?

But what does this really mean for the advice space?

It’s a well-trailed assumption that the FCA prefers a sector with a few large firms rather than a lot of small firms. This is, after all, easier to regulate.

Okusanya said the network model would “probably get a momentary shot in the arm” from an acceleration of breakaway advisers. After all, the appointed representative route is widely regarded as easier for a new advice firm owner than going directly authorised.

“But the idea of a big corporate giving advisers a blanket that shields them from the big bad regulator is for the birds,” he warned.

“The big lie the regulator and compliance folks have told us is that ‘big is better’ when it comes to financial advice. It’s not. Big is complex and messy. Big might be easier to regulate but it is less accountable to the end client.

“The simple truth is, the further removed the client is from the owners/managers of an advice firm, the lesser the accountability and quality of client outcomes.”

But there are concerns that more smaller firms could lead to more bad practices and scandals. We know the majority of advice firms caught up in the British Steel scandal were at the smaller end of the scale.

Does the FCA, for example, have roles advertised for this wave of additional oversight? Because it’s going to need them.

“The irony may be that regulation falls away,” Guy Skinner, director and financial planner at Citygate Financial Planning, commented on Okusanya’s LinkedIn post. I’ve said it for some time, tongue in cheek, but the vetting of people who come into this is more important.

“Just like a CV doesn’t tell you about a person, neither does a form A.”

Perhaps the time for the small advice firm is now. But the regulator will need to make sure they are properly vetted.