Our article on the decision by St James's Place to impose a cap on management fees sparked an interested debate among our readers in our comments section.
Two of them in particular held an interesting discussion which got to the heart of whether higher charges can be justified if a client chooses to pay them.
I have, I admit, long been a little fascinated by the debate around SJP and its charging structure and, I confess, I'm not sure where I land.
I live in a part of south London which has an Aldi, a Sainsbury's and a Waitrose. The Waitrose does brisk trade (as do the other two) but the shoppers who go to the Waitrose must surely know they could pay less at Aldi, right?
I think it's a fair assumption that they do.
In a capitalist democracy the act of being a little more expensive than others is not a cardinal sin.
In fact, I think it's a fair assumption that some people prefer to shop at Waitrose because it is "reassuringly expensive" (with apologies to Stella Artois). Their identity is bound in part to the fact they are a Waitrose customer.
It is probably reasonable to assume there are SJP clients who feel similarly.
Now it is certainly true that the consequences of paying more for an investment or pension product can be much bigger than paying more for pint of milk. The former are products which have a shelf life of decades rather than days.
And for this reason it is only right that SJP's fees and charges (and those of any financial advice firm) are adequately disclosed.
There was some speculation in the discussion below our article about how much clients do and don't know about what they are paying. Ultimately this can only be speculation.
If SJP is following the rules on fee disclosure (and we have no reason to think it isn't) then anyone who thinks clients are not aware of what they are paying should question the Financial Conduct Authority's rules, not an individual firm.
Personally I think the rules on disclosure could be improved. I also think advice firms should disclose their charges fairly prominently on their websites.
As much as anything else, I think this comes down to a matter of competition.
The FCA's Financial Lives survey which was published last week showed shopping around for financial advice is particularly uncommon.
Just over nine in 10 (91 per cent) adults who had received regulated advice in the 12 months to May 2022 said they generally used the same adviser or firm.
Of those who started using their adviser in the previous three years and did not shop around, two‐fifths (42 per cent) said they did not shop around because the adviser was recommended to them.
It was only a couple of years ago that the FCA warned of "significant" price clustering in the advice market which, it warned, was a sign competition was not operating effectively in the sector.
