FTSE 100 Wealth Manager St. James’s Place Shaken By Accusations Of Forgery & Miss-Selling

St. James’s Place (SJP), the UK’s largest wealth manager and a constituent of the FTSE 100 index of the 100 largest companies by market capitalisation listed on the London Stock Exchange, is facing a potentially hugely damaging miss-selling scandal. If the accusations published by The Sunday Times prove to be founded, the scandal would even encompass alleged forgery by one of the company’s advisors.

An article published yesterday details a St. James’s Palace client’s complaint that an advisor, named as Daniel Walton, operating on behalf of the company ‘misled’ her into transferring over £60,000 to his management. The advisor is said to have neglected to inform the client that doing so as one lump sum, rather than in instalments, would leave her liable for a capital gains tax bill.

He then allegedly responded to an inquiry by the Financial Ombudsman Service, to whom the client made the complaint, by providing documents, complete with the client’s signature, that did not match those she was given. The documents in question contained the tax advice and warnings the complainant said were missing. She has accused Walton of forging her signature. SJP denies the allegation of forgery and continues to work with Walton.

The advisor is additionally alleged to have incorrectly told the client her previous SJP financial advisor had retired. And that in order to continue to receive financial advice from the wealth manager she would have to transfer her assets from the investment firm Skandia, where they were held, to SJP’s direct management.

The advisor is not directly employed by St. James’s Place but Wakefield-based Regency Financial Planning. The company’s business model is based on ‘partnerships’ with independent financial planning businesses that operate under the St. James’s Place umbrella. Partners are only allowed to sell SJP funds and products and are reportedly pressured to meet aggressive sales targets, something alluded to by Justin Modray of Candid Financial Advice, an independent low-cost IFA firm invited by The Sunday Times to comment:

“I’m shocked that a financial adviser who tried to deceive the Financial Ombudsman Service is still practising, with the apparent backing of Britain’s biggest investment company. Offences like this should result in a ban, not a slap on the wrist”.

“Such examples almost always arise from an unhealthy pressure to sell, and I fear the problem will persist.”

St. James’s place advises and manages the wealth of around 650,000 individuals, mainly from the UK. The company has around £103 billion under its management and focuses on a high net worth clientele.

The allegations again call into question the ethics by which financial advisors operate. New rules introduced in 2013 banned IFAs from earning commissions on the savings and investment products their clients bought into on their advice. That forced them to change their business model away from a commission-based structure to one that relied on investors paying upfront for advice. The hope was this would remove the incentive for advisors to favour investment products that paid the highest commissions rather than those that were necessarily best for the investor.

The result was that many of the ‘free’ investment advisory services small investors had been able to access, such as the in-house investment advisors employed by high street banks, disappeared. This has led to what is termed ‘the advice gap’ that has left thousands of small, inexperienced UK investors ‘orphaned’ from the investment advice they need.

Advisors that are part of the St. James’s Place network of partners are not allowed to call themselves ‘Independent Financial Advisors’ because they only offer clients SJP products. However, that hasn’t stopped many of them growing into among the biggest investment managers in the country.