St James’s Place: ‘we’re a sales organisation’

Are you receiving sound financial advice, or being given the hard-sell? It is often hard to distinguish between the two, as I’ve argued in an earlier blog.

And you’re not helped at all by schizophrenic businesses like self-styled ‘wealth manager’ St James’s Place, which doesn’t seem certain as to whether it’s in the business of advising or selling.

SJP claims in adverts that its ‘essence’ is the ‘provision of face-to-face advice’. But in a courtroom earlier this month (September 20, 2010) one of its senior executives, giving witness, claimed that SJP was, after all, primarily ‘a sales organisation.’

The Manchester tribunal was hearing details of a dispute between St James’s Place and one of its salesmen, who was attempting to claim unfair dismissal.

SJP is a big and determinedly upmarket outfit with a reputation it tries hard to protect, although it has been tarnished by a number of cases of mis-selling, as well as a recent scandal involving a rogue salesman who defrauded SJP clients.

This current tribunal case is noteworthy. It raises a number of issues which I suspect SJP’s clients would find disturbing.

SJP’s 1,450 salesmen (they are called ‘partners’ but the word is merely used to glorify the salesmen’s status) are technically self-employed. They work from their own premises and must pay their own taxes and staff, if they employ them. SJP pays the salesmen commission based on what they sell or have sold in the past.

In order to claim unfair dismissal the salesman in question had first to persuade the tribunal that the nature of his role was not, in practice, that of a self-employed person.

It is quite a subtle distinction. The salesman was arguing that he was treated like an employee, being told what to do, being micro-managed, and so-on; while the company was arguing that in fact the salesman was more-or-less left by SJP to get on with his own business, provided he continued to meet legal requirements laid down by the watchdog, the Financial Services Authority.

You can see where the dispute quickly headed: it was all about sales targets.

The salesman argued that he was hounded out of the business because he didn’t sell enough SJP investments.

SJP’s barrister, on the other hand, tried to argue that sales targets were not really the issue, and that the salesman was guilty of other failings.

What you got was a picture in which sales clearly did matter. Sales certainly seemed to matter rather more than advice. The tribunal heard, for example (from the disgruntled claimant), how salesmen could rise up a hierarchy of ‘grades’, depending on how much they sold. Salesmen who did very well went off on luxury trips to Sidney, Majorca and Los Angeles, and could earn hundreds of thousands of pounds in commissions each year – probably more than many of their clients.

The court also heard how SJP tied up with posh partners like Debrett’s, the company which publishes lists of ‘movers and shakers’, to find suitably wealthy new clients to sell to.

‘I always wondered why I got invitations to attend St James’s Place events,’ said the judge.

Salesmen could also borrow, at attractive rates from SJP, money which they could then use to ‘buy’ lists of clients from other SJP ‘partners’. By ‘buying’ clients in this way, the new ‘owners’ would then receive the ongoing commissions generated by the clients’ investments. These commissions are paid year after year. The system enables successful salesmen to trade in their list of clients for a lump-sum. It also keeps all the clients’ money safely invested within SJP.

The salesman’s barrister argued that if ’partners’ were truly self-employed, SJP wouldn’t be able to force them to sell a certain amount of investments. ‘The reality is that SJP offers a carrot, but there’s a stick behind it,’ he said.

SJP is continually finding ways to ‘exercise control’ over sales volumes achieved by individual salesmen, the barrister went on to claim. One of the witnesses called was the manager for the Manchester region of SJP, under whose authority the claimant fell. When pressed about sales targets, the manager said: ‘As long as our partners are achieving above our minimum profit level, it’s acceptable to us. We are a sales organisation.’ We are a sales organisation. That phrase came up several times, and the claimant’s barrister repeated it for emphasis. There is as yet no outcome to the hearing. If it goes in the claimant’s favour – which in my opinion is unlikely – SJP will have to consider a number of implications. It could even be forced to alter the way it employs, and pays, its army of salesmen. Either way the hearing has thrown yet more light on the murky matter of commission-oriented, sales-driven organisations which purport to be offering advice.

My advice – for what it’s worth – is to avoid St James’s Place and to seek instead a financial planner, preferably a chartered one. Speak to several and seek and plump for one who will charge you a fee which is based on the time spent managing your affairs. Try also to find one who is independent of any bank, ‘wealth manager’ or other large corporation. The fact that a salesman or ‘adviser’ workes for a large institution such as a bank, or a business quoted on the stock market, like SJP, is absolutely no indication that the service they offer will be better – or better value – than the service offered by a local, smaller office of qualified planners. On the contrary, experience repeatedly suggests that the bulk of mis-selling and poor advice originates from large institutions, culturally fixated with sales. - Richard Dyson, Financial Mail on Sunday

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