Clients of St. James’s Place (SJP) are getting increasingly frustrated as they continue to pay around £3 million a month in fees for property funds they cannot access. The problem arises from the financial adviser’s decision to wind down its £2 billion Property Unit Trust and associated funds, leaving thousands of investors unable to withdraw their money.

The situation throws up some very serious issues in the investment sector, especially regarding liquidity mismatches in open-ended property funds. Investors are now questioning the management practices of one of the UK’s largest wealth managers.

Bear in mind this isn’t only a problem for high net worth clients, these issues can affect peoples pension savings and ISA’s too!

Why Were the Funds Suspended?

In October 2023, SJP froze trading in its Property Unit Trust and deferred redemptions in linked life and pension funds. This was after a sharp increase in withdrawal requests and broader problems in the commercial property market.

SJP eventually decided to shut down the funds entirely as a result of illiquidity and shrinking asset values. The effect is about 197,000 investors whose funds would be locked for up to two years during the winding-down process. Investors get payouts once the underlying assets are sold. In the meantime, the funds lie locked.

Financial Impact on Investors

Clients are charged management fees regardless of whether or not their investments are accessible. Life and pension fund clients have annual management charges at 2.5%, and a smaller reduction at 2.35% on unit trusts that were previously 2.5%.

This implies that a total of over £700,000 has been paid in fees every week since the suspension, therefore around £3 million per month. These fees could amass tens of millions over the two-year wind-down process.

Critics say that charging fees on frozen investments is unfair and breaks the trust in SJP. The firm has implemented a small fee cut for unit trust holders, but the gesture has done little to placate angry clients.

What if you were convinced to move to SJP from another provider?

Did your SJP adviser need to move you from a perfectly good pension or investment to their portfolios?

How much could you have lost as a result of increased fees or lower returns?

Many customers of SJP are now asking these questions, as they realise that a refund of fees may not be enough to negate the losses, they may have suffered because of moving their pensions or investments to SJP.

What’s Next?

SJP has put in place Invesco Real Estate as the liquidator of its property portfolio, replacing the earlier manager, Orchard Street Investment Management. The company looks for the best possible price while selling the assets. Challenging market conditions are, however, likely to dictate their choices.

The payouts to investors will depend on the sale proceeds of assets made in the two-year winding up process. However, some of the clients remain unsettled as to the outcome for their investment due to uncertainties surrounding the timeline and lesser returns.

Structural Flaws of Open-Ended Real Estate Funds

This crisis underlines a recurring issue with open-ended property funds. It allows investors to request daily redemptions, but their underlying assets, commercial properties, are illiquid and sellable only after months or even years.

Such structural defects introduce severe risks during market downturns or when there are high redemption demands. The suspension of SJP funds is the most recent in a series of incidents, which has created pressures for reform in the structures and regulation of such funds.

Investor Concerns and Lessons Learned

This has been a wake-up call for many investors as regards the suspension of these funds. Questions have arisen in terms of the suitability of these investments, the level of transparency provided by SJP, and the overall management practices of the firm.

Some clients have complained of being denied knowledge of the risks connected with their investments. These continuing fees only add salt to the wound, given the investors’ feelings of victimhood in decisions they neither make nor have control over.

This case emphasizes the need to understand the risks and liquidity constraints associated with investments. It also brings out the importance of regulated advice sought by the investor before committing their savings to possibly risky assets.

What Can Affected Clients Do?

If you are a customer of St. James’s Place and are concerned you may have been misled or financially harmed, it can be a difficult subject broach with your financial adviser.

Financial claims specialists, such as Claim My Loss, are able to review the facts relating to your pensions and investments with SJP and quickly identify if there is any cause for concern.

As experts in the financial adviser, pension and investment sector, we do not believe that anybody should accept a refund of fees and a token payment or good will gesture.

If you were convinced to move pensions and investments by any financial adviser and you have lost money as a result, then the goal should be to return you to the position you would have been in, had the transaction never taken place.

We handle all the heavy lifting for you, you can Start your claim online or why not book an free in initial consultation with us today and take the first step towards reclaiming your loss with our no win no fee service.