Within the last few months, the Times have delivered a number of articles relating to the cost of investing with SJP. This article takes a look at a comparison between the cost of investing at bdb or at SJP. SJP’s charging is extremely complex so here we simply focus on a pension with a value of £500,000.

This chart assumes the standard initial SJP charge of 6% (4.5% adviser and 1.5% product) and an ongoing charge of 2.61%[1] After 6 years, there is an additional ongoing product charge of 1%. For bdb there are initial costs of 1% for advice and £80 for trading. The ongoing charges via bdb are 1 % + VAT for advice (after 6 months), £798 for the product and 0.39% for the fund.

I have assumed a growth rate of 7% before costs for both scenarios.

You can easily see the compounding effect of the additional charges payable to SJP: you would be left worse off by c£990,000 after 30 years. This is assuming that the two portfolios perform equally (SJP’s Balanced Managed fund’s performance over the last 5 years is lower than bdb’s 60/40 portfolio but takes more risk).

One of the pillars of our investment philosophy is that costs matter; therefore if you have an expensive investment manager like SJP, the only way to maintain your investment return (assuming your portfolio is constructed efficiently in the first place) is to increase the amount of risk taken.

Even if you ignore SJP’s early exit penalties[2], at every point along the 30-year investment period they make more money for themselves than for you!

At bdb our clients don’t just receive superb, market and peer group beating returns, our service automatically includes our award winning comprehensive strategic financial planning service and our life enhancing financial life planning. At bdb our clients get peace of mind and confidence for a secure financial future.

 

[1] 1.94% fund charge and 0.17% transaction charges for the SJP Balanced Managed fund, 0.5% ongoing advice charge.

[2] Which apply on the first 6 years of each amount invested

Posted by: Samantha Hawken | Posted in: News