In December, the UK’s biggest wealth manager pulled £2bn from Jacob Rees-Mogg-founded Somerset Capital Management, causing the firm to close almost immediately, as the mandate represented around two-thirds of its assets.
The chief investment officer at St James’ Place has told City AM that there will continue to be significant changes to who manages some of the UK’s biggest funds.
In December, the country’s leading wealth manager withdrew £2bn from Somerset Capital Management, a firm founded by Jacob Rees-Mogg, causing it to close immediately as the mandate accounted for around two-thirds of its assets, as reported by City AM.
This week, St James’ Place made a similar move, dropping Impex Asset Management and two others as managers of a struggling £9.9bn fund, sending the smaller asset manager’s share price down six per cent in the past two days.
Justin Onyukwusi, who assumed the role of chief investment officer a year ago, said investors should expect “relevant changes” in terms of which asset managers control significant amounts of its coffers.
“But I think it’s also important to take a step back and say that the proposal should always evolve. It’s not like I came in and now it’s a big bang,” Onyukwusi added. The move could have serious implications for the entire UK financial industry, as asset managers vie to manage money for the wealth giant.
Over the past year, St James Place has had to evolve more than most asset managers, as it was ‘stuck in the past’ and following the introduction of customer duty.
The Financial Conduct Authority’s Consumer Duty, introduced last year, obliges all financial services to “put the needs of their customers first”. Despite this, St James Place has faced challenges due to high fees, exit costs and non-transparent fee bundling, prompting the need for reforms to maintain its position as the industry’s leading wealth manager.
Savers have struggled to decide whether they are getting value for money from St James’s Place as bundled fees make it difficult to compare with other similar funds. “From an investment perspective, we obviously welcome differentiation, because it means we can be compared to other managers on an as-is basis,” Onuekwusi commented on Citi AM.
Onuekwusi, when questioned on whether St James’s Place would apply the separation fee retrospectively to allow analysts to accurately assess the fund’s performance, said discussions were ongoing. “I think the backdate will make sense for people to understand the journey they’re going to be on from a fund perspective,” he added.
Onyukwusi, who started his role a year ago, noted that part of his job was to innovate the firm’s offerings to clients. He emphasized that while there is a shift to more cost-effective investments, it doesn’t just mean moving to index funds.
The chief investment officer (CIO) of a leading wealth management firm highlighted the evolving landscape of investment strategies, noting: “As the market has innovated, we now have a variety of index strategies, a variety of low-cost strategies, even quant, absolutely indexed, or other.”
He also emphasized the importance of emerging asset classes and said: “In 2035, you can’t guarantee more investment, but you will have new asset classes.”
The CIO’s comments reflect a forward-thinking approach, especially as he acknowledges the potential of crypto, digital assets, tokenization and private equity sectors to be avoided by companies with older ‘cultural DNA’.
“As the largest wealth manager in the UK, we’ve got a responsibility, I think, to be on top of that,” commented Onyukwusi.
However, this push for innovation is at odds with the company’s goal of becoming a low-fee St James’ Place, as new asset classes such as private equity are known for their high costs.
“We are very conscious that new asset classes tend to be more expensive, so we are very cautious about dipping our toes in the water there,” he explained.
Onuekwusi further commented on the integration of this asset class into the company’s offerings: “The idea is, do we want it in our core investment proposition, or do we want it in a more niche type of proposition? That’s something we clearly know,”
Still another challenge is the £500m cost-cutting measures that St James’ Place has committed to over the coming years, which could conflict with the resource demands of innovation.
Onuekwusi emphasized that “all the innovation we have done is using existing resources” and noted that his team’s focus areas “will be invested”.
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