Lothar Mentel (pictured), CEO and CIO of Tatton Investment Management, reports that 2016/2017 was an excellent year for the firm.
“We succeeded in maintaining our strong rate of growth of our platform focused DFM service of GBP1 billion per annum. We also launched a new platform service, the Tatton AIM Inheritance Tax Portfolio,” he says.
This latest service addition comes under the title of Tatton Onshore Tax Strategies, and is aimed at UK clients whose platform based investments in ISAs and general accounts have grown beyond IHT thresholds.
The firm now manages GBP4 billion on behalf of 25,400 clients, whose individual client relationships are managed by 260 independent financial adviser firms. This allows Tatton’s team of 20 staff to run 26 different portfolio types across nine different UK adviser platforms.
Mentel believes that Tatton’s platform only, price challenger approach is a large part of what has made it very successful. “We have been identified as an industry disrupter, offering our platform only discretionary management service for segregated, fund based portfolios for just 0.15 per cent, including VAT, while offering the same if not more service to the IFA and ongoing investment comment to their clients.”
The new AIM portfolio service targets the same cost sensitive adviser and client audience by utilising the platforms’ transaction cost and convenience advantage with a more widely diversified portfolio of 40-50 stocks, but without any upfront establishment charges. “The annual charge of 1.25 per cent, is low compared with the industry which normally charges 1.5 per cent plus establishment and substantial transaction charges.”
The other advantage Tatton has, Mentel believes, is that client ownership is entirely unambiguous with the firm being authorised for investment management, but not client advice. Tatton’s low charge business model was made possible through the combination of no fixed costs for back office or client relationship managers and its scale.
“We are not an integrated wealth management service,” he says. “We are just an investment manager – they are not worried that the clients are theirs today and ours tomorrow.”
Tatton’s portfolios across different risk profile bands returned between 10 and 20 per cent last year, managing, as Mentel puts it, to avoid all the little timing pitfalls the year had to offer.
The AIM product takes advantage of the fact that ISAs invested in qualifying AIM stocks are not subject to IHT after two years.
“This is quite popular with elderly investors,” Mentel says. “We observed that quite middle of the road clients fall into the IHT bracket because investment returns of their PEPs and ISAs have over the past three decades led to substantial size portfolio values. This is a very straight forward way to manage an IHT exposure. As a portfolio of UK stocks, it’s utterly transparent and easy to understand, particularly when compared to some of the complex structures the industry offers.”
The Tatton AIM portfolio service is currently available on Nucleus, the adviser wrap platform. Mentel’s familiarity with IHT solutions and AIM portfolio management goes back to his previous role as CIO of Octopus Investments until 2011.
“The difficulty is that when you have got small cap stocks without much market liquidity, you have to trade quite carefully – or risk moving the price against you and the interest of the client if you are forced to execute your trade in a single day, which is usually the way platforms work. We have found a way of combining our knowledge of the AIM market and how dealing works on platform that allows us to trade over a number of days.”