Tatton to target advisers' DFM arms

Tatton to target advisers' DFM arms

Tatton Asset Management will set its sights on advisers’ unwanted discretionary fund management businesses in the new year as the firm plans to increase its funds under management.

Chief executive Paul Hogarth said Tatton would be looking at more merger and acquisitions in 2020, noting he was especially keen on the DFM businesses set up by IFAs who “may have thought it was a good thing at the time”.

He said: “We do see an opportunity with smaller, subscale DFMs. We see the opportunity to buy from those IFAs who set them up so we will be focusing on that.”

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A number of IFA firms have gained DFM permissions from the regulator over recent years, but the costs of doing so and the work involved can be considerable.

Tatton completed its first acquisition last month when it bought Tenet subsidiary Sinfonia Asset Management, a move which Mr Hogarth described as “complementary” to the direction of the business.

In its six monthly results, published to the stock exchange today (November 11), the on-platform DFM reported its assets under management had increased by 22.8 per cent on the same period last year, to £7bn. 

The results also showed average Aum inflows were about £73m per month while its group revenue was up 15 per cent to £9.7m and its profit before tax was £3.6m — up from £3m in the year before.

Mr Hogarth said the results were “amazing” considering the market background, noting that political instability had left many investors cautious.

He added: “The crux [of the good results] is that more and more IFA businesses are tapping into how Tatton is different.

“We’re getting more and more support from the IFA world with 520 firms and 61,000 accounts. We’re definitely doing what we set out to do.”

According to Mr Hogarth IFAs were keen on the Tatton offering primarily due to its price — which was “very attractive at 15 basis points” — but he said eventually the firm’s price would be the industry standard.

He said: “We think we have created the price for this area and although we do not see very much movement towards it as of yet, it will become standard.

“IFAs are very much aware that price is key. It usually goes back to two things: price and performance, as it should.”

Advisers have been urged to challenge DFMs on fees recently, with Charlie Parker, managing director of investment house Albemarle Street Partners, warning advisers they were overpaying their DFMs.

Tatton also announced the amalgamation of its two ‘Paradigm’ arms today — the Paradigm Mortgages business and compliance outsourcer Paradigm Consulting.

Although this was mainly for reporting and simplicity purposes, Mr Hogarth said the merged sector would be able to benefit from those adviser firms that were stretching out to both wealth management and mortgage broking.

Mr Hogarth said the firm would also work on improving its technology offering over the next year in an effort to make it “nice and straightforward” for IFAs.