These clients - which typically have less complicated capital gains tax requirements - were using the wealth manager’s discretionary fund management (DFM) service.
This saw their independent adviser play a part in picking which funds they invest in.
Speaking to FTAdviser, Haig Bathgate, head of investments at Atomos - formerly Sanlam Wealth - said the firm’s view was that WTW will “do a better job” at selecting investments than a financial planner for smaller, less complicated clients.
Bathgate also pinned the change to Atomos’ company-wide drive for more consistency across client outcome, service and charges in light of the incoming consumer duty.
From July 2023, the Financial Conduct Authority will be monitoring firms' treatment of customers more closely, determining whether or not services offer fair value for money.
Bathgate said if a client will achieve the same investment outcome with a bespoke solution as with an MPS, then the latter is a more cost and tax-efficient option for them.
Atomos has now been in touch with a “number of clients”, according to Bathgate.
The firm notified advisers on December 19 that it would be reaching out to their clients.
“We’re dealing with clients on a plethora of legacy service and product lines, so it’s being done on a phased approach,” Bathgate explained.
“We started implementation at the tail end of last year. Some clients will continue to be serviced by a DFM, but the underlying implementation is done by an MPS.”
In the email, the firm said it was also writing to clients holding under £100,000 in assets about implementing its new multi-asset fund range.
“These clients are unsuitable for the MPS solution, due to the £1,000 per annum minimum fee,” Atomos said.
'Cutting out' the adviser
One adviser has accused Atomos of “shoehorning” his smaller clients into the new investment product and “cutting out” the adviser.
Managing director of PFEP Wealth Management, Richard Bishop, said: “Having worked with Sanlam for over 15 years, our clients valued the relationship of their adviser working with an investment manager to produce the desired outcome in terms of service, investment returns and risk.
“I'm shocked that Atomos has now bypassed the investment manager - adviser relationship and decided to shoehorn my clients into their very expensive and poorly performing MPS funds”.
Bathgate said in response that financial planners are not being excluded through the change.
“They still have to understand what the client wants to achieve, but we want the investment outcome to be consistent,” he explained.
“The contact points and the person giving the advice mostly doesn’t change...There’s no suggestion that any investment manager is bypassed if there’s a requirement for bespoke implementation.
“The investment manager still manages the client relationship, suitability etc. It’s only if there are no bespoke requirements for the underlying client that it makes sense to use an MPS for smaller clients on cost grounds.“
On the MPS’s performance, Bathgate said historic performance “isn’t really relevant” as the wealth manager is plugging into a completely new investment engine from Willis Towers Watson.
“That’s really why we want to move as many people into the new solution as soon as possible - the WTW performance has been exceptional. That’s evidently the reason we selected them to partner with,” he explained.
WTW’s conservative model, one of six risk types, outperformed the IA Mixed Investments benchmark by 0.5 per cent over one year, 1.5 per cent over three years and 6.4 per cent over five years.
‘Other firms will go down similar route’
Atomos is currently undergoing a grassroots review of its services.
Bathgate said as a result, the way Atomos delivers its products will start to look “quite different”.
The investment boss said: “The consumer duty is coming over the hill very quickly. So we’ve been looking at how to serve smaller clients with not too many capital gains tax restrictions and similar risk profiles who are likely to achieve the same outcomes, in a tax-efficient manner.
“This is the default proposition. Of course, those clients with more bespoke requirements - such as intergenerational planning or capital gains tax - will need a different service, but for smaller clients this is the most task-efficient way to manage their investments.”
In the email to advisers sent towards the end of last month, Atomos said the new investment service will see clients benefit from “over 100 researchers and over 70 sustainable investment experts”.
Client’s investment objectives and risk category will not change, it added. The MPS invests in passive, semi-active and active funds with institutional fee classes.
A custody fee of 0.20 per cent per annum will be applied.
“Where a client’s fees may be increasing slightly we have been explicit within the client letters on what we estimate that increase will be,” the firm said.
ruby.hinchliffe@ft.com
