Tatton Investment Management

Sanxxx

Having decided to use an IFA, the one I picked (out of 3) uses a DFM; Tatton Investment Management.

Does anyone have any experience of them and/or any comments?

I'm not adverse to using a DFM to me it all depends on the total charges which all in I'm expecting to be c1%.

I'll be consolidating 4 DC pensions and am weighing up the benefits of diversity between fund managers etc. and the ease of having everything in one place when it comes to drawdown.

I think I'm struggling with using an IFA which by definition has the whole of market open to him and then 'restricting' myself to the limited offering of Tatton IM.

Malthusian

I'm not adverse to using a DFM to me it all depends on the total charges which all in I'm expecting to be c1%.

You would usually be disappointed if they are using a DFM.

I'll be consolidating 4 DC pensions and am weighing up the benefits of diversity between fund managers etc. and the ease of having everything in one place when it comes to drawdown.

Having everything in one place isn't a benefit of using a DFM; you can have everything in one place with a portfolio managed on an advisory basis.

There is only one benefit to using a DFM and that is that you hope that they will pick funds or shares which outperform the market. There is no evidence that anyone can consistently outperform the market. (There are various other benefits touted for using a DFM but they can all be accomplished in other ways which any IFA should be capable of.)

Diversity between fund managers is a bit of a red herring. If you use an active management approach then the point is to reduce diversity on the grounds that the investments you exclude aren't as good as the ones you do buy. The more you increase diversity, the closer you get to just replicating the index, which gives you a "closet tracker" (a fund which gives you the same as an index-tracking passive fund but with much higher fees).

Similarly if you spread your money between lots of different fund managers to ensure that if any underperform it won't hit your returns too badly, then the more you diversify between them, the closer you will get to just expensively replicating the index (even if all of those managers are making their own indivdual bets and not running closet trackers).

I think I'm struggling with using an IFA which by definition has the whole of market open to him and then 'restricting' myself to the limited offering of Tatton IM.

As long as he selected Tatton IM from the whole of the market and they are the most appropriate solution for your circumstances there is no issue there.

Are you sure he is an IFA? People often think they are seeing an IFA when they aren't. If they don't explicitly describe themselves as an "independent financial adviser" on their website and literature they are a tied adviser (aka restricted).

dunstonh

Personally, I am not a fan of DFMs.  They add a layer of cost that is often unnecessary compared to other options.  However, there can be niche places they are useful.     I have three clients on a dfm service because they have specific ESG requirements and a DFM can make sense there and another that goes missing for long periods and is not suited to an advisory portfolio but needs a discretionary one.   The rest we use advisory models instead.

Some IFAs reduce their charge because they are passing all the work for the investment side to the DFM. That reduces the IFA workload but client is paying for it.  So, they reduce their charge to offset it.

I think I'm struggling with using an IFA which by definition has the whole of market open to him and then 'restricting' myself to the limited offering of Tatton IM.

Tatton is whole of market and the IFA is unlikely to be restricted to Tatton.    Also, you can say you don't want a DFM and the IFA can adapt to what you want.  If they don't then they are not allowed to refer to themselves as an IFA (although there are some that do this and wait to get caught by the FCA before dropping the "I").   Be wary of firms not using the word "independent" in their official literature but using words that sound like that instead (i.e. whole of market but refuse to say independent)

The main risk with some wealth manager models (rather then general practitioner models) is that they put you on an expensive platform (as its mainly only the expensive ones that do all the work for the IFA to comply with the EU directive MiFIDII - the cheaper ones require the IFA to do it) and an expensive DFM and they stick everyone on it whether it is the right option for the individual or not.   You could also them to benchmark the returns against the nearest Vanguard Lifestrategy fund.  If the returns, net of charges, are better then the VLS fund then you can feel more comfortable with the selection. If the returns are less then you should question them on why you should pay more for less.

Joey_Soap

Makes sense, though if at all possible, I think the OP should be the one doing the benchmarking. The temptation within the industry to massage the numbers by very selective data cherry picking is usually too great to resist. (Lies, damn lies and statistics.) In my own experience, the OP needs to ensure himself that any comparison against a Vanguard fund is a real apples versus apples comparison. It's pretty likely a IFA/DFM portfolio will underperform the low cost alternative on a real like for like basis after all IFA, DFM, fund management charges are accounted for properly.

dunstonh

 The temptation within the industry to massage the numbers by very selective data cherry picking is usually too great to resist. (Lies, damn lies and statistics.) In my own experience, the OP needs to ensure himself that any comparison against a Vanguard fund is a real apples versus apples comparison

It is a regulatory requirement to benchmark using comparable risk investments.

It's pretty likely a IFA/DFM portfolio will underperform the low cost alternative on a real like for like basis after all IFA, DFM, fund management charges are accounted for properly.

No, it's not.  Possible yes.  but not pretty likely.

JohnWinder

If the low cost alternative is a couple of well diversified trackers left untouched for years at a time, while on the other hand we have an IFA/DFM portfolio of something different, then I'd say we're not just in possible territory, but into probable territory, if the SPIVA reports are a guide to what might happen. 'Pretty', I'll leave alone.

[Deleted User]

Like John is saying, on a like for like comparison, over 5+ years and assuming we are properly accounting for risk, a portfolio with a 1% extra charge year in, year out is almost certain to underperform. The evidence is overwhelming. And 1% per year is a heck of a lot in this day and age. 

g002ahe

1% per year has always been a lot of money if you work out the compound effect over a lifetime.
Personally, I think it is pretty outrageous, and pretty well obfuscated.

And, not everyone is paying a "low" fee rate like 1%

dunstonh

And, not everyone is paying a "low" fee rate like 1%

Indeed.  Most are paying less than that.  0.5% is the more common figure

[Deleted User]

g002ahe said:

1% per year has always been a lot of money if you work out the compound effect 

Yes but if you account for all costs (various fund charges, platform costs, advisory fee, stamp duty, etc), in the past the options for low cost solutions were very limited. And information on funds used to be very limited too. Now its easy to pick a solid, simple  and well diversified low cost solution. 

Cus

Deleted_User said:

Like John is saying, on a like for like comparison, over 5+ years and assuming we are properly accounting for risk, a portfolio with a 1% extra charge year in, year out is almost certain to underperform. The evidence is overwhelming. And 1% per year is a heck of a lot in this day and age. 

How do you properly account for risk? For example, I pay a wealth management firm to invest for me, charging 1%. It ranges between 60 and 70% equity.  I personally benchmark it against a combination of lifestrategy 60 and 80 ( what I would probably do if I managed it myself)

Currently at 4+ years it's beating those benchmarks significantly. How do I know if my risk level is the same?