What does 'trading style' mean when describing an IFA?

ComicGeek

I have been speaking with a couple of local IFAs about personal pensions, and they are all suggesting using set risk rated actively managed portfolios with Tatton and other similar investment managers. They are definitely all advertised as IFAs, but seem very reluctant to look at any other funds apart from their favoured investment managers.

When I pressed each IFA about this, they just said that they monitor the investment managers and would change if they felt it appropriate at any time, and therefore still considered themselves technically IFAs - even though they don't actually offer any other alternative, and couldn't really explain to me how often they review this.

One phrase that keeps popping up is the IFAs' description of their firm as a 'trading style' of Tatton etc.

What does this actually mean in practice?

My understanding is that this means that there is some form of legal tie between the two parties, so I struggle with the 'independent' bit. This isn't to do with the platforms they offer, purely the fund selections.

tacpot12

A trading style is a brand, and they are sailing very close to the wind in terms of the law about clearly identifying who you are doing business with. If they are a "trading style" of Tatton, they are part of Tatton and this explains why they won't use any other platform. Them saying that they would change if they felt it appropriate is an outright lie. They can't change. 

Time to find a proper IFA. 

dunstonh

What does 'trading style' mean when describing an IFA?

Same as every other business.   Its not an IFA thing but an business thing.

I have been speaking with a couple of local IFAs about personal pensions, and they are all suggesting using set risk rated actively managed portfolios with Tatton and other similar investment managers. They are definitely all advertised as IFAs, but seem very reluctant to look at any other funds apart from their favoured investment managers.

IFAs are whole of market.  That is a requirement.  If any hint of a restriction is put in place, then they are not allowed to refer to themselves as IFAs.       

One phrase that keeps popping up is the IFAs' description of their firm as a 'trading style' of Tatton etc.

Trading style is where a company trades under a different name to their registered name.

So, if they are saying they are a trading style of Tatton then it means it is actually Tatton. 
https://register.fca.org.uk/s/firm?id=001b000003F7JelAAF
Look at trading names on that link and all those firms are owned by Tatton.

If a firm owned by Tatton is only retailing Tatton then they are not IFAs.    The definition of independent just doesn't work in that scenario.     However, if they have their own in-house central proposition which selects from the marketplace but also place things elsewhere in the marketplace then they can be referred to as IFAs.    e.g. if they use their CIP for servicing clients but a multi-asset fund for transactional then they could refer to themselves as an IFA.  Or if they use multiple platforms (there is no one best platform)

ComicGeek

Taking one of the companies that I've spoken to, and keeping the real name out of it, the IFA company is "Pension" Independent Financial Advisors Limited. 

They then appear to have a "Pension" Wealth Management Portfolio Service through Tatton, and are definitely listed on that Tatton link as a trading name - but as "Pension" Wealth Management rather than "Pension" Independent Financial Advisors Limited, which I wonder is how they try and keep it separate.

Cus

Just looked at the link above. It's 3% initial fee, and then claims that ongoing fees are typically 0.75%.  they also state they are whole of market and not restricted.
An actively managed portfolio suggests they use a load of high fee active funds, but it could just be a lot of passive index funds that are actively balanced etc aka vanguard. Devil is in the details.

Still wouldn't use them though personally 

wjr4

[Deleted User] said:

ComicGeek said:

... they are all suggesting using set risk rated actively managed portfolios with Tatton ...

When I pressed each IFA about this, they just said that they monitor the investment managers and would change if they felt it appropriate at any time, and therefore still considered themselves technically IFAs - even though they don't actually offer any other alternative, and couldn't really explain to me how often they review this.

I have no idea about your background.  However, if someone could not explain something to me in a way I could understand them then I would not use them.  So your comment about them not being able to explain something in a way that you could get to grips with would be a big no from me.  If they can't explain that, what else can't they explain.

Then saying "therefore still considered themselves technically IFAs - even though they don't actually offer any other alternative" again is a red flag to me.  If I wanted an IFA, then I'd want one who is legally an IFA and is in substance independent.  Not someone who is "technically" an IFA.

Then suggesting to use an "actively managed portfolio" with their own company (or a company linked to them in some way) would need a lot of explanations (that I could properly understand and validate).  But for me personally, an active managed portfolio is a big no as (i) I don't expect them to be lucky compared to the market as a whole, and (ii) I can't afford actively managed fees.

My original version

As I say, I have no idea of your background and taking Optimum (who seem to be a Tatton entity) terms and conditions: "https://optimum-ifa.co.uk/wp/wp-content/uploads/2019/04/client-and-fee-agreement-and-initial-disclosure-document-2019-v1.pdf", the fees for a £100,000 pot would be 0.15% + 0.54% (Tatton Managed) + 3% (per table in link).  So that is 3.69% per year. Now some people say a safe withdrawal rate is 4%.  Others say it is a bit less.  But 3.69% means that, after fees, the safe withdrawal rate is pretty close to 0%.  In other words, these fees will be 100% of what some people suggest is safe to withdraw when you retire.   I'm negative about fees generally but this is taking that to a whole new level. 

My additional edited comments

Looks like I read it too quickly and it says that the fees are 3% is this bit.  

Optimum Investment Management (OIM) Service

Our charges will include the cost of time spent on the above steps – our fee basis is generally

set as a percentage of the investments taken out through our firm in line with the following

tiered structure:

As Cus points out below, the "above steps" is for initial work.  There is then an annual fee which is not specified but they say is "typically 0.75% per year".  So my 3.69% would appear to (i) understates the costs for the first year - should be 4.44% or so, and (ii) overstates the costs going forward - should be "typically" 1.44%.

In my mind that is hugely expensive still.  So I would still not use them.  But that's just my view.

Even with your edited comment you’ve calculated it wrong. Ongoing would be platform charge + portfolio charge + DFM charge + ongoing adviser charge. DFMs also have assume portfolios, so the portfolio cost could be lower. 

Also, IFAs are allowed to offer DFM services. IFAs aren’t investment managers by day. There’s thousands of funds and you all expect us to choose out of them individually for every single client? It doesn’t work like that. 

wjr4

[Deleted User] said:

wjr4 said:

[Deleted User] said:

ComicGeek said:

... they are all suggesting using set risk rated actively managed portfolios with Tatton ...

When I pressed each IFA about this, they just said that they monitor the investment managers and would change if they felt it appropriate at any time, and therefore still considered themselves technically IFAs - even though they don't actually offer any other alternative, and couldn't really explain to me how often they review this.

I have no idea about your background.  However, if someone could not explain something to me in a way I could understand them then I would not use them.  So your comment about them not being able to explain something in a way that you could get to grips with would be a big no from me.  If they can't explain that, what else can't they explain.

Then saying "therefore still considered themselves technically IFAs - even though they don't actually offer any other alternative" again is a red flag to me.  If I wanted an IFA, then I'd want one who is legally an IFA and is in substance independent.  Not someone who is "technically" an IFA.

Then suggesting to use an "actively managed portfolio" with their own company (or a company linked to them in some way) would need a lot of explanations (that I could properly understand and validate).  But for me personally, an active managed portfolio is a big no as (i) I don't expect them to be lucky compared to the market as a whole, and (ii) I can't afford actively managed fees.

My original version

As I say, I have no idea of your background and taking Optimum (who seem to be a Tatton entity) terms and conditions: "https://optimum-ifa.co.uk/wp/wp-content/uploads/2019/04/client-and-fee-agreement-and-initial-disclosure-document-2019-v1.pdf", the fees for a £100,000 pot would be 0.15% + 0.54% (Tatton Managed) + 3% (per table in link).  So that is 3.69% per year. Now some people say a safe withdrawal rate is 4%.  Others say it is a bit less.  But 3.69% means that, after fees, the safe withdrawal rate is pretty close to 0%.  In other words, these fees will be 100% of what some people suggest is safe to withdraw when you retire.   I'm negative about fees generally but this is taking that to a whole new level. 

My additional edited comments

Looks like I read it too quickly and it says that the fees are 3% is this bit.  

Optimum Investment Management (OIM) Service

Our charges will include the cost of time spent on the above steps – our fee basis is generally

set as a percentage of the investments taken out through our firm in line with the following

tiered structure:

As Cus points out below, the "above steps" is for initial work.  There is then an annual fee which is not specified but they say is "typically 0.75% per year".  So my 3.69% would appear to (i) understates the costs for the first year - should be 4.44% or so, and (ii) overstates the costs going forward - should be "typically" 1.44%.

In my mind that is hugely expensive still.  So I would still not use them.  But that's just my view.

Even with your edited comment you’ve calculated it wrong. Ongoing would be platform charge + portfolio charge + DFM charge + ongoing adviser charge. DFMs also have assume portfolios, so the portfolio cost could be lower. 

Also, IFAs are allowed to offer DFM services. IFAs aren’t investment managers by day. There’s thousands of funds and you all expect us to choose out of them individually for every single client? It doesn’t work like that. 

Sorry, you are going to have to explain it slower for me.  I get:  0.15% platform + 0.54% OCF for Tatton Managed + "typically 0.75%" ongoing adviser charge + you think that there is an extra charge in the profolio charge on top of the OCF and then a DFM charge too?

Tatton is not a platform, it’s a DFM. Their charge is 0.15%. So you’d have a platform charge on top and then 0.75% ongoing adviser charge (or whatever percentage the company charges).