Tatton Asset Management plc (2T7.SG) Earnings Call Transcript & Summary

Hello to those of you who are joining us. We'll just pause a moment while the rest of the attendees join the webinar. Right. Good morning, and thank you for joining us today for Tatton's results presentation. We're going to hear from the 3 team members, Paul, Paul and Lothar. At the end, there will be an opportunity for Q&A. So without further ado, over to you, Paul Hogarth.

Thank you, Hannah, and good morning, ladies and gentlemen. I'm obviously delighted with our results, our 6-month results. Just to run you through some sort of the key highlights, I promise you, I won't run through every single bullet point, but just obviously the key ones. And then we'll get into the bones of the presentation. So obviously, delighted with group revenue increase of 26.4% and obviously dropping down to the profitability piece there. I'm very happy to see that, that profitability margin increases to 50.1%, which obviously is another landmark. Continue with the strong progressive interim dividend, so we're up 14% to 4p. That will be payable in December. I'm happy to say that we've got this financial cash position liquidity just short of GBP 15 million, and that's after the purchase of the Verbatim funds, which we'll talk about later on. When moving across on to the next slide, which is obviously the operational highlights, what we'd like to do, if you can -- yes, thank you, Hannah. The next slide basically takes you through the sort of the key KPIs for us. And obviously, the main one is the funds under management. So to see that go to GBP 10.8 billion is delightful. That's really, really strong flows, which have actually continued since the end of the 6-month period. So for the last 6 weeks, we now have moved up another GBP 400 million to GBP 11.2 billion. So our actual AUM, as we sit here today, is GBP 11.2 billion, growing at GBP 109 million a month actually and flows coming through, which is probably the strongest we've ever seen. And it obviously takes us back to the sort of the pre-COVID performances that we were running at before, obviously, COVID hit. So we'll continue very much on that organic growth, organic growth which doesn't include some of the new strategic partnerships, which we'll talk about later. So this is organic growth from work that's been done previously. But we've just unlocked or just about to unlock 3 major IFA distribution channels for us to develop and actually present to, and we've already started on those presentations over the last few days. So the acquisition of Verbatim sort of adds to that organic growth piece. And if you remember, the road map that we talked about 6 months ago, which was we wanted to move from GBP 9 billion through to 6 -- to GBP 15 billion over a 3-year period. I'm happy to say that over the first 6 months, we've already moved up to, say, 30% of that. So we've achieved 30% of our goal in a 6-month period of time, which I'll take you to a slide on that later on. But the Verbatim funds are really good for us because it actually -- not only does it add to the FUM, but it gives us a new range of multi-index tracker funds, which we're hugely excited about because we think they will be of interest to the wider Tatton user base. And also, very importantly, the arrangement with Fintel gives us a strategic marketing distribution contract with them for the next 5 years, which will enable us to access their firms. And we expect to be able to speak to all of the SimplyBiz firms, but also some of the Defaqto firms as well. So we're hugely excited about that. So it's not just the FUM that we brought. It's more of a strategic play of getting into IFAs that we've never been able to speak to you in the past. I mentioned earlier about the new partnerships with Threesixty and Sesame Bankhall. And you'll see in one of our slides later on how we've improved our distribution across the IFA landscape because a lot of the IFAs actually are members of these distribution businesses or these clubs. And you really need to have access from the host company before you really get into their IFA base. One of those ones, of course, was the Tenet one, which we've been working with for some time. Happy to say that, that increases and has moved forward from GBP 540 million that we got from the Tenet firms, which is now up to GBP 740 million over the last 6 months. So great traction there, and that will continue as well. And then looking at the other divisions, Paradigm Consulting and Paradigm Mortgages, they've done well as well over the period. Paradigm Mortgage completions are well up to a record level. That's partly helped, obviously, by the stamp duty situation. But we still see further demand coming through, which is very, very pleasing when you think about the fact that, that incentive has now ended. And Paradigm Consulting moving forward nicely, too. So really, what we've got is the 3 divisions with the arrows pointing in the right direction, and that leads -- really sets us in good -- hold us in good stead for the future. And Slide 10 is basically looking at the shareholder value and how that's improved over time. I'm happy to say that we've all had tremendous increase in the value. We were up roughly GBP 270 million from where we were when we floated. That's the combination of the dividend payments, of which is just over 35p in dividends has been paid out now and, obviously, then the share price moving forward, as you've seen over the last few months. So yes, all in all, a very, very positive update from me. I'll pass you over now to Paul, who will take you into a deeper dive into the numbers, and then we'll have a look at the market overview very shortly.

Okay. Good morning, everybody. Yes, so I think we've seen really strong growth across all our key metrics. I think what we're seeing now is the benefit of what is our sort of lower-cost, capital-light business model and the critical mass that we've delivered over the last few years really coming through or bearing fruit. As Paul said in the highlights, we've had very strong revenue growth leading to a strong operating profit growth of 38%. I think the most pleasing thing really is to see the operational leverage come through. So I mean this time last year, it was around 46%. The year-end in March, it was 48%, and we're now seeing 50% margins, which is really pleasing. And below that line, all the other key headlines are growing at very similar rates. And what that's enabled us to do is pay out a 4p dividend, so another increase in the dividend where, historically, we've had a progressive policy of paying around 70% of earnings out to dividends. Just moving on some balance sheet on the next slide. As I said just 2 minutes ago, we had a capital-light business model. As you can see, the tangible fixed assets, a relatively small part of our overall balance sheet. In fact, actually, just goodwill and cash make up the vast majority of the assets. And the movement in each one of those is obviously the impact of the Verbatim acquisition this year that we made towards the end of September where it's increased our intangibles and slightly decreased our cash. Noncurrent payables is just a deferred element. So this GBP 3 million payable, again, a particular target which we can touch on later. And the point that I'd probably like to bring out is capital adequacy. There's a new regime coming in on the 1st of January next year. This will increase our capital adequacy. Having said that, we'll still have over 100% headroom. On the next slide, we have a very simple cash flow bridge here. I think the key point here is that 100% of operating profit turned to operating cash. We have a very efficient working capital cycle. And as you can see there, last year's dividend of GBP 4.3 million or the final dividend from last year, the Verbatim acquisition, down payment and tax and a little bit of CapEx and lease payments delivered that GBP 14.7 million. On the divisional performance, you can see now Tatton continual growth since flotation. Compound annual growth is now just 24%.

Where was the slide? Next slide...

Oh, next slide, Hannah, please. Yes, the divisional performance, you can see the compound annual growth is just under 24%. And that's clearly delivered by an increasing AUM and the strong net inflows we've had this year of GBP 652 million. That's nearly at the same level of total flows for the whole of last year. We're now at just over GBP 100 million a month or GBP 109 million in size. And you will see that over the last 4 years since flotation, that went from GBP 80 million to GBP 90 million, and we've had a general progression as we've improved our distribution footprint. And then the investment team and Lothar's team have delivered good market performance, just over 5.5% of growth in AUM this year. On Paradigm, it's been a very strong performance this year to recover from what was a difficult period in the first quarter of last year. You'll recall the actual mortgage market closed down, but we bounced back very strongly. And in fact, actually, this year, we had record mortgage completions of around GBP 6.5 billion, GBP 6.6 billion. That's delivered GBP 3 million of revenue, so a strong growth in revenue, and all that revenue has actually fallen to the bottom line as the costs have been maintained and clearly improving and increasing the margin of that business. The next slide is -- one of the questions we readily get asked because of the strong operational gearing, is there a significant cost increase or investment required in the business? And the answer to that is no. And the vast majority of our cost is people. So 2/3 of our cost is staff costs, as you can see there. We split out the increase in cost this year, which is just over 16%, into 3 buckets: inflationary cost; investment in growth, which is really all about new people; and then COVID recovery. So this time last year, we saved probably about GBP 600,000 last year, in the last financial year, due to our inability to engage face to face and also market our business as we would like due to the COVID pandemic. And then we've just got one-off cost, which was the ACD change. So of that cost increase is about a 10% of that cost increase, which will be ongoing in future periods. And then finally, just in the final slides, on the next slide, Hannah, the Verbatim acquisition. We kind of achieved most of these data before, but I just wanted to make everyone clear, I think this is a great deal for Tatton. 0.9% of AUM in terms of 0.9% of AUM were GBP 5.8 million. It's very competitive price we've paid for those assets. We've put GBP 2.8 million down. The GBP 3 million of the consideration is deferred and will be payable in years 2, 3 and 4. And that would be payable particularly against whether that GBP 650 million AUM is maintained, and there are a number of caveats around that, which really is just about our performance and benchmarking our performance going forward. And I think the key thing here is that it's early to enhancing from day 1. So it will deliver about GBP 600,000 this financial year and about GBP 1.5 million as we move forward. So a strong synergistic deal where we're leveraging our existing investment team and delivering, as I say, a really good management-enhancing acquisition.

Thank you, Paul. Just looking at the market overview now, the first slide really is just showing how the adviser platform market has continued to grow. So very much as predicted, you can see that the amount of assets that IFAs are placing on these platforms is increasing. The last number we have is just short of GBP 600 billion, and that GBP 600 billion is at July 2021. So obviously, it will be higher now. But when you look at that, that's obviously a very, very good strong metric for us. But the silver ring inside, i.e., the DFM MPS where we operate our world, so to speak, that's now increased its market share there up to 14%. So 14% of the total now is actually in DFM MPS. Now I think that shows that this market is maturing. It feels like it's a maturing market. There's more knowledge out there. There's more competition for us as well, of course, but we're always very much aware that we need to keep an eye on what's going on there. But I think you've got a maturing market up to about 14% of the assets, but still plenty of room for growth there. And we're obviously holding our own end market share. So the next slide goes on to show again how over time, our reliance on the Paradigm firms is reducing as we get more and more firms who are non-Paradigm coming to work with us and supply us with investment business every single week. So for me, the big thing there, I suppose, is that half the AUM now comes from outside the Paradigm group, and you can see how that's changed over the last couple of years. And then actually, when you look at the number of firms, of which we're now 703 on the far right, you've actually got sort of that percentage of 76% being the direct firms. So that shows to us that the IPO flotation back in 2017 has absolutely worked. So we are actually out there, we're much more visible to firms and it's so much easier for firms to do their due diligence with everything that's in the public domain. So it's absolutely working as well as could be expected. The next slide, on Slide 21, shows our saturation slide, which is an old slide which we just continually update. And it just looks at where we are with the Paradigm firms and how much we've had from each one of those and how much we've had from the non-Paradigm firms. And the suggestion there is if we were to reach the same level of penetration or saturation from the non-Paradigm firms, then we've got a latent sort of 11 -- or GBP 10.9 billion of assets that could come to us. Now I don't expect it to be as much as that. But even if we got 25%, 30% of that, somewhere even 40% of that, you could see what that can do. And that's without us growing the number of firms that are supporting us, which obviously we will continue to do and are continuing to do, as you can see from our key metrics. So again, another strong position. Moving on to the next one. We're really showing how we're evolving as a, what I use as a term, as a true asset manager. Yes, managed portfolio services or DFM MPS is the mainstay and will continue to be the mainstay, but we're also building up our proposition around our multi-asset, multi-manager funds as well. You can see us actually getting bigger and bigger in that regard. But of course, there's a basic fund moving nicely into that. And then we've got our bespoke side, which is our aim, and MPS. Again, all our platform, again, growing and gathering traction. So we've got 3 pillars, effectively, which are all growing in the right direction with MPS, Tatton Funds and the bespoke. The next slide just shows you how we are changing that and showing it in a different way, which is the pie chart showing you the amount of assets sitting there. Yes, we're on a 15 bps charge with MPS. But on the funds side, we're on to a higher bps charge. Even -- although we are competitive on our OCFs, we're bringing OCFs down. And of course, you do not move the funds into the MPS side. They are completely separate. It's for a different type of clients and for a different type of advisers. But it shows that we can be an MPS and multi-asset, multi-manager funds at the same time. Slide 24 is our strategic direction, which is very much continuing with our organic growth, build that up and add to that with acquisitions such as the Verbatim one and then build on our strategic partnerships, as we've done with Fintel, also Sesame Bankhall and Threesixty. And then Slide 25, which is our road map to growth. If you remember last time, we did talk about moving from GBP 9 billion to GBP 15 billion over a 3-year period. And in the first 6 months, we've actually gone 30% of the way there on the journey. So with our organic growth of GBP 1.1 billion and with our M&A activity of GBP 0.65 billion, we've actually moved quite a way up that graph to GBP 15 billion in the 6 months. So we're well on track. So we don't need to do more acquisitions. It's not as if acquisitions are done to fudge our sort of organic growth. That's going absolutely fine, but we will continue to do acquisitions as and when we see that they absolutely are right, that they are earnings enhancing and they fit within our proposition. And we've got a little pipeline running now. We've got one, in particular, which is towards the close of due diligence, and we will continue to develop that pipeline moving forward. I just wanted to spend the next couple of slides just looking at the strategic partnership arrangement with Fintel. So we mentioned the 5-year contract. So we now go on the road to meet all of the Fintel advisers. There are 29 events across the country over the next 5 to 6 weeks. And we've just started on those, and we'll continue to attend those, and this will be the first time that we get in front of the Fintel firms. We're also going to be part of the risk control matrix of Defaqto, which means that any Defaqto user utilizing the risk control element of that Defaqto piece will be streamlined straight in to the Tatton portfolios. We're 1 of 3. So there will be ourselves and a couple of others who sit alongside. But we believe that we are actually pretty well placed of the 2 competitors that are coming in against us on the risk control side. So if an IFA is looking for simplicity, if he's looking for ease of actually using technology, he'll go straight through the Defaqto system and end up with a Tatton portfolio. The next, Slide 27, we can skip. Slide 28 shows us where we are with the Tenet Group. And the Tenet Group, we work incredibly well with from a head office level. And we can see how, for the first 6 months or first few months, you get very little business and then how the graph moves forward from there. And as I said earlier, now nicely up to GBP 741 million from 100 adviser firms. And they've got 474, so there's another 374 that we need to engage with, but I'm happy to say that those assets are coming through quite nicely. On to Slide 29, which shows you that strategic partnership, which 50% of firms in the U.K. tend to be part of these distribution or membership clubs. And I'm happy to say that last time, SimplyBiz, Sesame Bankhall and Threesixty, and SimplyBiz is now Fintel, they were all amber, but we've turned all 3 of them green. And I think, really, the only sort of issue that we've got is the execution risk of getting around all of these IFA businesses to extol the virtues of what we're doing and to get them to start to partner with us and start to place business into Tatton Investment Management. The red ones, we can't get a hold of because they have their own proposition. They have their own fund management experience. But you can see, if you take the red ones out, most of them are green, and we've got 2 or 3 ambers which we will work on at times and partner with them in the future. Although that's not really a priority right now because we've got enough to do with the first 3 major firms that we've now been given access to. Obviously, we get all of our business -- so the next slide, please, Hannah. We get all of our business from the IFA sector. We're a single-channel business. I think that resonates really well with the IFAs. Lots of our competitors are multichannel. And I just thought it might be handy just to spend just a couple of minutes of looking at the health of the IFA sector. And I'm pleased to say that it's probably never been stronger. There seems to be a massive demand for IFA's work, and basically supply -- sorry, demand is way, way outstripping supply at the moment. So wherever you go across the country, IFAs are struggling to keep up with the number of clients who want to utilize their services. And there's a couple of stats I'll just call out of that graph -- of that slide, which is really 50% of all IFAs plan to recruit in the next 12 months. That says to me, they're growing businesses. The average client portfolio is about GBP 350,000, which is nearly GBP 50,000 up from where it was in 2020. You can see their priorities. And also, on the left-hand side, you can see how fragmented the industry is and that we have over 5,000 firms out there and 2,500 or just under 2,500 are the sole traders. And that's brilliant news for Tatton. Obviously, it's the bigger firms who tend to have their own proposition, their own fund management proposition, where the smaller ones don't, and that's really our sweet spot moving forward. I think my next slide is the changing landscape. And that was really just to show you the integration of financial services and how certain providers are integrating. And this is something that we mull over all the time here in head office, just about what is actually going on in the wider picture. And you can see somebody like abrdn, for example, who absolutely cover every single base to cover financial planning, investment management. They have a platform, they have their own asset management team and they have their own back office. You can now add on another box to that because they now got their own B2C proposition after buying Interactive Investor. So that's a fully integrated model there. You've got AJ Bell, which is a platform, but results have drifted into our world with investment management. So they have their own version of Tatton. And then that might work for them, but I'm not sure there will be many IFA firms who will necessarily want to use the platform that they're utilizing and utilize their platform's investment management. It just feels a little bit too close enough for me. And then you've got Transact saying, actually, we're not going to be -- or [ IntegriFi ], we're not going to be involved in asset management. We're going to skip that out completely, but we will get involved in the back office and will help integration by offering the IFA, the back office, it links to our platform. So it's just very interesting. We put up there because it's obviously part of our daily environment to look at what everybody else is doing to see what we should be doing moving forward. And then on Paradigm Consulting and Paradigm Mortgages on Slide 32, we can just show you basically how the mortgage numbers are up 2%. This is members. The consulting members are up 3%, and then the protection up 6%. So all going in the right direction, all lines are steady away and all supporting the Tatton Investment Management piece as we continue to grow that. I'll hand you over to Lothar now, if I may.

Thank you very much, Paul. Yes, so on my first slide, always very happy to share with you our hockey stick chart of asset growth. Really proud to see how we're growing in this last 6 months at about GBP 110 million a month, very much testament to the tenacity of our sales team going out there and transforming, translating that relationship -- those relationships that we've built and that came on board, Tenet, we were talking about early on, and so now Fintel and the others are in the pipeline. On the next slide, just to reiterate our proposition footprint there with the MPS. On the left-hand side below that, the bespoke services. And then the investment funds, and I've circled there the Verbatim funds just to show how nicely they slot in to our overall proposition. They are just like what we have, multi-asset, multi-manager funds or multi-asset tracker funds, and that multi-asset tracker fund is particularly welcome because it gives us that critical mass to enter that segment in the market of not just having a tracker MPS, but now also a tracker multi-asset fund, which we are quite excited about, but slots in very nicely with what we've been doing so far. So it doesn't really require a complete rethink of our investment processes. We can apply exactly the same investment processes that we've had. And then access to and across 20 platforms, so we are now available across all those 20 platforms we're showing there, which I'm not sure any other of the DFM providers have actually been able to do. So on the next slide, 36, I've been asked in the past from time to time, why is it that -- or are we afraid that others might just steal the cheese? Whereas we've been the ones who -- well, we haven't actually stolen it from others. We're getting the inflows from IFAs who've so far done it themselves. But there is a more considerable moat around us and our business model than just the 15 basis points that you might think has been the advantage. That was obviously the key point when we started out together with having access to the Paradigm members as a marketing platform. But now we also have considerable other intangible assets, if you like, which are, on the one hand side, how we're dealing with the advisers and being a real expert partner to the advisers towards the platforms, which we are also underpinning with systems like our portal, which has really become sort of a meta platform for advisers where they can do client administration across platforms where they're using the Tatton model portfolios. They can draw down client information consolidated into reports for their clients, which actually makes it very convenient for them to work with us. That paired with the distribution footprint that we now have, which takes really a lot of time, not just money, but also a lot of time to develop when you think of all the road shows that we go up and down the country, attend with all these different IFA networks and IFA servicing partnerships. That isn't something that anybody can do overnight. And then obviously, our scale makes it very profitable for us now at the billions that we have, the GBP 11 billion that we have, but it's very difficult when you're starting out with very little assets. So overall, these 3 elements, we believe, provide a pretty nice moat around us. Obviously, you can't talk about investments at the moment without talking about ethical portfolios, which is the next slide. So our ethical model portfolios haven't just started. We have been doing this since 2014. So we've got a good 7 years of track record and experience in running ethical model portfolios, haven't just jumped onto that bandwagon, which is also why more and more advisers come to us for that sort of service. So we've more than doubled our assets there over the last 12 months. We are now at GBP 630 million, actually, by now a bit above that, obviously. And that, together with the feedback that we've received from the market, have really encouraged us to go one step further. So on the next slide, which we'll be launching the ETHOS range of funds. They are aiming at a lower price segment within the ethical markets because advisers have told us that where clients have so far been invested through tracker portfolios, but are interested in the ethical side, they're very keen to get there, but at a lower price point, which we can realize not quite with a managed ethical tracker portfolio because we think and we find that's a contradiction in terms, but a hybrid mix of ETFs and active funds and still bringing the OCF down to just 40 to 50 basis points, depending on risk profile, with the launch penciled in for the first quarter of '22. So the next slide, you've seen before, it's the grid of how our assets under management distributed across the 44 modern portfolios that we now have, the strongest growing relatively at the moment or no surprise to anybody is the ethical segment. So we're very happy to be a significant player in that space. But further, we still see significant interest in the hybrid model, so our combination of active and passive. While the global is also growing quite strongly and really giving us the evidence that it was the right thing to do last year to branch out from the traditional U.K.-biased model portfolios into the more global wealth management type portfolios where the U.K. is only represented with its global cap weighting. So all that is very good development from my perspective. Next slide, we have an overview of our relative returns across the grid compared to our peers. Very happy with what we're seeing here over the 5 years because that is the consistency and reliability really of returns that the IFAs are looking for. They want to see us generating the returns for their clients, which are commensurate with the levels of risk that they have signed up for, but also in some sort of relationship with what is available from the rest of the market because, usually, in their experience, if you significantly -- very significantly outperform against them, then that can bear bad news going forward in the future. I've inserted another slide there on the next page, which shows us specifically in the way that Defaqto show relative performance against a very relevant peer or some of our closest competitors. And that's important to us because, obviously, the Fintel following advisers are using Defaqto as their standard tool. And therefore, this is very important, what we look like there, we're obviously the red dots in there, and that's the 6-month picture. On the next slide, we've got the 12-month picture, which -- well, they haven't quite produced something longer than that because they've, I think, only started that last year. But on that basis, we're very happy to appear to those Fintel advisers. When they start researching us after speaking to them on the road shows, that should really be a good basis to connect with them and to win them over. Last but not least, we've got the, on the next slide, the ethical portfolio performance. And there, we see some significant outperformance over the last 3 years. Now that, we have to say, well, very happy with that. And we also believe we've still got quite a diversified portfolio here. It has to be recognized that ethical investment strategies are a somewhat restricted investment universe, which are very much overweight to growth, tech and to the U.S. where you have a lot of those ESG-qualified companies. And therefore, it is -- well, if we take those 3 factors together, we all know that they've been the main performance drivers over the last years, the last decade almost. And therefore, that's one area where we will strive to maintain that performance advantage. But obviously, if and when things change and long-maturity assets like growth go into reverse, we may not be able -- or the whole sector may not be able to quite maintain that performance advantage over the longer term.

Thank you, Lothar. So that takes us through to the summary slide. So you can see that road map to growth, which we highlighted 6 months ago and updated here today. So we've been asked, are we making any changes? And the answer to that is no. We will just continue to develop and move that road map forward and get the GBP 15 billion over that 2.5 years that's remaining. We -- obviously, we'll continue with the organic growth because that's obviously the one that we enjoy the most, and that grows very, very nicely. We've got all of that potential from the 3 new partnerships from Fintel, from SimplyBiz -- sorry, Fintel SimplyBiz, from Threesixty and also from Sesame Bankhall Group to go out. So that should bolster that organic growth forward. And then look forward to maybe some more M&A activity similar to the size and range of the Verbatim piece. And at the same time, just look at the developing other strategic partnerships. But as I said to you earlier, that's slap me on the back because we've got enough to do. And that's it really. That's it from the team. I think -- and I think we're probably now ready to move towards questions.

Yes, absolutely.

A couple through already. Your operational gearing is most impressive. Could you talk about the impact on Tatton of any possible bear market with significant reductions in asset prices?

Right. So it's a very good question. I mean, obviously, because we are involved in the marketplace, if the market goes up, our revenue goes up. If the market comes down, then our revenue will come down. So if there's a market correction, our revenue will come down. The [ BSO ], I think, is 0.6. But a bear market obviously means that we're not going to be growing at the same sort of level as we have been in the past, and that is expected. But we will continue to receive our 15 bps on whatever those assets are.

I think a good example of that would be, obviously, last year. It's a mark last year when obviously, the markets deteriorated quite significantly. And over the same period, we still continue to grow. So it really is about the size of the market and our capability of taking that opportunity. But that was a perfect example of a bear market and deteriorating asset prices and the impact they have on the business.

Okay. Thank you. Next up, could you talk about your competitive advantage, both in selling to your channels and in terms of the advantages of your funds for the end investor?

Yes, of course. Well, our competitive advantage has to start with our price. So our price has always been very, very reasonable. I won't use to word cheap. But we have been reasonable right from the start in 2013. We actually brought the pricing of the DFM MPS significantly down from around about 30 to 40 basis points at that time down to 15 where we came in. The competition has always stayed higher than that, but are gradually coming towards this, as we've expected as these markets mature. We actually have 1 or 2 who are down to a very similar level to us, and we have 1 or 2 that have actually gone lower than us. But that -- you've got to combine 3 things for the IFA to support you. One would obviously be competitive around your pricing. Two would be consistent with your investment returns and investment performance, and that is vital, and we've continually done that since 2013, as we've detailed. And an IFA is not just going to move on price. He's going to want to see a long-term track record from that asset manager to make sure that they have been performing nicely. And then the third one, as Lothar has highlighted, is the service standards and how close and how hard you work to communicate with your IFAs to make sure that they are completely equipped when their clients come on the phone. And I don't think anybody works as hard as we do on that, and we will get us close to that IFA as they will allow us. So I'd like to think that our proposition around price, investment, consistent investment returns and solid good service to those IFA stands us in good stead. For example, we have 1 or 2 of the competition are really big global names in the asset world, so people like Legal & General, Schroders. And when you -- is that a concern to us? Obviously, everybody, you need to be aware of where they sit and what their proposition is. But actually, I don't believe that those firms really completely get as close to those hard places we would do. We get our hands well and truly dirty and enjoy working with them and getting as close as they will allow us to.

This next question then perhaps leads on quite nicely. If we look at the Fintel deal and the other offerings that their partners will have to choose from, do those same competitive advantages apply across the board in this instance?

Yes, absolutely. And then on the Defaqto side, we're going to be in a universe of 3 providers. So that's even better. That cuts out everybody else. I don't think that will be forever, by the way. I think that will just be short term until they extend out. But we will have a period of where we can compete with just 2 others. We're not concerned about the competition of the 2 others. So we'll do quite well from that. The USPs remain the USPs. These are firms that we've never really spoken to in the past. So it will be an educational process of how that DFM MPS works for them, what structure they're currently using and why they've built more scalable businesses by moving across to our model.

Okay. Thank you. Perhaps one for you, Paul Hogarth, as the largest shareholder. Can you summarize the performance indicators your top level management's remuneration is based upon? Is it free cash flow per share or growth, et cetera?

I don't quite understand that one. Sorry, give me that one again.

It's what are the forward indicators that we use for paying performance-related bonuses?

I suspect that's where they're headed, yes.

Yes. So it's all growth, it's all related to growth, both in the earnings per share and growth in TSR and also hitting internal plans as well.

Okay. Thank you. If we head back to Fintel and these -- obviously, in with 2 other competitors as opposed to Tenet, are you expecting conversion rates to be slower than in the Tenet example?

No. I think, to be fair, I think the Fintel one will be very, very similar to the Tenet one, and I would expect it to take a few months to get underway. And then as we saw with Tenet, it actually sort of ramps up over an 18-month period. I would expect the Fintel one to be very, very similar. And also the same for Sesame Bankhall and for Threesixty. It just takes us a little bit of time to get around them all. But no, I can't see there'd be any sort of difference and change of assets coming through.

Okay. Will you be disappointed if you don't complete an acquisition in the next 6 months?

I'd be disappointed if I didn't complete an acquisition that we wanted to complete. So if we had one that we put a lot of work into and we're working to buy it and we didn't, then obviously that we would be disappointed on it. I think where we've got to with the road map so far is that we don't really need to actually go and buy to get to that GBP 15 billion. I think we probably could squeeze up there organically anyway, but that's not to say that we wouldn't do that. We would look to do M&A activity where we thought it was a good thing for us to do, whether it broadened our base and was earnings enhancing. And therefore, the answer to the question is, if we did have one and we didn't do it for other external reasons, then yes, you would be slightly disappointed.

Well, certainly the view that our analyst, Paul Bryant, ascribes to in our note is that it's not needed to get to the GBP 15 billion, but certainly will be the icing on the cake.

Yes.

We don't have any more questions, gentlemen. So you've got off lightly today unless -- oh, here we are. Here's one more. Oh, well, it's a compliment. I hope none of you are looking to retire in the next few years, and they're looking forward to what succession plans -- oh, what succession plans does Tatton have in place?

Yes. No, we're always looking to develop a team. We're always -- we've got some great management skills within the team, both on Lothar's side and also on the membership side and the head office. So we're not looking to retire, and we're not looking to get off the bus. But obviously, in time, that you will need to have succession. And also, from a business planning point of view, you need people who can fit in if any of us are not able to work at any particular point in time. So that's something we do spend a fair bit of time on, and happy to say that I don't think the team has ever been as strong as it is today. We've had some tremendous additions to the team over the last few years. And everybody that is in the senior management and actually lower than that, working very hard to move forward and through the ranks.

Wonderful. Well, thank you very much for your time, and we look forward to an update certainly in the next 6 months, if not before.

Thank you, Hannah.

Okay, thanks, everybody. Bye-bye.

Thanks, everybody. Thanks, ladies and gentlemen. Thanks.