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

We will go through the presentation. There'll be an opportunity for Q&A. And a reminder for anyone who hasn't seen it yet, there is also an updated research note with forecast on our website. But without further ado, I will hand over to Paul Hogarth, CEO.

Thank you, Hannah, and good morning, ladies and gentlemen. Yes, absolutely delighted with this set of results. We were really looking forward to, what I'm saying, coming out with everything that we've been guessing on with. So if we can go to Slide 8, please. And yes, just on Slide 8, I'm not going to pull every single individual piece out, but just to say, obviously, revenue and profitability up ahead of consensus. So consensus was about 14.1%, so nice to come in ahead of that. We also continue with our progressive dividend policy. So announced an 8.5p dividend, that's up 13.3%. But the key KPI for us is always -- this one's under management, I'm delighted to say that the funds went up by 26.2%. So now sitting at GBP 11.3 billion. So a record set of results, a record number for AUM. In fact, the AUM, if you include market movements and the acquisition that we had actually went up GBP 2.4 billion for the 12 months, which is obviously very, very strong. Moving to Slide 9, just again, just to pick up on a couple of points there. Obviously, organic flows, which is a big piece of GBP 1.28 billion and the purchase of the Verbatim funds are now firmly established. And then -- and the Fintel 5-year strategic partnership is working well, too. And I've got more on how that's going later. Actually, if we really -- we really should focus on the mortgage business as well, which has performed incredibly well over the 12 months and mortgage completions were 13.15 billion. But just going back to the organic flows, I'm happy to say that despite the markets that we're in, even post the year end, actually, we have been performing at the run rate of GBP 100 million of new flows per month, which obviously is excellent. And you'll hear the theme throughout the presentation the DFM MPS market coming of age. And I believe it really has done over the last 18 months. There are lots of new players coming in, which I think also helps the maturity of the market and some big household names entering this array of DFM MPS. And if you look at the latest set of numbers from Brewin or from Brooks Macdonald, you can see that the only area that they're growing it is actually in the DFM MPS space. And we will go back later on in the presentation to look at how assets have grown on advisor platforms and indeed, how assets are growing in the DFM MPS space over the last 5 or 6 years. My next slide on Slide 10 is really a bragging slide of how well we've done with flows to GBP 2.4 billion coming in over the 12 months. As you can see every single year, year-in-year-out, we have grown on the basis of at least GBP 1 billion of new flows per annum. And despite the market crash of 2020, with all of the pandemic and now, obviously, all the huge volatility we've got currently, the assets are still coming in on the usual run rate. So I'll pass over to Paul now.

Okay. Thanks, Paul. Good morning, everybody. Yes, as Paul said, I mean we've delivered a really strong set of results this year with revenue increasing 25%, obviously, on the back of sort of record net inflows but also coupled with the sort of record completions with our mortgage business and also the acquisition of Verbatim helping there. And across all our key KPIs, revenue, adjusted profit, PBT and fully diluted earnings per share. We've all grown in that sort of mid-20s range. And as Paul said, we're also really pleased to increase the dividend 13% to 8.5p which would be 12.5p for the whole year. And I think we can genuinely say now we have a progressive dividend policy over the last 5 years. We've paid approximately about 70% of adjusted earnings and dividend. Moving on to the next slide on Slide 13. We've put the cash flows at the next slide. As a sort high-margin low-cost business, the cash generation from operations is 107% of operating cash. There's a little bit more going on this year in the cash flow. We exercised some options this year and received GBP 1.3 million. Obviously, the dividend payment of GBP 6.6 million, which is last year's final and this year's interim in total. We acquired Verbatim back in September and the GBP 3 million is the down payment plus the acquisition fees and tax payments and CapEx make up the difference with CapEx actually accounting for about GBP 300,000 of that GBP 800,000 and lease payments and a little bit of interest is the balance. But a key number really for us there is the GBP 21.7 million on the balance sheet in cash. If we just move to the next slide, Hannah, please. That GBP 21.7 million really is the vast majority of the assets on our balance sheet. And the other movements really just relate solely to the acquisition of the Verbatim, as I said, back in September with the increase in intangible assets and also the other payables being the deferred element of that particular deal. And The key number there, that GBP 21.7 million. One of the questions we always get asked, how much of that 21.7 million is actually free cash. So on the next page, we actually put a slide here that's for capital adequacy and our requirement for that. So those of you who are familiar with this particular industry will recognize the IFPR changed and was implemented on the 1st of January this year, and it's had an impact on Tatton. Clearly, it's there as a framework for the amount of capital that were held -- that we are required to hold, should I say, sorry, to facilitate and will be wind down should that ever happen. And the impact on it, effectively, has been that we've had to increase our capital from GBP 1.7 million to GBP 3.6 million albeit Tatton still remains the only regulated business within the group. And we now have to incorporate and consolidate. The rest was improved within our calculations and as such has increased the capital adequacy. And secondly, the other impact is that as we look forward now it's highly likely that we'll have to issue shares or come back to the market and raise capital should require to make any other acquisitions. And the reason for that, on the right-hand side, you see there the capital and net tax of GBP 31 million is then reduced by the intangible assets of goodwill, intangibles and other sort of what I would consider as sort of nonliquid assets and obviously, the future dividend that we'll be paying later this year. And that gives us our attributable capital of GBP 11.8 million. We obviously required that capital, required about GBP 3.6 million So we have effectively capitalized with a headroom of GBP 8.2 million. The graph on the left-hand side is really the reconciliation of the GBP 21.7 million and how that works out from a free cash flow standpoint. So the takeaway for us on that slide really is, first of all, we currently have 228% headroom. We've got free cash to use, GBP 21.7 million. And the consequence of the whole IFPR process changing on the 1st of January this year will be that we'll have to make acquisitions in the future by using shares or raising capital. Just going on to the next slide on Slide 16. We separated out the divisional performance. You can see Tatton grown phenomenally stronger this year. The margin stayed extremely strong as well. Net inflows or what I could -- our record net inflows for -- is actually just under GBP 1.3 billion or a 14% increase on opening AUM, which actually, when you compare it against our peers, really leaves that stuff on the table there. And we've added market performance of GBP 424 million, and the acquisition of the Verbatim for $650 million to help drive that $5.2 million of revenue. And in addition to that, on that walk on the right-hand side which we've had an analysis, it's just a walk between the 2 profits year-on-year. Clearly, the revenues has delivered GBP 5.2 million. We've invested in cost of GBP 1.7 million. We've got some inflationary costs. And also, we've got costs that we're now actually recurring since effectively COVID has come to an end. And that was about GBP 300,000. And while relatively modest, if you like -- if you adjust 2021 for that cost, you'll see that, actually, the margin would increase by about 1.7% per annum. Paradigm is still obviously the smaller part of it, grew 20% of the revenue in total. If you looked at that revenue and you broke that down, it will be more than usual. It will be about GBP 3.5 million and the Paradigm consultancy, about GBP 2.5 million. What's really driven that growth is twofold, really. First of all, record mortgage completions, up 16% to GBP 13.1 million. And in addition to that, clearly, we had a slightly soft comparator in the prior year as well. But nonetheless, it's been a really strong performance now you can see, delivering also a slight uptick in the margin as well. Just moving on to the next slide on Slide 17. We put this slide in simply because we consistently get asked by our investor base a number of questions around costs. So is there a significant cost increase coming down the track for Tatton as the margin continues to increase year-on-year? And also, what potentially could that margin get to at some point in the future? And so we try to produce a sort of a candid explanations for that in a graphical format, So if you see that Tatton sits between the IFA and the platforms, currently Tatton deals with 746 firms. So we're a business-to-business and firm, and we have 746 firms in Tatton. Tatton firm actually have 90,000 clients, and those 90,000 clients all utilize Tatton MPS. So we think of that as our upfront office, but the fact that we have to deal with 746 firms rather than 90,000 clients means that we have a significantly lower overhead to do that. And then on the 18 platforms that we operate on, in many respects, Tatton is -- we have the same characteristics of a platform in that we usually feed off the same assets. And secondly, we have a huge amount of renewable income. But what we don't actually have is a significant infrastructure that we have to continually keep investing in. And a good example of that was IntegraFin's recent results where they said they had to have -- excuse me, had to add 50 developers. And if we double the developers that we had, we go from 2 to 4. So I give you the indication of the type of infrastructure that Tatton actually runs. In addition to that, we make our -- drag our revenue from flows, from the annualization of prior-year revenue and markets plus or minus, however that -- they treat us. But crucially, we actually operate through 44 models, and whether that -- those models contain GBP 10 billion, GBP 12 billion or GBP 15 billion of assets, it doesn't really impact the overhead that we require to run that business. So overall, we're looking to continue to invest in the growth, we'll obviously incur inflationary cost. But overall, we anticipate that we'll continue to grow in that sort of 1% to 2% margin per annum. And on the right-hand side there is really just a like-for-like example of how our margin progressed if we actually adjusted for those costs in the prior year. And then on the final check slide, we just put some high-level guidance. It's really just sets out that we look to grow by GBP 1 billion a year in new flows. We'll continue to invest in the business. and just really a reiteration of that 1% to 2% per annum in margin. Back to Paul.

Moving to Slide 20 then, our strategic update. This is our Tatton ecosystem. Basically, really, this is depicting the amount of distribution that we have the fees into the Tatton businesses and Tatton MPS and also Paradigm Mortgages and Paradigm Consulting. So on the right-hand side here, you can see we have all of the direct firms, which are now 746 firms there. We also have the Paradigm firms themselves, the strategic relationship with Tatton, which bears fruit, and I'll come to back to that later to show how well that's performing. And also now the new Fintel arrangement, which is just getting going and, again, is starting to bear fruit. And then we add in the 8AM firms, which we have exchanged contracts on but haven't completed yet. We're just waiting for regulatory approval for that transaction, which will give us access to the 8AM firms as well and then other strategic partners with people like Bankhall or Sesame Bankhall Group and 360. So moving on to Slide 21. This is our road map to growth, which we highlighted this time 12 months ago. And we said we'd like to take our assets, which were then at that point, GBP 0.9 billion, up to GBP 15 billion within a 3-year period. Now I'm happy to say that after the first 12 months, as you can see from that chart, we've actually gone 40% of the way to completing that growth from 9% to 15%, we're at 11.3%. But if you were to include the 8AM Global business, which, as I say, we're exchanged now. We're just waiting regulatory approval, which hopefully will be with us within the next couple of months, that would actually take you to 52% of the completion over the first 12 months. So we've done that through the organic growth, which delivered 1.7% and we've also done it by the M&A activity. And I think the question really is do we need to do more M&A activity? Well, the answer to that is we'll only do that if we see a very, very good opportunity that we feel actually would sit nicely within the group. We could leverage our existing distribution from all of the firms I mentioned just a few minutes ago, and also it was earnings enhancing. There is no burning bridge that means that we need to acquire. We really acquire as and when because we're very happy with the organic growth, as we've said earlier. Slide 22 just gives you some details on that 8AM acquisition. We bought 50% of the business at this stage with a put and call option to buy the other 50%. I think the big important point there really is it's on a multiple of EBITDA that we're buying. It's on a 10x multiple, so we don't think that's an expensive price. And we're paying 50% upfront for the 50% and the balance of the other 50% over the next 2 years subject to performance targets being met. Strategically, we see it fits very nicely as it complements our range of model portfolios. It's more of a quant momentum-driven type system. And we know the individuals who run that business very well. We've known them for quite some time and we respect them. And they believe that they'll be able to enhance their flows by working in conjunction with Tatton and utilizing some of the infrastructure that we've got because obviously, we're a lot bigger business than they are. We can help them with our IFA portals for client engagement. We can help them with their marketing and obviously, their communications as well. And obviously, our sales teams can distribute their MPS situation. So mutually excited about that, and I think it will turn out to be a very good little acquisition for us. So on Slide 23, we are showing our 4 fundamental characteristics coming back to that DFM world coming of age. We have lots of new providers coming in, which, as I said, actually strengthens the situation. So if you look at our 4 fundamental characteristics, we brought that down to growth. What's the market growing like? Well, the market continues to grow. The on-platform assets continue to grow, the amount of assets going into DFM MPS is on a CAGR rate 27%. That's now sitting at GBP 81.4 billion, which is actually higher than we anticipated. You can see our growth. We are very much the largest MPM player -- MPS players, sorry. We've got a market-leading price. Others are coming down towards our price, which is expected, but we're very happy with our price. It doesn't need to be changed. And we've even seen some of the providers actually go lower with a strategy to try and disrupt. And those ones going lower are really -- not really comparing like with like as they are in the main trying to populate their own funds within the MPS. And when you look at the OCF for the total cost of investing, there isn't a great deal between us and themselves. So we have got this really lovely, consistent long-term investment track record, which is nearly 10 years. It'll be 10 years in January, which is excellent. We've got the widest breadth of distribution through all of those partners I went through earlier. And we are well known for our service standards, which obviously we will continue to make sure that we give that best of service to IFAs. We are single channel only. So we only receive business from IFAs. We're not multichannel like everybody else is. And we retain both the firms and our AUM very well. We've got a slide on our attrition rates coming up shortly. And as Paul has highlighted already, the margins are strong and are like it to tick up as we move forward. I think in my killer slide is Slide 24, which, if you look at the beige shaded areas, you can see that the amount of assets sitting on platforms that have been introduced by the IFA community has gone from GBP 450 billion in 2017 to GBP 680 billion. That is expected to go to GBP 1 trillion by 2025 or 2026. You can see, from the silver circles, how well we've done with our AUM and also our market share increasing gradually from GBP 11.8 million to GBP 13.9 million. But at the bottom, you can see how the DFM MPS world has gone from 25 million when we floated in 2017, now up to that 81.4 million in 2022. I think the interesting stat for me there is the fact that it's still only 12% of the total. So there's a huge amount of growth because all of that is in the addressable market as far as we're concerned. -- and we believe MPS will continue to drive that forward. If you look at the latest set of numbers from some of our peer group from Brewins, from Brooks, you can see that they're growing in MPS but they're not growing on the sort of private wealth management side. And as I said, we're very happy with our position in the marketplace there. If you look at our defensive mode slide on Slide 25, you can see that we're recovering off that price performance, price, service and distribution. And then we've listed 5 people that effectively are in the market. Our closest competitors are Brewin, Brooks and Vestra. And you can see their size, and you can see their price. Market leader in general then because they've come in below us at 6 basis points. But as I say, their MPS is actually without cost factored in the -- it is populated with their own funds and then IFA investments at the bottom there sitting at GBP 5 billion. The rest the multichannel, as I said, and that really should sort of give us our defensive moat moving forward. The retention slide is the next one, Slide 26. And as you can see from that, our attrition rate is really 1%. So attrition rate of 1% is fantastic for our industry. Who are we losing those assets to? Well, we're not losing it to competition, we're actually boosting it to consolidation of the IFA sector. So there are numerous IFA consolidators that work in the marketplace. I think there's something like 30-odd out there. And we lose business occasionally to these consolidators, and we've actually sort of explored a bit by showing you some of the consolidators that they've actually taken some of the assets. Slide 27 is the changing landscape, which really just depicts where we are compared to the competition. And on Slide 28 just gives you our thoughts on strategic direction, which is pretty much the same as before. So nothing new there. It's through organic growth, as we've said, which is obviously a key area for us through white labeling and backward migration, which everybody is incentivized to create. That's where IFA actually wants to move all these assets very quickly across through us, which obviously benefits our FUM calculation and also by our strategic partnerships, which we are continuing developing. And then bolstering that with a little bit of M&A activity as in where it's relevant, as in when it's complementary and obviously, earnings enhancing. Slide 29, sure is you where we are with these strategic partnerships, the breakdown of the assets that we've got, a breakdown of GBP 11.3 million. You can see that Tenet is now nearly GBP 1 billion. In fact, it's over GBP 1 billion, if you include the Sinfonia funds. And I think we sort of guided the market to say that in time, we get GBP 1.2 billion from that. Happy to say that we should fly through that. And then we've got the same with Fintel, Sesame Bankhall Group and 360, where we expect, in time, to get to that GBP 1 billion mark, and Fintel is already starting to bear fruit. And then the GBP 4.2 billion from the 700-odd terms that we're working with in the direct market, which includes the Tenet number and the Fintel number. Slide 31 -- let's stay on 30 for a second. These are the old sort of slides, which we just can't find another way to depict where we're going. I think the key position for that is you've seen that the direct firms and non-Paradigm firms are now effectively bigger, both in AUM terms and also in number of firm terms. So the first time they've actually gone bigger, all from March '21 to March '22. So 54% of our assets are now coming from non-Paradigm firms and 46% from Paradigm and the number of firms, as you say, 78% direct. So Slide 31 is our saturation or penetration point. And this is where we compare where we've got to the Paradigm firms that we work with for the longest, where we've got an average GBP 31.3 million per firm. And then we look at the non-Paradigm firms, the direct firms, which were recruited all the [ firms ] that were being floated. And we've got 581 of those and we've only got GBP 10.6 million per firm left. So if we were basically to sort of get to know them as well as well as we've got to know the Paradigm firms, work with them for a longer period and reach the same penetration level, there's actually GBP 12 billion of the latent potential just for the firms we've already signed up. And of course, we'll continue to sign up more firms as we go through our progression. I think the final slide really, before I pass over to Lothar is just looking at Paradigm Consulting and Paradigm Mortgages. And really, both businesses on both divisions have done well over the period, had grown steadily. The mortgage side has actually done incredibly well. And even post the year-end, again, showing great returns and great results. But obviously, the mortgage market is expected to tail off when affordability becomes an issue as interest rates increase. And the way we counter that is mortgage advisers are very resilient. They'll start looking at more re-broking remortgaging of their existing book. And obviously then, as a sales team, we'll make sure that we've got more, then, firms joining us so that we've got a bigger membership moving forward. It's only 12% of our total revenue, and we therefore don't expect to blow up anything that we're doing across the board. But obviously, there is expected to be a little bit of a downside as affordability becomes an issue. Currently, we're not seeing that, but we just have to put that level once we're out there. That's it from me. I'll pass it over to Lothar on the investment side.

Thank you very much, Paul. On the investment side, we'd like to highlight and perhaps emphasize that Tatton Investment Management is now steadily moving beyond just MPS. Our fund range is now of a nature where actually we are increasingly able to offer our services to those advisers who haven't necessarily used MPS that is based on single asset class funds, but based on selecting a few multi-managed risk profile funds. Initially, we just had one series in there, the Tatton blended funds, and the success of those has also driven us to be very warm to the acquisition of the Verbatim funds, which are now allowing us to have a fuller complement of funds because they're adding their fully up-to-scale range of tracker-based risk profiled funds, but also an equivalent to our managed range. And over the course of the summer, we are hoping to be able to add our Tatton ETHOS range, launch that, obviously, subject to FCA being on time with the permissions for those funds. And with that, we then have a full complement of funds that mirror pretty much what we're doing in the MPS world. Very cognizant of the fact that the ethical world, at the moment, is under a lot of scrutiny. So we're very clearly labeling and, always have, what our ethical or ESG investment strategies are, what they can do, but also what they cannot do. So we will very clearly label that the ETHOS funds, for example, because of the cost targets that we have with them will be running under the SDR responsible banner once that's been formally adopted in the U.K., whereas the MPS, our Ethical range at the moment is running 1 notch higher under the sustainable transitioning range. We also see the continuation of our trend. Yes, let's go to the next slide of the distribution of our assets across the matrix. So we continue to see the Ethical growing, but that is -- it has to be said, slowing now in terms of relative growth. Obviously, our inflows, as we heard, are very strong and very positive for us. But the change in the proposition proportions is slowly slowing. We're seeing it most in the tracker in the hybrid. And at the moment, it's still going into Ethical and global. But with the active managers actually having done really well over the last 8, 10 months, having been able to take advantage of the rotation from growth more towards value and other more cyclical exposures, we would expect that trend to be stronger and to be enforced and sort of a normalization coming through as well, because we have to acknowledge that there's always a bit of the asset distribution following the past performance. And that obviously has been the strong risk in growth and tracker and the Ethical is just in terms of the investment universe quite a bit more growthy than anything that we otherwise run. We make that very clear that it is a restricted investment universe, but we've also been very happy with the performance of the -- our Ethical portfolio is not following the path of many other growth and tech propositions. It has not been able to perform quite as strongly on a relative basis as the previous years, but it's held up pretty well compared to what growth portfolios have done. So that takes us neatly on to our portfolio performance slides. So this is the long-term portfolio position that we have. We're very happy with how we managed to get through the last year with an overweight in equity, but also tactic positions that we took, for example, for a time in global small cap, which contributed very nicely to the portfolios, but also being, at times, fairly short duration on the bond portfolio, which again has worked well for the portfolio. So in comparison to our peers, who are discretionary managers, who we compete with on the platforms, you can see that we are, over the longer term, pretty close, slightly higher, which is exactly where the IFAs like us to be. Not too much of a surprise in one way or the other, just consistent, steady performance of getting into the portfolio. What is generally available in the markets, while perhaps with the active component, earning back the fees that retail investors have to incur. So on the next slide, we see our Ethical portfolio range, the year only 3 years because we've run only the balance for the longer time period. And it's pretty obvious. I think that it's a slightly different investment universe that we're investing through, so those green dots are still significantly above the average ARC portfolio, but that is very much due to the fact that they are more growthy and more geared towards the U.S. market, which is still coming through strongly in the 3-year performance numbers, even though that's currently coming back down somewhat. What we've learned all throughout, and that's on the next slide is that no matter what the markets are throwing at us, it's always extremely important to have timely contextual information for our clients, both in a written format but also in a video and a media format that is more easily to access for clients. Because at the end of the day, we can do as much as we like keeping portfolio steady and on track. If the clients lose the nerve and forget about their long-term investment strategy that they'd agreed with our adviser, then it can all be for naught. And therefore, we're always happy to see that even when the going gets really tough in the markets, our clients, our advisers' clients are staying put and hopefully sleep a bit better by just having the background information that we can provide them with. Thank you. Paul?

Thank you, Lothar. Yes. Thank you. So just our final summary slide, ladies and gentlemen. Obviously, hopefully, we've demonstrated that we are on track for our road map to growth that we said and delivering well, continue doing the organic growth, because organic growth is absolutely right towards everything we're doing with our key KPI or FUM. And then top that up with some disciplined M&A activity as and when, but no burning bridges, no massive requirement to do it. We'll just do it as and when we see fit and continue to develop our IFA distribution partners, as we've said as well. And finally, it's just a question of all of that distribution that we've got, if we ever wanted to extend our asset management position into other areas and we've got this lovely distribution connection that we can actually utilize that and leverage up and against. So that's it from us. I think Hannah, we'll probably go to you for questions.

Thank you very much. Let's make a start. You've commented already on price and how you've seen competitors moving. This gentleman asked, how are you being impacted by the increased price competition in the market, specifically Legal & General and Schroders?

Yes. Okay. So, so far, we've not been impacted at all, and we don't expect to be impacted either. I think these businesses are obviously very established waterfront providers. And it's -- I think it's a good thing to see them in the industry. As I mentioned earlier, I don't think the Legal & General one is actually comparing apples with apples because it's an MPS but actually just populated by their own fund range. And as I say, so far, seeing no increase in sort of competitive activity from either of those. We compete against people like Brooks McDonald, against Brewin Dolphin, Vestra. They are the people that we come across on a day-by-day basis. But as I say, it's an interesting thing to keep an eye on, but I don't see our prices under any pressure whatsoever.

Okay. Could you give us a little bit more flavor on the Fintel deal and how it's going? Are you seeing -- any insights you can offer on progress? And then perhaps once you finish with Fintel, maybe you could touch on Tenet as well.

Sure, of course. Fintel is doing fine. They just take a little bit of time to gather momentum, but the momentum is coming and the assets are coming and we will continue to develop that. We've done lots and lots of member meetings with firms, lots of face-to-face ones and lots of remote ones. And I'm very, very pleased and encouraged by where we're going with Fintel. The Tenet one's been amazing, being better than you could have ever hoped for. As I said, we've got a target out of GBP 1.2 billion, and we're heading up over GBP 1 billion already. So these are still very early days. The relationship with the Tenet firms is good; with management, it's very, very good and very strong. And we're very happy to continue to develop that with other distribution businesses as well.

In terms of the learnings that you have benefited from, from the Tenet deal, are you able to apply these to Fintel in order to speed up conversion?

You can apply them. It's very interesting that you have cohorts in different distribution businesses. So not every distribution business is the same. The Tenet firms are attracted to Tatton as we are the same type of firm, being attracted to be a Tenet number. The same with Fintel and they're all a little bit different and all at different stages. So we are probably still educating a way, really, to get everybody to understand exactly where we fit and where it sits, although that becomes lesser of an issue as the market matures and DFM MPS becomes the place to be.

Okay. 8AM, obviously going well so far. What is your longer-term plan there? And how will your relationship change? What will it look like if you choose to take the other 50%?

Yes. So would it be a 50% deal? They all continue to manage and run their business. And all we'll do is assist them, and they will keep our own brand and we'll assist them in what we believe is utilizing some of our infrastructure. So for example, we engage with all of our IFAs through our own in-house IFA portal. And the team at 8AM are very excited about having a version of that available to them to help them distribute their portfolios through the IFA sector. We have digital signatures. We have a lovely ease of engaging with the IFAs and they'll benefit from that. They'll also benefit from our marketing and from our cons, the weekly and things like that, which go down very well with the market. They'll benefit from that. But we'll definitely leave them as a stand-alone with them running that business. We'll get through the first 2 years. And it's obviously complete on the first 50%, and then we'll look to acquire the other 50% and then start to fully integrate into the Tatton business.

Okay. One here on ESG portfolios, which obviously had a challenging time recently, I think, you touched on, Lothar. Are you seeing a big slowdown in acquisition of assets there? Is it -- I mean, we've talked before how it's an important part of an introduction, perhaps, to some investors to Tatton. How are the slowdown in the hit to ESG impacting more broadly?

We're not seeing a major slowdown. I really can say that. I think what we're seeing is, on the side of some investors, a major surprise that those assets may not be top of the tree all the time. I think there was perhaps a perception among some investors if they went for this type of investment, they would always get the best and only have a positive returns. And so that's, I think, dispels myth about what Ethical and ESG can do. But I mean, aside from that, we're just continuing with our educational drive on Ethical and ESG, too, because we think it's probably one of the most misunderstood areas of investment. And it's always been our passion to demystify investments and make it as clear as possible to investors.

Yes. Okay. And another one here on ESG. Your ESG portfolio, great and looks fairly traditional. Would you look to include impact investing funds, too, within the portfolio as is being demanded by clients?

It depends on whether they can also meet our investment targets. The ones we've had a look at weren't quite up to scratch so far, but that doesn't mean to say that we wouldn't invest the impact. The problem within impact, once -- is oftentimes that they are, in fairly, illiquid assets. And whenever there is illiquidity in investments, it really isn't particularly suitable in the retail space. So hence, why that may not be becoming the big -- a big part in the portfolios.

Okay. Here. Last one that we have, so if you do have any more, to our viewers, now will be the moment to submit them. Adjusted margin is close to 50%. What do you think you can do to get this up in the next 5 years or so?

I'm glad there's a question for Paul because he's stopped talking a little bit. Get onto it, then.

I think that was the point the sort of last slide in the financial section, so apologies if I didn't get that across well enough. But I think what we're looking to do is increase our margin 1 to 2 points per annum. I think that's an achievable target given the nature of the business model that we're currently running.

Yes. Lovely. Right. And we have 1 good and running. Do you think costs by other providers will come down? I think you sort of touched that we were already seen that, but it seems like the poor retail client is being lumped with high DFM costs.

I think the resale client has been lumped with high DFM costs, and I think that's a very good question because it takes you to client outcomes, which has always been central to our proposition. And client outcomes is all about making sure that the client actually gets what they should get at the right price. And of course, the FCA is really focusing on that on the new consumer duty paper, which again, just looks at client outcomes all the way and guess what? We've been through about that paper. It's 2 things: it's price and value. So I think we've led the way with our 15 bps. It was very brave of us to do what we did when we did that one. Lothar and I got together in 2013. It was one of the biggest decisions with what was the right price and we went out 15 basis points. That's nearly 10 years ago. And we're now seeing the industry coming towards us. And you've still got areas of the industry where there is higher pricing. And I think that will be under scrutiny from the IFAs who want to do the best for their clients. So I couldn't agree more with the question that pricing, total cost of investing needs to come down and will continue to come down. But I absolutely got it with -- our 15 basis points is at the right level.

Lovely. Well, that's it from the questions. So thank you to all 3 of you for your time today, and we look forward to an update in 6 months' time.

Thanks, everybody. Cheers. Bye-bye.