TAM Asset Management may be a relatively small business, but chief executive Lester Petch has big ambitions and believes the firm is on the verge of a 'quantum leap’.
Since launch in 2005, TAM has quietly grown its assets under management to £250 million by purely focusing on building strategic relationships with professional intermediaries. The firm’s core range of tailored risk-rated portfolios was supplemented by ethical and Sharia-compliant versions last year to provide a wider choice for clients. However, it is the opportunities offered by overseas expansion that could prove the real game-changer, according to Petch.
‘We’ve had significantly good long-term performance to attract clients and from a corporate perspective, we’ve been growing at 30-40% per annum for the last three to four years,’ he says. ‘Our international aspirations are quite strong and we are in discussions with a number of strategic partners about using our technology.
‘If we make two or three international connections it could quantum leap this business in the next two to six months.’
The bedrock of TAM’s expansion drive is the strength of its proprietary IT infrastructure, which Petch says is so robust that it could be transplanted into any jurisdiction, subject to local regulations.
When he set up the company a decade ago, he wanted it to be the most transparent wealth manager out there, with full automation and straight-through processing to make its investment proposition both scalable and efficient.
‘Our core thesis is to deliver quicker, better and more transparent information to clients and I think we are still at the top. That is why we are growing so fast,’ he says.
‘We are very IT-oriented with straight-through processing for most things and everything we do is automated, except the investment decisions.
‘We offer open access for all clients, including their trading history, and we can deliver 100-page four-year management reports online in about 10 seconds. A lot of other companies are starting to catch up now, but we’ve been able to do this for four or five years.
‘We’ve got £250 million assets under management and 12 staff, but we could take that up to £1 billion and only need to bring in one or two more staff.’
Of course, slick IT systems need to be backed up by solid investment performance and TAM can tick that box too.
Its Balanced portfolio is up 34% over five years to the end of July, comfortably ahead of a 22.8% rise by its 50/50 FTSE All-Share/FTSE Gilts All Stocks composite benchmark.
The firm offers two core portfolio ranges. TAM Focused is a suite of four risk-rated model portfolios aimed at clients of intermediaries with £10,000 or more, with its Premier range expanded to eight tailored portfolios for clients with over £100,000.
The portfolios all invest solely in collectives, with the underlying investment process driven by two teams.
Petch, whose background is in institutional management, including 15 years running what is now Hermes Investment Management’s Asian equity desk, chairs TAM’s six-strong investment committee.
‘Around 70-80% of the hard work goes into the top-down view, with the investment committee formulating a top-down overview,’ he says.
‘It is very much focused on should we be in or out of this asset class, where should we be invested and how do currencies affect it.’
The firm’s team of four analysts then select the best fund managers to implement the committee’s asset allocation view. Portfolios typically hold 14 to 24 funds.
The recently added ethical and Sharia risk-graded ranges are run to the same asset allocation, but to their specific mandates. The former is advised by ethical specialist Virtuo Wealth Management, and the latter only buys vetted Sharia-compliant funds.
Petch says the firm is ‘making good inroads’ with both and the unique fee-sharing option that is built into its ethical range is capturing clients’ imagination.
Clients in the funds can elect to donate a percentage of their investment gains to a nominated charity of their choice and TAM will pass on the same percentage of its fees to the same charity.
‘We have introduced the concept of “you give, we give”, which we’ve trademarked,’ Petch says.
‘The client can nominate to give up a percentage of their profits and we will pass on the same amount of our total fees to the same charity. In the first full year of the ethical service we’ve helped 20 charities and a lot of them are hardworking local ones that don’t get as much support.
‘It is an innovative way of looking at socially responsible investing.’
With the IT and investment proposition in place, Petch sees multiple avenues for growth both home and abroad. He is dismissive of moves by rival wealth managers to ditch smaller clients, and is happy to scoop up those intermediary clients who have been cast adrift.
‘When the business was set up, we saw a massive gap in the market for clients with between £50,000 and £250,000. We felt they were being totally ignored and not being given a managed portfolio, just a single fund. I think it’s actually getting worse and we are seeing a culling of clients at our competitors,’ he says.
‘We look after clients with £50,000 to £70,000 in the same way we would any other client. You don’t make as much money because of the numbers, but that’s no reason why they can’t have the same level of service. But that’s not to say all of our clients are small – they come in a range of sizes, with the largest at around £8 million.’
Petch also views the auto-enrolment market as an opportunity that is overlooked by many wealth managers that do not have the systems in place to be able to work to the 0.75% charge cap.
Looking at the future, with the strength of TAM’s IT infrastructure considered such a key selling point, will the firm be venturing into providing low-cost online investment management direct to consumers?
Petch is coy, recognising it would mean a shift in its business model and no longer solely working with the professional intermediary market, but he hints at ‘never, say never’.
‘We are probably 80% of Nutmeg without trying. Clients can place and execute trades and get valuations online. The only thing we don’t have is the interactive front-end, which with all due respect is not rocket science,’ he says.
‘Our long-term thinking is that robo-advice will grow. We have no intention of changing our model now but recognise it is a growth area. With our technology we could be in that market in three months, subject to regulatory approval.
‘We are looking at where robo goes, let’s put it like that.’