I bet he didn’t even have it.

It’s tempting to do something about lack of discretion and all that, but time’s marching on and our subject this week is a little weightier than usual. We need to talk about DFMs, and specifically DFM model portfolios on platform.

I covered this back in June when Tatton secured its VAT ruling, and noted that Big Shuggie at HMRC wasn’t about to wave goodbye to all the lovely VAT that the DFM sector charges on models without a bit of a square go. But whaddyaknow. It turns out that Shug and his mates Eck, Jai and Fat Boab perhaps haven’t been on top form lately, as here comes Brewin Dolphin, securing a ruling that it no longer has to charge VAT on its 0.3% DFM MPS charge.

This is important stuff because, as you may remember, Tatton has always had a different method of presenting its charges in terms of them being VAT-inclusive; this is its defence for not returning refunded VAT to clients. BD – along with most DFMs – has a charge and adds VAT explicitly on top.

So what are the ramifications? First up, good news if you’re in a Brewin MPS; life just got 0.06% cheaper. Second up, it’s surely now open season. There’s nothing all that different in terms of how the many, many, many MPS providers ply their trade, so we can expect Shug et al to be chained to desks for a while. Of course, if there is a flood, we may see a bit of muscle flexing yet. “No VAT is it? Aye son, nae bother. And we’ll jist be poppin doon to dae a wee audit on yer chief exec’s expenses while wur aboot it.”

Third, BD will have to find a way to give the VAT back. Clients paid it explicitly and will need to be refunded. And here’s where life starts to get interesting. Because what looks like a tax problem is actually a platform data problem.

Brewin – and pretty much every DFM running an MPS – has no idea who’s invested in its portfolios. It gets aggregate data of varying quality from the 16 platforms it’s listed on (according to our last check). It doesn’t know when Client Polson was popped into MPS number 5, or when he disinvested to splash his entire £5k ISA on a custom Suhr and never mind the leaky roof. So although it will get the VAT monies back, it then needs to know what to do with it.

The good news is that platforms have that data. The bad news…is that platforms have that data. This is going to be a fascinating test of who’s got good records and who will be flapping about. And to take it a step further, platforms have long looked to commercialise their data; will some of the more entrepreneurial ones be asking for a fee for helping out?

There’s another angle to this. The VAT exemption, as I understand it, is the same for BD, Tatton, EQ, Sparrows and everyone; that is that the manager isn’t actually running a discretionary portfolio; it’s a form of a collective investment service – sort of like an unwrapped multimanager fund – and so doesn’t count. If that’s true, I can think of two things we’ll need to talk about soon:

  1. This surely has a bearing on ‘agent as client’ vs ‘reliance on another’ – we wouldn’t expect whoever manages a multimanager fund to accept suitability beyond staying within the fund’s objectives, and if this is basically the same thing then why would we do so here?
  2. CGT – we’re aware that a case is already being made that models in a GIA shouldn’t be subject to CGT as they are sort-of-not-but-sort-of in a virtual fund-like structure, sort of.

We could talk about them now, but it’s lunchtime and you need to go watch Steve Nelson interviewing The Secret Coach (the brilliant Rosanna Williams-Wood) on HomeGames right here at 12.30pm. Also I need more subjects for the weeks to come.


  • It’s survey madness time here; just a quirk of the calendar. Can we please ask for your help with two things? We know it’s a lot. But I did write you that nice piece on DFMs that you read just a moment ago.
  • First, it’s our annual State of the Adviser Nation survey. If you work for an advice business in any capacity we want to hear from you. It’s our biggest exercise of the year, and we want to make this one the biggest ever. We’re on track for that, but it could be YOU that pushes us over the edge. You can find that survey here. All respondents get cool stuff in return.
  • Second, we need to hear how your platform(s) has/have done in the last quarter. We think service levels have really bounced back after a bit of an understandable dip in Q2, but we need you to prove it. Takes about 4 minutes per platform. You can find that survey here. Thanks in advance.
  • Standard Life is readying its new D2C foray with open banking and decision support from automated Choicemakers, which is a nice name for algorithms. Be interesting to see how this one pans out.
  • And your music choice this week was hastily rewritten this morning in the wake of the sad news of Eddie Van Halen’s death at a too-young 65. Mind you, a year of Eddie’s life is like three of any normal human years, so 195 isn’t a bad age. What marks EVH out isn’t the skill – though it is that too – but that it’s all just totally joyful stuff, and we can do with more than that. 2020 just keeps on taking. Anyway, here’s the live version of Eruption, and the widdly bits start at just after 3 minutes.

See you next week