Introduction #
Model Portfolio Services (MPS) continue to see significant growth, driven by regulatory compliance, cost efficiency, and diversification, but face emerging pressures related to administrative inefficiencies, perceived lack of value, and rising competition.
Financial advisers are increasingly shifting their focus from traditional investment selection to comprehensive financial planning. This transformation, driven by regulatory pressures and the Consumer Duty initiative, has propelled the adoption of Model Portfolio Services (MPS).
This report explores this growing trend, revealing both the potential and pitfalls of MPS as advisers seek cost-effective and efficient investment solutions.
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Key Highlights #
This report delves into the rapid growth of Model Portfolio Services, highlighting key findings that demonstrate their importance in today’s investment environment.
- The significant uptick in MPS adoption among financial advisers, with 51% now utilizing them for more than half of their clients.
- The fragmented nature of the MPS market, with major players like 7IM, AJ Bell, and Brooks MacDonald leading the way.
- The growing challenges related to implementation and administration, which pose risks to advisers and their clients.
Methodology #
Conducted on behalf of Equisoft by Opinion Matters, this research involved a survey of 500 financial advisers and wealth managers, 75% of whom currently use Model Portfolio Services. Data was collected from May 13 to May 20, 2024.
Key Sections in the Report #
This report is structured to provide deep insights and actionable intelligence. Key sections include:
- Market Leaders: The research identifies key players in the MPS market, noting that while it is fragmented, firms like 7IM, AJ Bell, and Brooks MacDonald hold significant market shares among advisers.
- The Opportunity: This section explores the potential for MPS growth among advisers, indicating that many plan to increase their use, although it faces competition from discretionary fund management.
- Emerging Pressures: It highlights challenges faced by MPS providers, including administrative burdens and concerns regarding cost and added value, which may deter some advisers from utilizing these services.
- Administrative Problems: This section details the technical difficulties and inefficiencies faced by platforms managing MPS, which can lead to operational risks and client dissatisfaction.
- Perceived Lack of Value: It discusses how the reliance on platforms can restrict investment strategies, leading to commoditization and feelings of inadequate value among advisers.
- Costs: This section addresses the downward pressure on fees in the MPS market and the implications for wealth managers as competition increases.
- A Gap in Priorities: An examination of the misalignment between advisers' and clients' priorities in selecting MPS providers, which could affect client satisfaction and retention.
- Can MPS Providers Support Increased Volumes?: This section raises concerns about the growing number of models and whether MPS providers can manage this complexity effectively amidst increasing regulatory scrutiny.
- Disruption: It notes the emergence of tools for comparing MPS, which could enhance transparency and challenge providers to improve their offerings in light of performance metrics.
- Call to Action: This section emphasizes the need for collaboration among providers, platforms, and advisers to address administrative issues and improve the sustainability and efficiency of MPS.
