Consumer Duty has encouraged wealth managers to review and change their propositions in various ways, according to our recent UK Wealth Management: Market Overview report.

Consumer Duty has accelerated the migration of client portfolios from bespoke discretionary to model portfolio services (MPS), with MPS growing almost twice as fast as the overall wealth management market.

Leading wealth managers have increased minimum investment levels for bespoke portfolio services, meaning that a larger share of future clients will get the MPS or unitised portfolios over full bells-and-whistles bespoke. They have also developed various halfway house services – ‘MPS plus’ or MPS with investment manager access.

Some commentators think that this shift into lower-margin business will undermine the profitability of larger wealth management outfits. It’s a fair point, even if it is mostly made by specialist MPS providers watching the more traditional firms moving further into their space.

But it could turn out to be a win-win scenario for traditional wealth managers. Clients with smaller portfolios and simple tax issues end up paying lower fees, while wealth managers grow the most scalable part of their businesses and free up their investment managers to pursue new high-value clients for whom bespoke services still make sense.

The large players’ broader range of services has increased the likelihood of wealth managers providing the right solutions for a wide range of clients. As one senior director we spoke to put it: “We’ve moved from a conversation about ‘suitable’ to a conversation about ‘most suitable’”. Consumer Duty is evidently helping to modernise the wealth management market.

Platforum recently published UK Wealth Management: Market Overview, our annual report which sizes the market, provides analysis of year-on-year change and discusses market trends. For more information, please get in touch.