Managed portfolio services (MPS) on adviser platforms are one of the fastest growing segments of the market. Some of the strongest growth for wealth managers has come from MPS distributed through financial advisers.
In 2020, platform MPS grew much faster than adviser platforms overall. Many factors are at play including: the evolution of advisers’ investment propositions, the shift towards using more ethical/ESG focused portfolios and a focus on financial planning rather than investment management. But a key driver has been the race to the bottom on fees.
Most DFMs have now removed VAT from their MPS charges in the last 12 months effectively reducing these by 17%. This will postpone the need for any real price reductions in the short term and allow those charging over 0.30% to keep some parity with the cheaper providers in the market.
DFMs have increasingly adopted passive products in their portfolios to keep down charges. More DFMs are also creating portfolios of their own funds making them easier to run on multiple platforms and typically at lower cost.
Finally, various new players have plunged into the market, with some of them introducing innovative fee structures like fixed fees on a per client or per firm basis. For asset managers coming into the MPS market, heavy investment into their own funds creates some cross subsidies. LGIM has launched with a headline management charge of 0.06%.
Advisers who already use MPS might be tempted to switch to the new low cost providers but probably won’t as long as their chosen DFM’s performance holds up. But as MPS fees continue to drop, it might attract advisers who have historically avoided these strategies because of “high” DFM charges.
We will be publishing a report delving deep into platform MPS next week. Get in touch to find out more. Information on our UK Wealth Management research is available here.