DFM use is on the rise among financial advisers and platform-based managed portfolio services (MPS) have been the main beneficiaries. Recent Platforum research shows that advisers are using more DFMs now than they were two years ago, with advice firms that use platform MPS increasing the number of their providers from 2.2 in 2019 to 2.5 in 2021.

Firms that outsource at least some of their investment propositions typically pass the bulk of their flows to one main DFM. But most of these advice firms also link up with satellite DFMs for different types of business, such as passive models, ethical models or other specialist models.

There’s been a substantial rise in the number of advice firms using DFMs’ platform MPS. The average number of firms using each DFM has risen by 17%, based on data from many of the leading players in the market.

DFMs offering ethical portfolios have benefited from some of the strongest growth in the numbers of advice firms using them. Ethical and ESG investing is increasingly important and an activity that advisers are likely to delegate to specialists. DFMs with a long track record of running ethical models attracted growing interest and strong growth during 2020, as did some of the big names with new services.

Advisers building DFM panels tend to limit the numbers of providers to a manageable handful that can cover all the needs of the firm and its clients. Of course, they might only use certain DFMs for specialist off-platform or bespoke portfolios.

The range of model portfolios DFMs offer is a key factor for advisers in selecting a platform MPS provider. We think that this will be a crucial feature – along with competitive pricing – that will give the edge to DFMs who run variety of portfolios with great track records.

We have just published a report delving deep into platform MPS. Get in touch to find out more. Information on our UK Wealth Management research is available on our website.