ISS: Model portfolio sales quiet in first half of 2024

Nearly two in five advisors using model portfolios depend on them for over 75% of their business

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Model portfolio sales through the UK financial adviser channel slowed to 6% growth in the first half of 2024, down from 13% over the same period last year, according to ISS Market Intelligence.

While the rate of model portfolio sales decelerated, gross sales for the channel increased 14%. The quieting for the sector means model portfolios now make up just 51% of sales, regressing to its proportion from the beginning of 2023. Despite the slowdown, net sales remained well in the green for model portfolios, attracting £8bn for the half.

Benjamin Reed-Hurwitz, EMEA research leader at ISS MI, said: “Although gross sales lagged the channel in the first half, model portfolios are proving their staying power and continue to bring in net new money. While much of the growth seen in 2023 stemmed from firms moving money towards insourced MPS programmes, model growth was driven by the adoption of outsourced MPS programmes this year.”

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Less than half of model portfolio sales were insourced offerings in the first six months of 2024, decreasing from 56% year-on-year. Outsourcing, however, accelerated during this time, with growth in line with overall channel gross sales.

“While for now insourcing remains prevalent, there is a question of how much more room it has to run. A question that will be tied to the trajectory of consolidation in the UK,” Reed-Hurwitz said.

“The outsourcing trend on the other hand is something we expect to continue as we see more model providers converting new IFAs. Consumer Duty is also leading to many questions around choice, which is beneficial to outsourced model providers looking for new territory.”

Across the adviser space, the average firm will choose just two model providers to work with their clients. However, of firms who use model portfolios, 38% depend on the offering to make up over 75% of their sales. In the first half of the year, Quilter, Tatton, Parmenion, Timeline Portfolios and Financial Express were the top model providers.

“This power user group might be generating the bulk of model business through a select group of providers, but that’s not to say there aren’t still opportunities. And the size of that opportunity comes down to where advisers are in the adoption curve,” Reed-Hurwitz said.

“While it remains unclear whether everyone thinking about switching has done so already, there’ll no doubt be some advisers only part way through the journey and still deciding how far they want to take things.”

This story was written by our sister title, Portfolio Adviser