Outsourced investments through DFM models and managed portfolio services have grown to account for 41.9% of Quilter’s platform assets, up from 16.7% just five years ago.
As outsourced investments grow, those managed on an advisory basis have shrunk to 15.8%, more than a ten percentage point decrease from 2020. Total assets have also decrease from £13.9bn to £13.4bn.
Much of the outsourced growth has been due to the popularity of the MPS model. According to NextWealth, MPS assets grew 36% in the year to September 2024.
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Graham Folley, head of business development and discretionary sales at Quilter, said: “MPS growth in the past decade has been nothing short of phenomenal. In 2014 we had only three discretionary managers with model portfolios on the platform with assets around £350m.
“That number now stands at 149, representing over 3,000 portfolios and close to £18bn in assets under management, excluding our own WealthSelect managed portfolio service. Indeed, if you include multi-asset funds under the definition of outsourcing, we have very much reached a crossover point in how the majority of client assets are managed.”
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One of the major appeals of the MPS is the visibility for customers, who can see what is invested in the fund, and when changes occur. It can also be a more affordable option for clients because so many are using the same strategy.
“However, that visibility needs to be properly interrogated, as the growth of MPS has brought about new and possibly unappreciated risks. MPS providers are making greater use of passives to help drive costs lower, but this brings about a latent risk some advisers and their clients are not necessarily aware of,” Folley said.
“With the US making up over 70% of the MSCI World index, and the magnificent seven around a quarter, some MPS portfolios are concentrated in a small handful of names and may lead to outcomes that cause some clients discomfort. Given how this would expose clients in a market downturn, as evidenced during 2022’s fixed income struggles, due diligence of the investments, as well as the operations, of an MPS is more vital than ever.”
This story was written by our sister title, Portfolio Adviser
