Platform model portfolio services (MPS) has continued to experience healthy asset growth, buoyed by growing adviser demand as more advice firms have decided to outsource their investment management functions.
Competition among MPS providers has intensified with wealth managers finding it increasingly tough to stand out in the crowd. However, some MPS providers are managing to compete and differentiate themselves with their tailored MPS offerings, according to our most recent UK Wealth Management: Platform MPS report.
Platforum’s research points to a growing tendency for outsourcing advice firms to partner with a single MPS provider. Tailored MPS (sometimes termed ‘bespoke MPS’ or ‘custom MPS’) can establish an attractive basis of such partnerships. The advisers have some influence over the shape of the MPS the wealth manager runs on their behalf, and this arrangement can offer them valuable benefits:
- A more attractive and better supported investment proposition with no extra costs for the end-client. The advice firm can negotiate price from a position of strength by offering the wealth manager the prospect of a reasonably strong and assured flow of assets.
- The optics are good. Clients may perceive that the advice firm is adding value to the investment proposition by participating in the ongoing strategy as well as monitoring the performance of portfolios.
Tailored MPS is good for wealth managers too. The market is less hotly contested than the broader platform MPS space, where well over 200 players are vying for advised client assets.
But tailored MPS is not all upside for wealth managers. They have to decide just how much advice firm influence they are comfortable with and where they draw their ‘red lines’. After all, it is they who are on the regulatory hook for the investment proposition. What’s more, these strategic partnerships generally cost more to set up and run.
Differentiation is increasingly challenging for MPS providers and advice firms must carefully consider their long-term partnerships. Tailored MPS is tilting the competitive landscape and will be a more significant determinant of future success for both MPS providers and advice firms.
Platforum recently published UK Wealth Management: Platform MPS, looking at model portfolio services (MPS) that wealth managers offer to financial advisers through adviser platforms. We measure market size and growth, identify market leaders and discuss the major trends. For more information, please get in touch.