Evidence of value for money and alignment with Consumer Duty is the factor advisers weigh most heavily when choosing a model portfolio service (MPS), a survey by Nedgroup Investments has found.
Consumer Duty, the Financial Conduct Authority rule requiring firms to evidence that products deliver fair value and not just decent performance, was cited by 42% of advisers as the most important facet when selecting an MPS provider, ahead of consistency of outcomes relative to a stated risk level on 34%.
Investment process, governance and team credibility tied with quality of reporting, service and adviser support on 32% each. Performance and track record and total cost to clients each scored 30%, while platform availability and ease of implementation ranked lowest at 24%, as shown in the table below.
|
What are the most important facets you look for when selecting an MPS provider? |
|
|
Evidence of value for money / Consumer Duty alignment |
42% |
|
Consistency of outcomes relative to stated risk level |
34% |
|
Investment process, governance and team credibility |
32% |
|
Quality of reporting, service and adviser support |
32% |
|
Performance and track record |
30% |
|
Total cost to clients (including all underlying charges) |
30% |
|
Platform availability and ease of implementation |
24% |
Source: Nedgroup Investments
Apiramy Jeyarajah, chief commercial officer at Nedgroup Investments, linked the findings to advisers' regulatory workload.
"The survey highlighted that advisers are increasingly regulation-conscious as this aspect of their role becomes more burdensome," she said. "Investment outsourcing to ease regulatory burden is not a new concept but the importance of credibility is now a key priority for advisers as Consumer Duty weighs heavily on their shoulders."
Advisers were separately asked which client needs, of up to three, an MPS most effectively addresses, with confidence in volatile markets highlighted as the key driver of MPS growth.
This was chosen by more than half of the interviewees (52%), ahead of diversification (38%) and cost transparency and value for money (32%). Fewer advisers cited easing regulatory burden (28%), ongoing professional management (24%), simplicity and clarity (16%) or reliable risk targeting (14%).
|
Advisers were asked which client needs MPS most effectively address |
|
|
Confidence during market volatility |
52% |
|
Diversification |
38% |
|
Cost transparency / value for money |
32% |
|
Mitigating regulatory burden |
28% |
|
Ongoing professional management |
24% |
|
Simplicity and clarity |
16% |
|
Reliable risk targeting |
14% |
Source: Nedgroup Investments
Given today's heightened volatility, Jeyarajah was "not surprised to see that confidence was a key reason behind the use of MPS among advisers".
"Advisers are looking for a safe pair of hands for their clients' investments. They want to see experienced fund managers who have been through a number of different market cycles as well as diversity of ages and experience in the teams, for balance," she concluded.