Expert: Andy Parsons, Insight Manager (Funds and DFM), Defaqto Facilitator: Matthew Lonsdale, Director, Davies Group
Headlines:
- MPS portfolios have seen exponential growth, with assets under management reaching £145 billion and a 100% increase in portfolio numbers over the past five years
- Advisors increasingly recommend MPS portfolios over traditional multi-asset funds, influenced by cost-efficiency and customisation options
- The Defaqto MPS Comparator enables advisers to benchmark and compare MPS solutions based on volatility categories, performance, and risk-adjusted returns
- On average, MPS portfolios offer cost savings, with fees 21 basis points lower than traditional multi-asset funds
- Challenges in platform execution, transparency, and regulatory compliance pose hurdles for the MPS sector's continued growth
Discussion points:
Exponential Growth and Market Trends
Participants reviewed data showing the rapid expansion of MPS portfolios, with a significant growth peak in 2021–2022. Despite traditional multi-asset funds maintaining the majority market share, MPS solutions are becoming a preferred choice due to their flexibility and efficiency.
Cost Comparison: MPS vs. Multi-Asset Funds
The MPS portfolios’ cost advantage was highlighted as averaging 0.71%, making them more attractive to advisers and clients alike. Cost savings, coupled with the ability to tailor portfolios, were identified as key drivers of adoption.
Advisor Filtering Criteria and Recommendations
Advisers’ preferences for MPS are shaped by considerations like total cost, availability, and active versus passive stock selection approaches. These factors are prioritised over traditional filters like 3- and 5-year quartile rankings used for multi-asset funds.
The Role of the de facto MPS Comparator
Launched in May 2022, the Comparator categorises MPS portfolios into defensive, cautious, balanced, growth, and adventurous segments based on volatility. This tool provides performance league tables, risk-adjusted return data, and cost vs. return analyses, equipping advisers with deeper insights for better decision-making.
Challenges and Regulatory Considerations
The group discussed issues like inconsistent platform execution, transparency concerns, and the implications of the upcoming Consumer Duty regulation. These were acknowledged as obstacles that the MPS industry must address to sustain growth and maintain trust.
Key takeaways:
- The Defaqto MPS Comparator provides essential insights for evaluating MPS portfolios. Advisers should integrate it into their due diligence processes
- With average fees lower than multi-asset funds, MPS solutions offer competitive pricing without compromising on service quality
- Collaboration with MPS providers to resolve platform execution issues and improve transparency will be crucial for maintaining adviser and client confidence
- Firms must adapt their offerings and compliance frameworks in response to regulations like Consumer Duty to ensure alignment with client protection standards
- The continued shift towards MPS portfolios highlights the need for advisers to stay informed about industry innovations and performance metrics
