Portfolio Management: Why Not Do It Yourself?
The FCA has announced a multi-firm review of MPS in 2025, due to assess how firms are implementing the Consumer Duty and “to provide confidence that investors are receiving good outcomes from MPS and share good practice on how firms are doing this.”
The Consumer Duty
The introduction of the Consumer Duty has heightened the emphasis on delivering fair value and consistent outcomes for clients. For financial planners, managing investments in-house now entails increased scrutiny. Outsourcing to an investment manager can help to alleviate this burden, ensuring that investment decisions align with regulatory standards while allowing advisers to focus on holistic financial planning.
Operational Efficiency
Managing portfolios internally demands substantial time and resources, often diverting attention from client-centric activities. By entrusting investment management to a firm such as Waverton, advisers can reallocate their efforts toward understanding client goals, providing strategic advice, and enhancing service delivery.
Costs
The MPS market has witnessed a notable decrease in costs in recent years. According to the NextWealth MPS survey, the average price paid by end clients of MPS fell to 0.60% in 2023, down from 0.67% in 2022 and from 1% in 2021. This downward trend in fees enhances the value proposition for clients, offering professionally managed portfolios at competitive rates. The total costs (including underlying and transaction costs) for the Waverton MPS, a truly active solution, is now 0.56%.
Access to Expertise and Diversification
DFMs bring a wealth of expertise, sophisticated research capabilities, and access to diverse investment opportunities. Their ability to navigate complex markets and implement strategic asset allocations can lead to more robust portfolio performance. For clients, this translates to confidence in knowing their investments are managed by seasoned professionals dedicated to achieving optimal outcomes. It also allows for the adviser to sit on the same side of the table as the client in review meetings, holding the DFM to account.
Enhanced Communication and Transparency
We believe that DFMs should prioritise transparent communication, providing advisers with timely updates, market insights, and client-facing materials. This collaborative approach ensures that advisers remain informed and equipped to address client inquiries effectively, reinforcing their role as trusted financial partners.
Conclusion
While managing investments independently may offer a sense of control, the evolving demands of the financial advisory landscape suggest that outsourcing to a DFM is a strategic move. It enables advisers to deliver comprehensive, client-focused services while ensuring portfolios are managed with expertise and regulatory compliance. In a world where regulation is rising, costs are falling, and clients expect more, advisers must ask themselves: is DIY portfolio management helping or hindering their value proposition?
