Navigating the great wealth transfer

The Managed Portfolio Services (MPS) market is ever-evolving, staying ahead of the curve is crucial for independent financial advisers (IFAs).

The rise of low-cost solutions has been the biggest change in the recent past, the quality of technology we have now didn’t exist, and neither did the support systems we have in place. With investment services being provided in a more cost effective way than ever before how do IFAs cut through the wheat to get rid of the MPS chaff?!

Several critical factors come to mind when selecting an MPS provider. They may sound obvious, but sticking to the basics and doing your research is crucial to getting it right. We know from IFA research that the providers service proposition is at the top of the list of importance, how easy is it to work with them? Unfortunately, a providers poor service wont only reflect badly on them but you too. The technology offered, the availability of services, and the flexibility for customised arrangements should also be high on the list. Don’t forget about behind the scenes too. The expertise of the MPS team, what is the depth of their experience, do they have the right amount of resource. Additionally, advisers should consider contingency plans for potential issues, as market fluctuations can lead to trades not executing at optimal times across multiple platforms. A robust operational and administrative team is vital to navigate these challenges effectively.

Moving on from service, naturally, you'd ask about investment style, track record, and ability to be resilient, but then, ultimately, you've got to also understand the fees. IFAs need to look through the fee smoke screen and compare the full costs after all charges have been applied and not just the headline fees that we see in bold. The fees need to be transparent, clear and readily available on all levels and in full detail. Understanding fully about their fees is obviously critical, and then you have performance, or rather, performance after fees.

How you work with the provider is also an important factor. Some advisers may not yet fully grasp the nuances between Reliance on Others (ROO) and Agent as Client (AAC), especially in the context of Managed Portfolio Services (MPS) when utilising a third-party platform. While both approaches have their merits, a lack of understanding can lead to uncertainty among advisers.

It is preferable for the discretionary fund management (DFM) sector to work together to draw more private clients to MPS through their financial advisers. A notable instance of such collaboration is DFM Connect, of which Evelyn Partners is a member. Supported by PIMFA, this initiative seeks to create dialogue and establish best practices for the benefit of the advice and investment sectors. Recently, they published a paper that serves as a resource on the regulatory landscape, outlining the advantages and disadvantages advisers face when choosing between ROO and AAC, both of which are valid options in the industry.

We all know that mergers and acquisitions are rife in our industry, I don’t think it would be a stretch to say that of the top 10 MPS providers, there will be a couple who are a product of that process. Evelyn Partners are well versed in this and understand the significant disruption when M&A inevitably occurs, the biggest firms are able to absorb this more readily but it’s certainly an advice piece to consider, it does make a less attractive option to employ a DFM who is potentially for sale. Don’t be afraid to ask the direct questions, who owns the firm, is it PE backed, what is the owners track record for selling?

Evelyn Partners have recognised the importance of answering these questions, we have worked hard to ensure that when IFA’s work with us they can be confident they have made the right choice. A focus we centred on was around rationalising fees and reducing the overall cost of our MPS solutions. We reduced our headline fees in 2023 for the core range and then implemented a promise to keep our Core MPS OCFs below 45 basis points, giving IFAs peace of mind. Be aware of firms who will shout about a very, very cheap underlying fee but don't shout so loudly about the OCF, which is equally important.

Secondly, we know that not all IFAs will have the same requirements or target market, and so for this reason, we developed five different approaches to MPS, all delivered by the same central team. We have a Core range, which is low cost, as well as an active range, which includes investment trusts as a USP. We have a Sustainable range for responsible minded investors, and we have MPS direct for advisers who prefer to use Evelyn Partner’s custody and technology solutions. We can provide versions of our MPS on our own platform, so it is possible to have everything together in one place. Finally, the largest movement in the market is probably where IFAs are looking to have their brand associated with a manufacturer like us. We can work with advisers to understand what they are doing with their own MPS propositions and potentially manage that for them.

In conclusion, understanding the dynamics of low-cost options, the importance of thorough due diligence, and the need for transparent fee structures will empower advisers to make well informed decisions. Make sure you understand the finer detail of the proposition you are using; do more than ‘kick the tyres, ensure you have a proper look under the bonnet when performing your due diligence.

By leveraging advanced technology and tailored solutions, firms can not only navigate the complexities of the market but also enhance their value proposition to clients, ultimately leading to stronger, more resilient advisory practices.

Please contact your local BDM for more details.

UK IFA BD Team | Evelyn Partners