As more advisers shift towards outsourced investment management, Andy Miller of Quilter explores what’s driving the trend — and the key considerations for ensuring an MPS meets Consumer Duty expectations.
The shift towards outsourcing investment management is not new, but it has accelerated markedly in recent years. Advisers face mounting pressures: the complexity of managing in-house portfolios, rising regulatory demands, and the need to deliver holistic financial planning within tight fee constraints. For many, the cost and operational burden of maintaining robust in-house investment processes, especially under Consumer Duty, has become unsustainable.
Consequently, advisers have outsourced investment management to focus on more value-additive activities and ensure consistent client outcomes. Managed portfolio services (MPS) have been the big winner of this shift, with assets gathered by these services at an impressive rate. NextWealth’s latest report showed assets in discretionary MPS grew by 11% in the six months to 31 March 2025 and 25% year-on-year.
If you are one of the advisers who is using, or is considering using, an MPS you must ensure that it is suitable for your client base and provides fair value.
There is, however, an issue around a general lack of transparency in the MPS market when compared to mutual funds. There are three reasons for this. Firstly, basic practices that ensure customer understanding — a key tenet of the Consumer Duty — are not universally followed, such as publishing a monthly factsheet with details on performance, volatility and holdings. Secondly, MPS are not easily visible on analysis tools in the same way that mutual funds are. And lastly, there is no prescribed Assessment of Value framework in the same way that exits for funds.
So, how should you evaluate an MPS to ensure it meets the requirements of Consumer Duty? Despite there being no specific requirement, most MPS providers publish an Assessment of Value. This provides some insight, but there is always a risk that it could be the provider ‘marking their own homework’ somewhat – so you should seek to understand the basis on which it is assessed. You may find it useful to consider a checklist to analyse any MPS against, which could include:
1. Are there enough options to meet a broad set of my client’s goals and preferences?
- Clients will have a range of risk preferences
- Some may be focused on costs, hence a passive
- Others may be prepared to pay for potential out-performance – hence an activeOr a blend mixing both approaches
- Responsible investment preferences
If your chosen MPS cannot cater for the various needs of your client base, it may be difficult to demonstrate suitability on an individual basis for each investor.
2. What are my clients getting for their MPS fee?
- What does the investment process look like – how is asset allocation derived, how are funds selected, and how often is this updated?
- How many investment professionals are over-seeing the process and what are their roles and qualifications/experience?
- How often are portfolios rebalanced/updated to ensure that they remain suitable for your clients?
MPS fees vary widely from 0.00% to 0.75% (according to the latest NextWealth Report). It is perfectly acceptable to have an MPS with a relatively higher fee – but the manager must be able to justify it.
3. What are the performance and risk outcomes?
- What has performance been like over the past 1, 3, 5 years or longer if available?
- What level of risk has been taken to create these performance outcomes?
- How has portfolio performance been measured – i.e. what is the performance comparator?
Past performance is, of course, no guide to future returns. But for those who have been invested, performance relative to costs is a tangible method for analysing value. But, if part of your advice process is the analysis of client risk appetite, you should consider the level of risk taken to produce those returns.
4. What resources can be used to increase my clients’ understanding of how the MPS works?
- Are costs, risk targets, holdings, and process laid out at outset clearly?
- For responsible investors, are the portfolio’s non financial targets defined in a way that allows them to match investments to their principles?
- Are there clearly defined target market statements?
Being able to describe the ‘intentionality’ of an investment is very important – in other words, what is the investment designed to do? That gives your client an understanding of what they are buying, and you (the adviser) a basis for assessing the portfolio going forward.
5. What material is available to support my clients on an ongoing basis?
- Is regular client reporting available?
- Does reporting clearly state updated costs/performance/holdings?
- Is wider market commentary available to help clients understand the market backdrop/context?
The communication responsibility of MPS providers doesn’t stop at outset. There is an ongoing requirement to provide information to keep investors informed of how their investments are performing to ensure that it is meeting their objectives and providing the right outcome.
Ultimately, when chosen and managed well, managed portfolio services can help advisers improve operational efficiency and enhance their ability to deliver consistent, high-quality service. However, transparency, value for money and client suitability must be central to any recommendations, so careful selection and ongoing oversight will be essential.
Andy Miller is lead investment director at Quilter
Andy heads up the investment director team at Quilter. He joined Quilter in 2015, having previously held senior distribution roles at life offices and fund managers. Andy is a chartered financial planner, a fellow of the Personal Finance Society, and holds the CFA ESG certificate.
This feature was part of our MPS Insights 2025 publication – designed with advisers’ needs in mind. You can download your copy of the publication here…. https://wealthdfm.com/2025-26-managed-portfolio-services-mps-insights/
