Model portfolio sales in the UK finance adviser channel slowed in the first half of this year despite the market ‘boom’ of 2023.
According to data from ISS Market Intelligence (ISS MI), sales grew 6% over the course of H1 2024, both in aggregate and among individual firms.
This is compared to 13% in the same period last year.
Altogether, model portfolios still saw £8bn in net sales. However, net sales outside of models continued to see significant redemptions.
The five best-selling providers for H1 2024 were Quilter, Tatton, Parmenion, Timeline Portfolios and Financial Express
The best-selling fund managers for the same period, by gross sales, were Vanguard Asset Management, BlackRock Investment Management and Legal & General Investment Management.
The research also showed that the average financial adviser firm only uses two separate model providers.
Overall, 14% of adviser firms are using more than five providers, a year-on-year increase of 11%
Altogether, 38% firms using model portfolios rely on them for more than 75% of their fund sales.
The report also found that the average ongoing charge figure (OCF) for model portfolios used by financial advisers was 41 basis points at the end of H1.
ISS MI said this means that 43% of all share classes sold through models had an OCF below 20bps at the end of H1, “highlighting how the growth of passives has changed the cost profile on MPS programmes”.
ISS MI EMEA research leader Benjamin Reed-Hurwitz said: “Although gross sales lagged the channel in the first half, model portfolios are proving their staying power and continue to bring in net new money.
“While much of the growth seen in 2023 stemmed from firms moving money towards insourced MPS programmes, model growth was driven by the adoption of outsourced MPS programmes this year.
“Passive investing continues to grow within the UK as questions around value and cost remain predominant.
“For MPS providers, this has meant further scrutiny of both portfolio management costs and underlying fund costs.
“As a consequence, the last 18 months has seen many MPS providers look to lower their costs on one or both fronts, which is a trend we expect to continue as competition within this space remains high.”
