The UK’s platform model portfolio services (MPS) market has grown at an average annual rate of 27% since 2019, according to new research from Platforum.
Platform MPS now accounts for 16% of the UK’s discretionary wealth management market, more than double its share five years ago.
The findings come from Platforum’s latest UK Wealth Management: Platform MPS report, which highlights the growing dominance of outsourced investment solutions among advisers.
Third-party model portfolios have become the most recommended investment strategy among financial advisers, representing 29% of advised assets.
By contrast, competing investment options have struggled to make inroads.
Just 5% of advisers surveyed said they are very likely to switch clients from MPS to multi-asset funds in the next six to 12 months.
Nearly half of the 40 leading MPS providers recorded annual asset growth above 30%, with four firms more than doubling assets over the period.
“Providers are optimistic that we haven’t reached peak MPS and feel there is still plenty of headroom for growth,” said Annalise Toberman, associate research director at Platforum.
“Firms continue to win new business as more advisers shift from managing client money in-house to outsourcing their investment proposition.
“Low fees and strong support have helped advisers show the value of MPS to clients, while unitised solutions have struggled to compete.”
Hybrid and passive MPS models now dominate demand, with nearly two-thirds of advisers using hybrid portfolios that blend active and passive funds.
Passive MPS also continue to attract strong flows, with providers reporting rising allocations.
Pricing pressure has driven down fees across the board.
The median ongoing charges figure (OCF) for active and hybrid portfolios has fallen by 23 basis points since 2019, driven in part by increased exposure to passive funds, particularly in US markets.
“While charges for purely passive model portfolios appear to have bottomed out, those for other portfolios have still fallen as providers increased their passive exposures,” said Toberman.
“We’ve noticed both discretionary managers and advisers become more agnostic when it comes to active vs passive, particularly post-Consumer Duty.
“But investment decisions could increase the average total cost of an MPS in the coming months, if portfolio managers behind these services trim US allocations and invest more in regions where they prefer active funds.”
Platforum’s report includes data on MPS assets under management, pricing trends, adviser preferences and the leading firms in the sector.
It also explores the strategies shaping the future of outsourced investment propositions and offers insights for MPS providers and asset managers looking to grow their footprint.
