Outsourced investments on the Quilter platform have surged in recent years, with new data revealing a significant shift away from adviser-managed portfolios.
As adviser appetite for running their own portfolios has diminished, discretionary fund management (DFM) models and managed portfolio services (MPS) have seen rapid growth.
At the end of 2020, outsourced investments accounted for 16.7% of all platform assets. Today, that figure has climbed to 41.9%, marking a 331% increase in total outsourced assets over the same period.
This trend is likely even more pronounced when multi-asset funds, which fall under the platform’s ‘other’ category, are considered.
Conversely, the proportion of assets managed on an advisory basis has fallen sharply. In 2020, adviser-managed assets stood at 28.1%, but this has since declined to 15.8%.
The total value of advisory-run assets has stagnated, standing at £13.4bn today compared to £13.9bn in 2020, highlighting a clear shift in investment management preferences.
The managed portfolio service market has expanded rapidly in recent years, driven by declining fees and a waning adviser appetite for running advisory portfolios.
This shift has been particularly noticeable since the challenges faced by fixed income investments in 2022.
Research from Next Wealth supports this trend, showing that discretionary MPS assets grew by 36% in the year leading up to 30 September 2024.
This growth has been attributed to favourable market conditions, stronger relationships with existing firms and an expanding client base.
Graham Folley, head of business development and discretionary sales at Quilter, described the rise of MPS as “nothing short of phenomenal”.
He noted that in 2014, the platform hosted only three discretionary managers with model portfolios totalling approximately £350m.
Today, that number has risen to 149 managers, representing over 3,000 portfolios and nearly £18bn in assets under management – excluding Quilter’s own WealthSelect service.
“If you include multi-asset funds under the definition of outsourcing, we have very much reached a crossover point in how the majority of client assets are managed,” Folley said.
Quilter tops Defaqto’s 2024 adviser platform ranking
He added that advisers and clients appreciate the transparency of MPS, as well as the downward pressure on fees, making it an increasingly preferred investment strategy.
However, he cautioned that the growing reliance on passive investments within MPS presents potential risks, particularly in terms of market concentration.
“With the US comprising over 70% of the MSCI World Index and the Magnificent Seven tech stocks making up around a quarter, some MPS portfolios are significantly concentrated in a handful of names.
“This could lead to undesirable client outcomes, especially during market downturns. Given the lessons of 2022’s fixed income struggles, due diligence on both investment strategies and operational structures within MPS has never been more crucial.”
