When purchasing a Managed Portfolio Service (MPS), the platform route is often preferable for financial advice firms. It has advantages and is popular. Yet, for some clients with specific requirements or preferences, it may be that MPS Direct is a better alternative, says Peter Stewart, strategic account manager/ associate director, Waverton Investment Management. He uses the company’s own MPS, which is accessible via a third-party platform or can be held in Waverton’s custody, to illustrate the point.
Tax advantages
Where assets are held by Waverton as opposed to by a platform, together with the adviser, we are able to take a more nuanced stance for each customer, particularly with respect to their tax affairs. For example, we can automatically subscribe to an ISA each year for the customer.
Along similar lines, given Waverton’s MPS is constructed using four ‘building block’ asset class funds, MPS Direct is able to hold the higher yielding assets (currently Bonds and Real Assets) in the tax-free environment, such as the ISA, for high-rate taxpayers if needed. The lower yielding equity and absolute return components could then be held in a General Investment Account (GIA). Alternatively, it may be the client or the advisers preference to shelter capital growth within the tax wrappers, which can also be accommodated.
Similarly, where investments or a portfolio is transferred in-specie, our portfolio managers are able to phase investments into the models within a CGT budget. We may also be able to hold products, e.g. SIPPs or Offshore Bonds, in our custody, which might not be available or desirable on platform.
Direct MPS allows for more control over capital gains tax (CGT) – it can ensure that as much as possible of the CGT allowance is used each year and help avoid going over the annual CGT allowance if required or crystallise an agreed amount of gain in case client has taken gains elsewhere. Directly managed MPS can also allow us to transfer in a CGT constrained portfolio and manage its holdings across to the model over time.
MPS Plus, or Bespoke Lite…
Portfolio managers are able to phase cash into the markets over agreed time periods, giving advisers more control. Should the client wish to have direct contact and performance updates with the manager, this is easier facilitated where Waverton have custody of the assets.
A directly held MPS is also able to offer a more personalised portfolio, adjusting the weights of the component funds to suit the clients wishes. For example, if a client has a large exposure to property, then they might wish to hold a lower weighting in the Real Asset Fund than the mandate guidance. Equally, a client may have fixed income exposure elsewhere in their portfolio, and therefore would prefer exposure purely to equity and alternatives.
Digital benefits
At Waverton, if the MPS is held directly, then the client is able to take advantage of our digital account opening process and our online portal, where they can find up-to-date valuations of their holdings. These valuations provide a full look-through to the underlying portfolio. Financial advisers are also able to take advantage of an Intelliflo integration – giving them information on the assets that they are monitoring in one back-office system.
Summary
For many investors, the choice between platform and direct may not see a material benefit one way or the other. Both Direct MPS and MPS on Platform are accessed via a financial adviser, and for many of their clients both will be a great option, but there are cases where Direct MPS can be the more suitable route to an MPS investment.
