Sales of model portfolios dipped in the first half of 2024 as the boom of the past 12 months ran out of steam, new data from ISS Market Intelligence has shown.
Model portfolio sales grew 6% over the first six months of the year, both in aggregate and amongst individual firms using model portfolios, down from 13% in the same period of the previous year.
ISS MI said that due to relatively modest sales growth, model portfolios’ share of channel sales reverted to 51%, which is where it was at the beginning of 2023.
Separately, the data showed that the five best-selling providers for the first half were Quilter, followed by Tatton; Parmenion; Timeline Portfolios; and Financial Express. Meanwhile, the best-selling fund managers for the same period by gross sales were Vanguard Asset Management; BlackRock Investment Management; Legal & General Investment Management; Quilter Investors and HSBC Global Asset Management.
Despite a dip in gross sales, ISS MI said model portfolios reached £8 billion in net sales.
Benjamin Reed-Hurwitz, EMEA research leader at ISS MI, 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.”
The firm said the first half of 2024 saw a dramatic shift towards outsourced solutions, with the share of insourced model portfolio sales declining to 49%, down from 56% year-on-year. The report revealed that the average financial advice firm only uses two separate model providers, although 14% are now using more than five providers.
Four in 10 (38%) firms using model portfolios rely on them for more than 75% of their fund sales.
Reed-Hurwitz said: “This power user group might be generating the bulk of model business through a select group of providers but that’s not to say there aren’t still opportunities. And the size of that opportunity comes down to where advisers are in the adoption curve. While it remains unclear whether everyone thinking about switching has done so already, there will no doubt be some advisers only part way through the journey and still deciding how far they want to take things.”
The report also found that the average ongoing charge figure for model portfolios used by advisers was 41 basis points at the end of the first half.
