Paraplanners have highlighted a range of misconceptions surrounding multi-asset funds, suggesting that while they remain widely used, their strengths are not always fully recognised.
Multi-asset funds are firmly established within adviser propositions, yet our latest Parameters Survey suggests there is still considerable debate about how they are viewed.
When asked in our July Parameters Survey about the biggest misconception or missed opportunity when using multi-asset funds in client portfolios, respondents repeatedly pointed to a gap between perception and reality.
While many regarded them as a valuable and versatile investment solution, they also felt some advisers underestimate their flexibility and diversification benefits.
The responses revealed questions about how multi-asset funds compare with model portfolio services (MPS).
Not all multi-asset funds are the same
One of the strongest messages from respondents was that multi-asset funds are too often treated as a single, homogeneous category.
Many pointed out that strategies can vary significantly in terms of asset allocation, manager approach, risk profile and underlying holdings. As a result, funds that sit within the same sector can deliver very different outcomes.
Several respondents also noted that the range of assets available within modern multi-asset strategies is often underappreciated.
While some investors assume these funds are little more than blends of equities and bonds, many now incorporate alternatives, property, commodities and other diversifying assets.
For paraplanners, the challenge is ensuring that fund selection is driven by what sits beneath the bonnet rather than by the label on the factsheet.
Diversification remains misunderstood
Diversification featured heavily throughout the responses, although not always in the same context.
Some respondents argued that multi-asset funds are unfairly viewed as overly simplistic despite offering broad exposure across asset classes and geographies.
Others warned that investors can sometimes assume a multi-asset approach automatically guarantees effective diversification.
And several respondents highlighted the risk of what one described as a “diversification illusion”, where portfolios appear diversified but remain heavily influenced by similar underlying market exposures.
At the same time, some cautioned against assuming that adding multiple multi-asset funds together necessarily improves diversification.
If funds are managed in a similar way or hold comparable underlying exposures, the benefits can be less significant than expected.
The responses suggest that diversification remains one of the principal attractions of multi-asset investing, but also one of the areas most likely to be misunderstood.
Not always the default choice
A number of respondents suggested that multi-asset funds are sometimes overlooked in favour of model portfolio services.
Few argued against the merits of MPS solutions, but some questioned whether they are always the most appropriate answer for every client.
Several contributors commented that multi-asset funds can provide a straightforward, diversified solution at a competitive cost, particularly during the accumulation phase.
Others felt there remains a perception that more complex portfolio structures are inherently better, despite the fact that a well-managed multi-asset fund may achieve many of the same objectives.
Many also pointed to practical advantages, including simpler administration, fewer trading events and, in some cases, greater flexibility across different platforms and product wrappers.
The feedback suggests that the missed opportunity is not a lack of awareness of multi-asset funds, but rather a failure to fully explore where they may be the most suitable solution.
Cost and value continue to divide opinion
Cost was another area where views differed.
Some felt multi-asset funds are commonly perceived as expensive, while others argued they are often a cost-effective way of accessing professional asset allocation and ongoing management.
A number of paraplanners suggested that multi-asset funds can compare favourably with more complex portfolio structures once all layers of cost are taken into account.
Others questioned whether advisers should rely too heavily on a single fund solution while still charging ongoing advice fees.
These contrasting views underline a wider industry debate around implementation, value and the role advisers play in delivering ongoing outcomes for clients.
More than a “set and forget” solution
Another misconception identified was the idea that selecting a multi-asset fund removes the need for ongoing review.
While fund managers take responsibility for asset allocation and rebalancing, several paraplanners stressed that advisers still need to assess suitability, monitor outcomes and ensure portfolios remain aligned with clients’ objectives.
As one respondent said, “A multi-asset fund may simplify portfolio construction, but it does not remove the need to consider factors such as capacity for loss, time horizon and changing client circumstances.”
In other words, outsourcing investment management does not mean outsourcing advice.
Opportunities beyond accumulation
Respondents also highlighted areas where they believe multi-asset funds remain underutilised.
General Investment Accounts featured prominently, with several contributors citing tax efficiency and reduced trading activity as advantages when compared with some alternative approaches. Others pointed to their use in retirement planning, income generation and decumulation strategies.
The feedback echoes themes that emerged elsewhere in the survey, areas we noted in another Professional Paraplanner Parameters Survey article: Multi-asset funds remain firmly embedded – Professional Paraplanner
Tax management was identified as an increasingly important consideration when selecting investment solutions.
As firms continue to navigate a more complex tax environment, these practical benefits may become more significant.
A more balanced discussion
One of the clearest takeaways from the survey is that multi-asset funds merit a more balanced discussion than they sometimes receive.
Respondents described them as misunderstood, underrated and occasionally overlooked, yet the survey also showed they remain widely used across adviser firms.
Rather than viewing them as either a complete solution or an inferior alternative to other approaches, many respondents saw them as one option within a broader investment toolkit.
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