Managed portfolio services (MPS) grew by nearly a third in the past year, while the cost for clients continues to fall, according to a new report by NextWealth.
The MPS Proposition Comparison Report showed assets in discretionary model or MPS grew 28% in the last 12 months. Growth was buoyed by strong market conditions, the Consumer Duty, fee pressure and a focus from advisers on client-facing activities.
NextWealth said MPS asset growth in the year to 31 March 2024 outstripped the FTSE 250 and matched the S&P 500.
Tatton, Quilter Wealth and Timeline are set to emerge as the dominant players based on net asset growth, adding a combined £10.7 billion in assets in the last year. This compares to £14.4 billion asset growth for the entire rest of the market.
NextWealth said the findings of the report also revealed a continued shift towards passive.
Heather Hopkins, managing director of NextWealth, said: “We are able to quantify a 14% shift in the asset-weighted allocation from active to passive funds over the last 18 months. In the last year, 56% of DFMs have increased weighting to passive instruments while only three have increased their weighting to active. The average across the industry is also influenced by the strong growth from DFMs that invest solely in passive.”
The cost of owning an MPS has also continued to fall, largely due to continued downward pressure on the OCF. Over the past three years, the asset-weighted average total cost paid by the client has almost halved from 1% to 0.58%.
NextWealth said the level of assets flowing into lower cost portfolios, combined with some DFMs lowering their fees, have been the driving force behind the lower cost.
Hopkins added: “This year for the first time we have analysed the pricing of portfolios by the style of investment. Unsurprisingly, passive portfolios are significantly cheaper than active and hybrid portfolios. Hybrid portfolios have a similar cost to active, suggesting they are more akin to active than passive.”
The report also found that assets in sustainable portfolios grew slower than the wider MPS market. Assets in sustainable portfolios reached £11.2 billion, an increase of £1.6 billion in the past year, but falling as a share of overall assets to 9.1%.
