The “rapid” decline in model portfolio service fees has slowed, remaining flat over the past six months, a new report from NextWealth has found.
NextWealth’s bi-annual MPS tracking study showed the average total cost fell only 4 bps in the past 12 months. Between 2021 and 2024, the asset weighted average total cost – MPS fee plus ongoing charges figure – paid by the client almost halved from 1% to 0.54%.
Heather Hopkins, managing director of NextWealth, said: “We’re calling the bottom on fees. While over recent years we’ve reported on the rapid decline in fees, mainly due to a higher allocation to passive tracker funds, downward pressure seems to have eased.
“We think fees have bottomed out and will remain stable over the next two to three years.”
The report finds that a key response to fee pressure among DFMs has been the increased use of passives, caused by growth in low-cost tracker portfolios and use of passive funds in hybrid portfolios. However, the latest set of data revealed the shift to passive has plateaued, with assets in passives dipping slightly to 42% as some fully active DFMs have experienced strong asset growth.
Separately, the report showed that strong growth in discretionary MPS has continued. Assets in discretionary MPS grew 11% in the past six months and 25% in the past year, while underlying platform assets grew just 5.3% in the same year on year period.
The market for discretionary on-platform MPS has grown £15 billion since the end of September, reinforcing strong continued growth.
Hopkins said: “The market for discretionary MPS continues to grow, with assets growing faster than underlying platform assets. We are not just seeing strong growth but a continued shift in assets. Within the pie that MPS is operating in, it continues to take a bigger slice.”
Meanwhile, NextWealth said the top five DFMs by net asset growth in the past six months were Quilter Wealth Select, Tatton, Timeline, Omnis and Brooks Macdonald. The top five by percentage growth were Blackfinch, Marlborough, Aspen, LGIM and Omnis.
Quilter Wealth Select and Tatton continued to dominate, representing a quarter of all market assets, the firm said.
Hopkins added: “While Quilter Wealth Select and Tatton continue to capture an outsized share of assets in discretionary MPS, the market remains vibrant and competitive. Firms with different business models and different pricing structures continue to experience strong growth.
“Among the fastest growing firms are service-led firms, low-cost passive providers, vertically integrated wealth managers and firms offering a higher-cost active solution. This points to a healthy and competitive market.”
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