Nearly three-quarters (72%) of MPS due diligence exercises ranked ‘Target Market’ as the most crucial factor for MPS selection in 2024, new data from the lang cat has revealed.
Analysis of its Analyser MPS software over the past 12 months showed that while fees are a vital aspect of selection, other factors such as product design and client suitability all feature heavily for advisers, with suitability factors accounting for seven of the top 10 most important selection criteria.
The lang cat said Underlying Ongoing Charge was the second most important feature (67%), followed by Negative Target Market (66%), Retail (65%) and Minimum Investment Criteria (58%).
Meanwhile, 58% of advisers ranked Asset Allocation Strategy as the most important feature, while 57% considered MPS Charge/Management Fee as the most important, followed by Link to VFM Assessment/Statements (55%), Unique Selling Point (51%) and Objectives of Range (50%).
The lang cat said the findings suggest that Consumer Duty is having a considerable influence on adviser practice, ensuring that target client suitability is being taken seriously when it comes to panel product selections.
Terry Huddart, digital director at the lang cat, said: “There’s an open debate around whether the MPS sector has become commoditised on cost and performance but this is not what we are seeing. It’s natural to think that, with so many to choose from, cost and performance would be the path of least resistance. It’s great to see that advisers are thinking beyond just those aspects and focusing on the vital factors of their own firm’s investment philosophy and target client definitions.”
Huddart said performance is not represented in the data as it comes from the proposition feature screening phase of the process. Instead, it comes towards the end and is looked at in 100% of due diligence exercises, he said.
“As vital as assessing past and ongoing performance is, we’d challenge much of the commentary seen around it. Performance is a combination of returns and volatility, which also speaks to overall client suitability in terms of life stage and attitude to risk among several other factors,” Huddart added.
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