Consumer outcomes should not be dictated by operational issues with model portfolios on platforms, such as disjointed and manual processes, according to Julie Best, qualitative researcher at NextWealth.
NextWealth's latest report, ‘Keeping MPS clients in focus’, conducted in partnership with Criterion, looked at how the management of MPS on platforms is not able to keep up with an increase in demand from advisers.
The COO of a DFM interviewed for NextWealth’s report said: “Nobody knew that MPS was going to become what it has become. Everything has pushed more IFAs towards it. We have processes that were not designed to cope with the world we are now in.”
Best pointed out that assets in MPS have “exploded” in recent years.
Best added: “There’s been enormous growth in assets going into MPS and that will only continue.
“Unfortunately, the current processes are just too heavily reliant on manual checking, manual uploading, and discretionary fund managers employing analysts.”
Friction
Best argued this increase in assets has led to difficulty in the MPS market.
“The amount of work and friction of working with different DFMs and different platforms is defining what advisers and what DFMs feel they can manage,” she explained.
“The world that we would like to be in post-consumer duty is where everyone understands what their consumer segments are and how different types of clients experience the standards they receive from the advice firm.
“However, at the minute, adding more providers and more partners to the client matrix is complicated and full of friction.”
She added that given the responsibility sits with advisers with the solutions they’re recommending to clients, “we want to help them understand how to gauge the operational robustness and resilience of the partners they’re using."
Recommendations
The report made some suggestions of due diligence questions for advisers to ask MPS providers.
Best said: “We’ve outlined potential solutions to this issue and obstacles to embedding those solutions.
The report outlined three levels of recommendations - gold, silver and bronze - each offering differing ease of implementation and effectiveness.
“Our gold standard would be that existing tech is reconfigured to support the industry standards that Criterion are creating and that all parties in the chain adhere to those standards so there’s a universal data standard,” Best explained.
“The technology to do that exists and the challenge is building awareness of what currently happens and that, if you have the client in the room, we’re not delivering as an industry what we can for clients.
“That’s our gold standard but even with some of the industry adopting standards that’s still going to reduce that time and cost and friction.”
Criterion Tec Limited managing director, Billy Burnside, added: “This range of recommendations reflects the capability in the market today.
“We know from a long experience that not every platform, not every DFM has the same technical capabilities to build these types of integrations where the gold standard would come into play.
