Model portfolio interest ‘may have passed’

Adviser interest in outsourced model portfolio solutions might be past its peak, according to one investment manager.

James Goward, IFA development manager at Rathbone, told Money Management that this is likely down to increased regulatory scrutiny.

“We feel that perhaps the heightened appetite for the use of model portfolio services may have passed,” he said.

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“With the regulator’s increased focus on individual client suitability, a one-size-fits-all solution aimed at a large chunk of an adviser’s client book does not seem to fit with this.”

Mr Goward said that despite the raft of solutions launched by discretionary fund managers (DFMs) – with recent releases including the Thomas Miller DFM model portfolios and Evercore PanAsset model portfolios – the volume of assets sitting in such solutions across the industry is probably not as high as anticipated.

“Many DFMs were quick to product model portfolio service solutions but several will report actual funds under management in such arrangements as being relatively modest.”

According to the latest Money Management survey of DFMs, there is a wide range of model portfolios available from investment managers. While some offer none at all, Arbuthnot Latham offers 40 and Parmenion lists 60. More common, however, is a suite of five to 10 model portfolios.

Some managers are concerned at how advisers might approach the use of model portfolios.

“There are concerns that the recent increased popularity of DFMs is due to clients being directed down the model portfolio route for administrative ease and as a proxy for a specialist bespoke solution,” said Joanne May, marketing manager at Brooks Macdonald.

“Model portfolios cannot supplant the creation of a truly bespoke portfolio for clients over £200,000.”