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A report from research house Platforum has found its way into our inbox, revealing that MPS fees have generally been falling, particularly in the active MPS space.

The report found the median price for active MPS has fallen by 2.8bps over the past year. 

The fees on passive MPS, an area which, if our inbox is anything to go by, is experiencing a flood of product supply right now, have been flat.

Perhaps the marmalade-dropper in the report is that the fees charged by sustainable MPS providers have dropped by 5bps in a year.

The latter might simply be a function of the market for ESG fund products expanding so rapidly that the supply of new products has naturally exceeded even any robust level of demand, with the consequence that prices have fallen.

The research paper said that on the plus side, asset growth remained strong. On the minus side, MPS was growing into a crowded market and was highly scalable – which would drive aggressive competition on cost.

This means wealth managers will look at other differentiating factors, beyond price, to avoid a race to the bottom on fees - which can be a fickle game to play.

On top of this, wealth managers operate in a market which is intermediated by platforms and dependent on them for distribution.

Richard Bradley, research director at Platforum, says the price compression happening in the active MPS space was a function both of new entrants arriving in the market with a lower price point, and existing providers trimming their own fees. 

James Sullivan, who runs model portfolios through Tyndall, said the next iteration of MPS growth would come as firms choose "more bespoke, less of the shelf" solutions for their MPS in future.

He feels that smaller MPS firms can never hope to compete on price with the behemoths of the industry, but that one way they can compete is "to make the adviser part of the investment process, and that way it is less off the shelf".

"Some advisers will always want that, and that's fine, but I think there is growth in the more bespoke end of the market."

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