Are model portfolios worth the extra cost?

This article is part of
Guide to Discretionary Fund Management

Multi-asset vs model portfolio services

So which should clients opt for?

Greg Mullins, director of sales at Rathbone Unit Trust Management, says: “The question therefore of whether a multi-asset fund would be a more efficient or better solution has to be viewed in the context of what the investment will provide to the end-client versus an MPS.”

Mr Mullins adds: “Typically, over a multi-asset fund solution, an MPS will provide a greater range of risk profiles, look-through valuations and annual client tax packs.”

Mr Chan stresses that model portfolio services are less actively traded as new investments are made directly into underlying assets. 

He explains that this lowers any dealing charges, an advantage that model portfolios have over multi-asset funds.

Mr Chan adds: "Additionally, some of the other instruments above such as derivatives can be used as a “hedge” against volatility, however if markets are rising then you could be paying for derivatives that go unused, thus hindering the investment performance.”

“Model portfolios are a simpler form of investing and can often be viewed as much more streamlined for the reasons above, giving the potential for longer-term growth,” says Mr Chan. 

Mr Mullins says: “At the heart of this is making sure we always look at cost in relation to what the solution offers, and what the end-client actually wants."