Defaqto has introduced a tool which compares the performance of model portfolio services.
The software company's MPS Comparator will allow advisers to assess portfolio performance and compare an MPS portfolio's metrics to the average of those that have similar characteristics in relation to volatility and asset allocation.
John Milliken, CEO at Defaqto, said: “Our new service is set to be a game-changer for MPS. This is another example of how we’re supporting advisers and their clients to make smarter financial decisions, helping improve adviser efficiency when assessing value and addressing regulatory obligations."
The tool will also offer providers competitor insight and allow them to differentiate their offerings from others in the field.
Defaqto calculated MPS assets under management grew to £85.5bn at the end of 2023 compared with £73.4bn the previous year - an increase of almost 14 per cent.
The company claims this has made it difficult for advisers to find the most suitable products for their clients and providers have not been easily able to differentiate their offerings from lower-performing alternatives.
Andy Parsons, insight manager for investments at Defaqto, said: “With MPS Comparator, we’re enabling smarter distribution. Currently, DFM asset managers choose between Investment Association sectors, CPI + or other industry indices to compare their MPS portfolios against.
"These don’t provide an appropriate comparison when assessing, comparing, and showcasing the performance of a portfolio. From a consumer duty perspective, advisers and clients could be misled in terms of performance comparison."
Defaqto’s DFM coverage spans more than 120 DFMs and around 2,700 portfolios, providing data such as performance, fees, and asset allocation.
Alongside the launch, Defaqto said it was updating MPS performance data monthly.
The Defaqto MPS Comparator is now available for advisers and providers and it will be available in Defaqto Engage soon with further developments expected to be phased in during 2024.
tara.o'connor@ft.com
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