The Impact of MPS on Client Outcomes: Enhancing Financial Planning and Investment Strategies

Managed Portfolio Services (MPS) have become an integral tool for financial advisers aiming to enhance client outcomes through professionally managed, diversified portfolios. However, better outcomes are not guaranteed. With a proliferation of MPS options available and greater regulatory scrutiny on MPS solutions, how can advisers ensure that their MPS provider will deliver what they expect?

The theory behind adoption of MPS is clear: it delivers access to experienced portfolio managers who employ sophisticated investment strategies to optimise returns and manage risks. Unlike advisers, who have practices to run and clients to manage, these experts are focused exclusively on investment management. This should create better, more resilient portfolios that can adapt to changing market conditions.

However, this isn’t always the case. The popularity of MPS – and the well-documented problems of implementing MPS on platforms – has created some commoditisation in the sector. Advisers may struggle to differentiate between providers that appear to offer similar solutions, with a handful of funds appearing within multiple solutions.

What to look for in a good MPS Provider?

If advisers are looking for a true, long-term partnership, they need to seek out certain elements in an MPS provider. The first, and perhaps most important, is that the MPS provider does, in fact, deliver a better outcome. Initially, this was difficult to assess, with comparative performance data elusive. That has been rectified, and advisers now have a broad choice of analytics providers that can show whether MPS providers are delivering better outcomes for clients.

Advisers also need to look at the resources MPS providers have available to them. Is the MPS powered by an algorithm? Or is it supported by a real depth of resources and expertise? At Charles Stanley, we dynamically review our strategic asset allocation every month to ensure our portfolios are appropriately positioned to optimise performance in today’s changing market conditions. MPS providers with deeper resources are better able to monitor and adjust portfolios to capitalise on market opportunities or mitigate market risks.

Customisation

For some advisers, an off-the-shelf standard MPS will not meet the needs of their clients or their advice proposition. This is where a customised MPS range will be attractive. There are a number of benefits derived from creating a customised MPS proposition with a DFM/MPS provider and they come in the shape of; investment process aligned to your advice proposition, cost efficiency for clients with AMC/OCF caps, enrichment of your own brand through a range of regular client communications that give your clients the information they need at a time when they need it and many other.

There have been some well-documented problems with the implementation of MPS on platforms. While we do not underestimate the problem, we are clear that this shouldn’t impinge on the asset selection we make for clients. There is a danger that portfolios narrow down on a small range of readily available funds. We manage the implementation on platforms and ensure that the platform tail does not wag the investment dog.

Advisers need to look at whether an MPS provider allows them to select portfolios that align with their clients’ specific needs and goals, be that through passive, blended, active, or responsible instruments. Is the MPS provider offering the flexibility an adviser needs?

Diversification

While it has become easier to assess the performance of different MPS strategies as more analytics tools have come into the market, analysing whether an MPS portfolio is adequately diversified is less straightforward. As Warren Buffett once said ‘only when the tide goes out do you see who is swimming naked’ – while the tide is still in, it can be difficult to judge the efficacy of a diversification strategy.

Diversification is a cornerstone of Charles Stanley's MPS ranges. Our portfolios are constructed to include a mix of asset classes, sectors, and regions, ensuring we can take advantage of investment opportunities wherever they may present themselves. Importantly, the depth of our investment team means we can look broadly for diversification strategies and look at a more nuanced range of risks – such as interest rate exposure.

The key for advisers is to look at how an MPS strategy has performed in a range of market environments. If it claims to offer diversification, has it protected client assets during periods of stock market volatility? Properly diversified portfolios, managed with a robust investment process, should ensure clients receive a predictable experience and an outcome that meets their expectations.

Managed Portfolio Services can significantly enhance client outcomes by providing professionally managed, diversified portfolios tailored to meet specific needs and goals. However, this is not a given with all solutions in the market and advisers need to ensure that their MPS Partner always delivers in line with their clients’ objectives.

Contact us to find out more