Lifting the veil of opacity

As the FCA’s recent interim platform market study dropped onto our desks with only the lightest of thuds on Monday, not only did we welcome the relative brevity, but our hearts were swelled as the regulator laid out some of its thoughts on model portfolios. Echoing our calls for greater consistency and transparency in their reporting, it seems we may now be faced with the opportunity to lift the veil of opacity currently shrouding the world of model portfolios.

For as long as most of us have been in the industry, investors in funds – the more grown up cousin of MPS – have had access to a reasonably well organised set of performance figures upon which to undertake some due diligence. For some of us, our introduction to these numbers will have been via the back pages of the industry press publications. For the more fresh-faced, the use of Morningstar, Lipper or something similar will have provided a more navigable set of data to manage and manipulate.

So, why can’t the same be said for model portfolio services, where currently access to data is patchy, inconsistent, poorly collated and, worse still, probably etched onto the modern-day equivalent of a stone tablet - the pdf factsheet document? For a sector of the market with over £50bn of customer assets1 (and growing) invested in it, surely as an industry we can do better than this.

On performance numbers, at the minimum, we call on all providers to make model portfolio numbers available as a daily downloadable dataset (we’re working on this as you’re reading), with the performance numbers shown net of fees. I’m sorry, but the ‘but it depends what platform you’re on’ excuse doesn’t wash anymore. And that’s just a first step.

For those that care to join us, we’re calling on the industry to come together to create performance measurement standards for MPS. Not only for model portfolios, but also for dispersion of customer outcomes. We believe the data should be freely available to the public, the press, students and, of course, advisers and investors. Let the sun shine on our industry and provide the advice community with a valuable tool for assessing the market.

As advocates of choice, if the MPS world is to provide an alternative for advisers to the multi-asset/multi-manager fund market, it must surely be time for the providers of MPS portfolios to step up and put the two products on a more equal footing. Are you with us?

1FCA Investment Platforms Market Study Interim Report

Managing Director, AJ Bell Investments

Kevin began his career in the financial services industry as an Investment Analyst, eventually progressing to become Chief Investment Officer at a major private bank. He then took on the position of Group Head of Research & Strategy for a Luxembourg-based private banking group, before moving into a number of consultant roles for various investment management and banking businesses. In October 2017 he joined AJ Bell Investments as Managing Director and CIO.

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