An important consideration for firms is how an MPS provider fits within its current technology stack, says Vaudry. “Is it available on your chosen platforms? Does it map to your preferred risk-profiling tools?
“Also, you need to understand if the MPS provider’s target clients mirror your own in terms of whether they are in the accumulation phase, at retirement or post-retirement, and their investment objectives; for instance income generating or sustainability.”
Indeed Jason Day, a senior investment manager in the discretionary team at Abrdn, says as clients become more aware of the impact of ESG, and new investors seek to invest sustainably and ethically, he is seeing greater acceptance of bespoke MPS models.
“MPS solutions have become a firm part of the investment landscape and a widely accepted way of outsourcing investment management,” says Day.
“However some advisory firms, while recognising the advantages that these solutions bring, are becoming more discerning with specific requirements and a need to work closely in partnership with their investment manager to deliver their client outcomes.”
Bespoke MPS
Bespoke MPS, as Day explains, look to provide a distinctive solution for the firm’s particular client base.
He says: “Specific mandate requirements that might require an asset management company to work in partnership with an advisory firm could include the level of income or capital growth required by the models.
“Cost may be a key factor, with a cap set by the adviser firm on the overall cost of the models, which may mean that the standard risk-targeted models available do not neatly fit, and so a fresh approach is needed to align the models to this pricing sensitivity."
According to Day, the adviser firm’s investment committee may also have restrictions in place on particular asset classes such as commodities or direct commercial property.
This means that the standard risk-targeted models offered by providers, in either a fund of funds or MPS format, are not appropriate, with a specific approach needed to construct a bespoke range of MPS models.
Chloe Cheung is a senior features writer at FTAdviser
