LONDON (3 APRIL 2025) – Model portfolios continued to dominate sales in the UK financial adviser channel during the second half of 2024, a new report from ISS Market Intelligence (ISS MI) reveals.
Total multi-asset net sales continue to be robust in an otherwise muted retail investment sales environment, rising from £6.9bn to £7.1bn over H2 2024. Model portfolios accounted for nearly all of the growth, as multi-asset funds sold outside of model portfolio sales (MPS) programs essentially broke even on flows.
The weak spot remained adviser managed solutions, signaling a continuing shift by independent financial advisors (IFAs) to formalised multi-asset programs. Fund outflows through adviser managed solutions totaled £4.3bn in the first half of the year and £3.3bn in the second half.
Benjamin Reed-Hurwitz, EMEA Research Leader at ISS MI and lead author of the report commented: “MPS remains at the fore of a broader shift to centralised investment propositions. What’s striking about the growth of MPS is how much it’s been driven by power users, with only about a quarter of today’s IFAs accounting for the majority of today’s MPS sales. With many MPS users yet to incorporate the solution across their broader practice, the question of whether we have hit peak MPS remains very much open.”
“Within MPS, the third-party MPS managers won the lion’s share of the net flows. Even though there is a consistent in-sourcing movement, the outsourcers are still winning the majority of the business and continue to be the driver of MPS in asset accumulation terms.”
The other notable trend was the growing dominance of blended portfolio solutions across all multi-asset solutions sales. Around half of all IFAs implement an MPS and multi-asset fund sales mix that blends active and passive funds to a meaningful degree. These firms accounted for 86 percent and 62 percent of all MPS and multi-asset fund sales, respectively.
Reed-Hurwitz adds: “In today’s cost-conscious environment, IFAs are opting to take a balanced approach to investing. Interestingly, this is occurring through both the selection of balanced solutions and through the blending of actively and passively oriented solutions. Asset managers are increasingly evolving their distribution conversations away from active versus passive and more to active and passive. There remains plenty of opportunity for all strategy types to succeed.”
Only adviser managed options show a marked preference for active, but even here, there is a shift. Reed-Hurwitz adds: “The growth in MPS and the shift of these fund selectors to blended solutions has been a contributing factor to the surge in passive investing in the UK. It is interesting to note that adviser managed portfolios are picking up on the trend. Even against a tide of money coming out of adviser managed solutions, passive funds still experienced positive flows. Rebalancing towards tomorrow’s blended portfolio is being observed across the sector.”
This data comes from ISS MI’s latest research, “Portfolio Construction Uncovered: Insights from the frontline of UK Retail Advice.” The report draws on adviser platform and funds-of-funds investment data to unpack model portfolio, multi asset market and adviser managed structures, trends and opportunities at the solutions and portfolio level.
As part of this, ISS MI analysed the best-selling third party fund managers through MPS and multi-asset by six-month model gross sales in the UK. The five best-selling third-party managers within MPS providers for the six months ending 31 December 2024 were found to be:
- BlackRock Investment Management
- Vanguard Asset Management
- Legal & General Investment Management
- Fidelity International
- Quilter Investors
The best-selling third-party fund managers within platform sold multi-asset funds-of-funds programs, by AUM at December 2024, were:
- BlackRock Investment Management
- Vanguard Asset Management
- HSBC
- Invesco
- Amundi
The best-selling third-party fund managers within the adviser managed space were:
- Fidelity International
- Vanguard Asset Management
- BlackRock Investment Management
- Dimensional Fund Advisors
- Legal & General Investment Management
Reed-Hurwitz concludes “Multi-asset solution providers have become the dominant fund selectors in the channel. The question is how much further their presence will grow. Even though the net sales picture is very positive, particularly for MPS, eventually that will taper if a greater share of new sales is not captured.”
To learn more about ISS MI’s Model Portfolio Service Report, visit https://www.issmarketintelligence.com/solutions/marketsage/uk-retail-advice-report
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