Model portfolios that run on third-party platforms continue to gain popularity among financial advisers, allowing them to streamline their investment proposition and focus on delivering strong client outcomes.

The discretionary MPS market continues to show strong growth. Latest figures from NextWealth show that assets in discretionary MPS grew by 11% in the past six months, and 25% year-on-year. With this growth comes greater regulatory scrutiny, as demonstrated by the FCA’s announcement of a multi-firm review of model portfolio services in 2025.

With more advice firms outsourcing investment management to DFMs and increasing volumes of client assets moving into these solutions, it’s crucial for firms to conduct thorough due diligence on their MPS providers.

That was a key recommendation in our report: Keeping MPS Clients in Focus, produced in partnership with NextWealth.

In an ideal world, the only operational questions for financial advisers to ask when selecting or reviewing their MPS providers would be: 

  1. Which platforms are your models on?
  2. How frequently do you rebalance models (and why)?
  3. What reporting do you provide?

The reality is that financial advisers have a responsibility to kick the tyres hard enough when assessing their MPS partners to understand the impact of operational issues, especially where an MPS is run across multiple platforms.

This is a real challenge especially for smaller advice firms that are unlikely to have the time or resources to research and examine the operational capabilities of their DFM partners in detail. Particularly when the data to make an informed decision are not readily available.

We welcome the publication of NextWealth and Quilter's latest guide for financial advisers: Making sure your MPS partner is the right choice, which provides a detailed and actionable framework for MPS due diligence with insights from fellow advisers.

One adviser highlighted the importance of understanding operational risks:

If the provider has a manual ‘four-eyes’ process, how many people are in that team? What happens if they’re sick? What are the back-up solutions? These are the bits that trip advice firms up. It’s never the financial resilience, never the fees, and rarely the performance. It’s the operational side of it.

Another adviser noted that discrepancies across platforms are often first identified by paraplanners or administrators when preparing reports, valuation statements or benchmarking exercises:

Quite often it’s the admin teams or paraplanners preparing annual reviews who spot issues. They’re the ones who realise something doesn’t look quite right on the valuation we’ve produced versus what we’ve cross-referenced. Or they might see a client on one platform with the same MPS as another client on a different platform – but with different results. The key question then is: why are they different.

To address these concerns, advice firms need to ask detailed questions of their MPS providers around topics such as: 

  1. Operational consistency: When a model is run across multiple platforms, are there differences in how it’s managed? Does the time taken to rebalance models vary?
  2. Automation versus manual processes: Are model updates and edits automated, or do they rely on manual inputs? If the latter, how is the risk of human error mitigated?
  3. Rebalancing risks: How does the provider ensure that all of an adviser's clients successfully complete a rebalance? If some clients fail, how quickly is this resolved, and how long might they be out of position?
  4. Reporting and oversight: What reporting is available to track client positions and minimise CGT charges or additional transaction costs?

These questions should not only be asked at the outset of a relationship but revisited regularly to ensure that the service provided continues to meet client needs.

Moving towards greater consistency

Some DFMs and platforms have invested heavily in operational capability, while others have prioritised resources elsewhere. The reality is that without industry-wide standards, processes will continue to vary. 71% of advisers surveyed by NextWealth for their latest report agree that industry standards to govern the management of MPS would support better client outcomes.

As one DFM interviewed by NextWealth put it, 

Processes for managing MPS across multiple platforms just weren't built for the world we now find ourselves in.

While that may be true, new solutions do exist. Last year, we published a set of data and technical standards designed to bring more transparency and consistency to MPS processes.

We hope that greater industry adoption of these standards will support advisers in conducting effective due diligence. If a DFM and platform have signed up to the standards, advisers can take that as a sign of commitment to operational efficiency-helping to iron out discrepancies and delivering more consistent outcomes for clients.