A major challenge for any successful sector, industry or business is to continue expanding without losing the qualities that enabled that growth in the first place. The development of platforms and model portfolio services (MPS) increasingly provides a notable example says Mike Phillips, Commercial Director at Novia Global.
In recent years, there have been numerous worthwhile attempts to examine the rapidly evolving platform-MPS nexus. Most of them – or at least those that have attracted significant attention – have portrayed a system under increasing pressure.
For example, a key conclusion of a report published in late 2024 was that the entire system could come under severe strain as a result of rising administrative burdens, intense competition and concerns about value[1]. The outlook was far from encouraging.
Similarly, a survey conducted earlier this year found that many advisers remain concerned about a range of platform-MPS challenges. These include tax complexities, workflow limitations, account restrictions, transaction speeds, client communications and, once again, costs[2].
Despite these widespread concerns, the platform-MPS nexus continues to expand. However, it does not necessarily follow that the weaknesses and shortcomings that have emerged over time must worsen at the same pace.
There are likely to be ways of addressing these issues so that the respective strengths of platforms and MPS – rather than their combined weaknesses – once again come to the fore. A useful starting point may be to understand precisely what each party expects from the other.
What does a platform expect from an MPS?
Two considerations typically arise first when a platform is assessing an MPS. The first is performance. The second, reflecting a theme that runs throughout the research cited above, is cost.
It can be easy to be overly influenced by performance figures that highlight striking peaks amid short-term volatility. A platform is more likely to value evidence of steady, dependable returns over time.
Similarly, costs are generally more attractive when they avoid extremes. Charges that are conspicuously high almost invariably cause concern, while those that are unusually low may prompt doubts about credibility and long-term viability.
Beyond the right numbers, what else do platforms look for?
In our experience, what matters most is the prospect of genuine alignment. There must be a shared willingness to work closely, collaborate effectively and co-create positive outcomes for all stakeholders.
Partnerships in name alone are unlikely to be effective. The relationship must be grounded in a mutual commitment to addressing unmet needs and providing advisers and clients with what they require – a point to which we will return shortly.
What does an MPS expect from a platform?
In light of the above, it is reasonable to assume that an MPS also seeks the same commitment to openness and cooperation in a platform partner. Crucially, however, it also seeks technology in which it can have confidence.
This is not as straightforward as it may appear. Many of the problems that have come to affect the platform-MPS nexus, including the perceived risk of systemic failure, are rooted in inadequate technology.
These issues arguably began to emerge more than a decade ago, when the Retail Distribution Review led to a significant increase in advisers’ use of outsourced investment solutions. Many platforms have struggled to respond to the resulting demand for enhanced functionality.
In some cases, the result has been a problematic accumulation of legacy infrastructure. As a source of both operational stress and risk, this patchwork of outdated technologies can undermine processes by steadily introducing further inefficiencies.
Conversely, a platform may also move too far ahead of the curve. Many purported innovations ultimately prove to be untested, poorly conceived or both.
Ideally, an MPS seeks a platform that can clearly demonstrate the benefits of sustained investment and adaptation. In the effort to keep pace with continuing digitisation, an appropriate balance between progress and prudence represents the most effective course.
What do advisers and clients expect from the platform-MPS nexus?
There is, of course, another critical consideration here – one that in many respects outweighs the others. Ultimately, what advisers and clients expect from platforms and MPS providers is the decisive factor.
This brings us back to the starting point. What were the qualities that originally made both platforms and MPS successful and that may, to some degree, have been diminished over time?
The answer may lie in articulating the fundamental purpose of this work. Put simply, the task is to safeguard people’s money, preserve it, grow it and ultimately return it to them.
This is not to suggest that platforms and MPS providers no longer pursue this objective. However, its importance may at times have been overshadowed by the market “noise” that tends to accompany a crowded sector.
Like any sector, industry or business that experiences sustained growth, the platform-MPS nexus has become increasingly burdened by elements that are superfluous or unnecessary. This may be a natural consequence of expansion, but that does not make it beneficial.
If the focus remains firmly on providing stakeholders with what they genuinely need, the outlook should remain positive. Looking ahead, the sector may benefit from devoting more attention to getting the fundamentals right and less to promoting features whose value is ultimately superficial.
Sources:
[1] See, for example, Equisoft: Transforming Investment Management: The Rise and Risks of Model Portfolio Services, 2024 – https://www.equisoft.com/insights/investment/transforming-investment-management-the-rise-and-risks-of-model-portfolio-services.
[2] See, for example, Morningstar Wealth: Unlocking the Next Phase of MPS Growth, 2026 – https://mp-morningstar.com/morningstar-langcat-report.
