Isio: FCA review should drive higher standards in the growing MPS market

Daniel Nilsson, Senior Portfolio Manager at Isio Investment Management, comments on the FCA’s ongoing review of the Model Portfolio Service (MPS) market: “As the FCA’s review of the Model Portfolio Service (MPS) market continues, the focus on governance, oversight, value for money and investment propositions has become increasingly important. With the sector growing rapidly in recent years, greater scrutiny in these areas is both appropriate and necessary, particularly as advisers seek to demonstrate that the solutions they recommend are delivering good outcomes for clients.

“Scale, longevity and brand recognition should not be treated as substitutes for a robust investment process. The strongest MPS providers will be those that can clearly demonstrate how decisions are made, who is accountable for them and how portfolios are monitored and challenged over time. Advisers should expect evidence-based portfolio construction, formal governance structures and a clearly articulated investment philosophy, rather than relying on broad claims about performance or diversification.

“More consistent guidance on performance reporting and benchmarking would also be a positive development. Advisers need to be able to compare propositions on a meaningful basis, understand the risks being taken and assess whether investors are receiving genuine value after fees. Greater transparency should make it easier to distinguish between providers that have embedded governance throughout their investment process and those treating it primarily as a compliance exercise.

“Ultimately, the FCA review should encourage the MPS industry to move beyond product-led competition and focus more closely on the quality of investment decision-making. Providers that combine strong governance, transparent reporting and institutional-quality portfolio oversight will be best placed to support advisers and deliver better long-term outcomes for investors.”

Institutional portfolio construction

At Isio, our MPS range has been built by applying the same institutional investment disciplines we have developed through advising some of the UK’s largest pension schemes and institutional investors. Our investment philosophy is centred on evidence-based decision making, robust governance and disciplined portfolio construction. We believe advisers should expect clear accountability from MPS providers, strong governance structures and a well-defined investment philosophy – principles that sit at the heart of our approach.