Bespoke investment portfolios are growing in popularity, according to a new study.
Bespoke portfolios, built by advice firms in partnership with a discretionary fund manager and designed around their own client base, are now being used by 8% of financial advice firms, according to research from DFM Copia Capital Management.
The bespoke models are most popular with larger advisers, with almost a quarter (23%) of firms with assets under management of £500m to £999m using them.
Two in five (42%) of 182 advisers surveyed by the DFM expect bespoke models to form part of their investment proposition within 10 years.
Gary Stirrup, director of sales at Copia, said: “For a long time the choice was framed as in-house or outsourced, with bespoke sitting somewhere in the middle as a niche option. The high number of firms expecting to use bespoke in the next few years shows this is changing.
"Firms increasingly want a partnership approach where advisers can work closely with a discretionary fund manager to build bespoke solutions aligned to their own investment philosophy, target market and client needs. It gives them the discipline and resource of a DFM while keeping their own thinking at the centre of how portfolios are built.”
Outsourced managed portfolio services (MPS) continue to be the dominant model for central investment propositions, with 63% of advice firms predominantly using them in comparison to 23% mostly managing portfolios in-house. This compares with 51% of firms who mainly managed portfolios in-house in Copia’s first CIP report in 2022.
The move away from in-house management has been driven by growing governance and operational demands. Almost nine out of ten (87%) firms now have a documented CIP policy, three-quarters (74%) operate a formal ongoing monitoring process for their CIP and 66% have documented provider due diligence frameworks in place.
Oversight requirements are also creating a growing operational burden for firms, with more than a quarter of CIP management time (28%) spent on ongoing monitoring.
• The financial consultancy TheLangCat surveyed 182 financial advisers on behalf of Copia in the first quarter of the year.