NextWealth’s latest MPS Proposition Comparison Report reveals that assets in discretionary MPS grew 12% in the year to 30 September compared to a 9% growth rate for adviser platforms over the same period.

At the same time the average price paid by end clients of MPS fell again to 0.60%, down from 0.67% in 2022 and 1% in 2021.

Managed (or Model) Portfolio Services are used mainly by investment advisers to keep investment costs down and to access 'off the peg' portfolios for clients.

Heather Hopkins, managing director of NextWealth, said: “This increase (in MPS assets) suggests that while the overall market pie expanded by 9%, discretionary MPS has managed to secure a larger slice, outperforming the broader adviser platform market.

“It highlights that discretionary MPS remains a strategic growth driver within the wealth management sector.”

She said there were potentially significant benefits for clients.

She said: “They now pay an average of 0.4% less on an asset-weighted basis for discretionary MPS than they did in 2021. DFMs (Discretionary Fund Managers) that charge less are growing assets more rapidly, a similar trend to last year.

“Firms charging a combined MPS fee and OCF of less than 0.8% grew by an average of 8% in the year to Q3 2023. This compares to negative growth for those charging 0.8% to 1% and 1% growth for those with charges over 1%.”

The report found that the average OCF has fallen by 35 bps in the past three years to 40 bps (on an asset-weighted basis).

Ms Hopkins added: “Some firms are using a fettered fund range or an allocation to in-house products to bring down fund charges. Surprisingly, we did not see a shift away from active funds this year. There has been a 1.9% increase in allocation to active.”

While the market size has grown, the number of DFMs that advisers work with continues to fall, says NextWealth, and this trend has accelerated with the Consumer Duty. Advisers work with an average of 1.7 DFMs, down from 2.2 last year.

Among other trends NextWealth found that financial advice firms were focusing more on planning than managing investments in-house and younger planners, in particularly, were more willing to outsource investments. The Consumer Duty is also nudging the market towards outsourcing and DFMs are being squeezed on price.

• NextWealth’s latest MPS Proposition Comparison Report