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Are MPS solutions doing enough to comply with Consumer Duty?

2026-01-15

Tom Whateley

Tom Whateley

Associate Director, Customised Portfolio Solutions Sales




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Key Takeaways:

  • The The Financial Conduct Authority (FCA) is closely examining Model Portfolio Services (MPS) to ensure they deliver good consumer outcomes under Consumer Duty rules
  • Low headline fees don’t guarantee value. Platform charges, rebalancing costs, and operational inefficiencies must also be considered
  • Adopting a unitised or partially unitised MPS structure can reduce costs, streamline operations, and better align with regulatory expectations

MPS – a potentially simple and cost-effective way to distribute a centrally defined portfolio to retail investors – has grown significantly within the wealth management industry in recent years. MPS now total approximately £300 billion in assets.1

Yet, with this market dominance comes greater regulatory oversight. In 2025, the Financial Conduct Authority (FCA) published a letter outlining its priorities with a focus on MPS solutions, especially in the context of Consumer Duty.  The FCA aims to ensure that investors can confidently achieve good outcomes: yet, with MPS solutions varying widely, will all firms be able to demonstrate this?

Cost & Efficiency

While low cost does not always equal good value, it is certainly a key component. When considering costs to a retail investor, it is important to consider operational costs as well as management fees. Investing in funds via a retail platform will have various layers of fees and costs. These platform-related fees include fund trading charges, anti-dilution levies, in addition to the inherent costs of selling to cash and reinvesting. 

Within the portfolio itself, ongoing costs associated with a multi-manager portfolio can also add up. To ensure truly good value, we believe all these elements must be considered and minimised as far as possible. 

Operational Risk

Operational efficiency not only requires resource from the MPS provider but also has a significant risk factor associated with it. Analysis by consultancy firm NextWealth reveals that discretionary wealth managers (DFMs) and advisers can spend up to 100 hours a month rebalancing client portfolios.  This manual process is clearly a drag for DFMs and adviser firms and has the potential to cause significant financial loss if a mistake occurs.2

A key question for wealth managers is whether this rebalancing requirement can be reduced or even eliminated?

Unitise Your Portfolio

We believe the key to complying with Consumer Duty lies in reducing costs and operational risks through a unitised, or partially unitised, MPS solution. 

Typically, MPS solutions are multi-asset portfolios targeting specific risk ratings. Risk levels are achieved by adjusting allocations to higher- and lower-risk asset classes. However, the specific investments within each asset class often remain consistent across risk ratings. For example, while a lower-risk portfolio may have less equity exposure, the equity strategies are likely to be the same or very similar to the larger allocation in a higher risk portfolio.

As a result, investments can be consolidated into "building blocks," (e.g. Equity, Fixed Income, Alternatives). Instead of constructing a portfolio with 20–30 individual funds, a unitised MPS solution can allocate to as few as two – or more typically, four to five building block funds.

Building Blocks Benefits

These building block funds will still follow the third-party, active and passive investment strategies but by consolidating within a fund structure there are various benefits:

  • Efficiency: Multi-manager investment portfolios have the potential to be inefficient. By investing in a single account based on models rather than multiple funds, it can lead to significant turnover reductions and cost savings.
  • Operational simplification: Unitisation reduces the need for frequent MPS rebalancing and portfolio changes can be made within the building block funds at any time. This eases operational burdens, lowers platform fees, and mitigates risk. It also has the potential to enhance Capital Gains Tax efficiency.
  • Customisation: Within the building blocks investment models can be provided by managers, retail or institutional, from anywhere in the world. Systematic and bespoke passive strategies can be implemented to reduce cost and custom exclusions or overlays can be utilised to orient portfolios to investment preferences or desired outcomes. 
  • Reducing manager costs: In our experience, the fee for an investment model is typically lower than that of an investment mandate, which, in turn, can be more cost-effective than investing in a fund (even after significant Annual Management Charge rebates). 

The Bottom Line

With MPS solutions under FCA review, firms must demonstrate how they meet Consumer Duty and deliver positive outcomes to investors. A unitised ‘building block’ approach can help by streamlining operations, reducing costs, and enhancing investor value.

Those that adapt won’t just stay compliant, they’ll strengthen their offering and position themselves for long-term success.

Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.

1. Source: moneymarketing, Model portfolios projected to grow to £554bn by 2028, January 2024

2. Source: CityWire, MPS rebalancing can take 100 hours, stressed DFM insiders reveal, June 2024

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