Managing portfolios no longer a ‘binary choice’ for advice firms

Advice firms are no longer facing a binary choice between running investment portfolios in-house or outsourcing them, with bespoke portfolios becoming an established third option, according to Copia Capital Management.

Its analysis showed that outsourced managed portfolio services (MPS) were the dominant model for central investment propositions (CIP), with 63 per cent of firms primarily using them, while 23 per cent were mostly managing portfolios in-house.

However, bespoke portfolios built by advice firms in partnership with a discretionary fund manager (DFM) and designed around their own client base were gaining ground as a third option.

Around one in 12 (8 per cent) firms were using a bespoke approach, rising to 23 per cent among firms with between £500m and £999m in assets under management.

More than two fifths (42 per cent) of all advice firms surveyed said they could see bespoke models forming part of their CIP within 10 years.

Copia’s CIP 2026: Turning the engine for growth report, in association with The Lang Cart, highlighted a ‘significant move’ to outsourcing over the last four years.

Its 2022 report found that 51 per cent of firms primarily managed portfolios in-house, while 38 per cent predominantly outsourced to MPS providers.

By 2024, 55 per cent of firms were mainly outsourcing portfolio management and 34 per cent were primarily doing it in-house, before reaching 63 per cent and 23 per cent respectively in 2026.

Over three quarters (76 per cent) of firms expected outsourced MPS to form part of their CIP over the next decade.

Copia said the move away from in-house management was being driven by growing governance and operational demands.

Almost nine in 10 (87 per cent) firms now have a documented CIP policy, 74 per cent operate a formal ongoing monitoring process for their CIP, and 66 per cent have documented provider due diligence frameworks in place.

More than a quarter (28 per cent) of CIP management time was spent on ongoing monitoring.

“For a long time the choice was framed as in-house or outsourced, with bespoke sitting somewhere in the middle as a niche option,” said Copia director of sales, Gary Stirrup.

“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 DFM 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.

“We see this most clearly among firms running between £500m and £999m, where almost a quarter already use a bespoke approach, and we expect it to become an option for a wider range of firms over time.

“Those considering bespoke are often large enough to want portfolios that reflect their own investment thinking, but without the scale to recruit investment and operational specialists to run money entirely in-house.

“Many firms now see bespoke models forming part of their CIP within ten years and we believe demand will continue to grow as advisers look for more say over client outcomes without taking on the full operational load of managing money themselves.”

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