Strategic Report
Governance Report
Financial Statements
Other Information
Market overview
Short-term trends UK and global economy
Proportion of advisers using strategy
More broadly, we continue to work closely with intermediaries and current and prospective private clients to manage sentiment to support our net flows. We have also increased the interest paid to clients on cash, in line with the increased base rate.
54%
Model portfolios outsourced to a DFM
The UK has experienced elevated inflation over the past couple of years during the post- pandemic period. This led to a rise in interest rates and increased costs for consumers, meaning the wealth management industry has faced a challenging period of increased outflows. At the same time, higher interest rates have increased the relative attractiveness of cash versus equities, as well as encouraging clients to pay down debt, further impacting net flows. Over the past year, we have seen inflation begin to fall and an improvement in investor sentiment, together with rising expectations for a reduction in interest rates in the next year. This has not yet resulted in a significant change in behaviour but with a more stable political backdrop, the outlook is more positive.
45%
Multi-asset managed by third parties
35%
Bespoke portfolios (advisory basis)
Changing product preferences
31%
In-house model portfolios (advisory basis)
The competitive landscape continues to evolve with advisers increasingly moving away from their historic use of discretionary fund managers as providers of bespoke portfolio services in their custody to model portfolio services and funds delivered on third-party platforms. This changing product mix gives the industry a lower revenue yield per £ of funds under management, but has less impact or even positive impact at the level of profit margin, especially when considering the significant scalability of these services. Investment platform solutions are becoming increasingly popular with a substantial growth opportunity from both new assets entering the market and from non-platform assets to gradually move on to platforms. 200
30%
Bespoke portfolios outsourced to a DFM
25%
Multi-assets managed in-house
17%
In-house model portfolios (discretionary basis)
14%
Bespoke portfolios (discretionary basis)
established player with a strong track record. Within that, our B2B BM Investment Solutions offering, where we provide a range of support to the adviser, for example white-labelled or co-branded marketing materials, has been particularly successful. In line with Consumer Duty, and in recognition of the increasing popularity of MPS, we are transferring portfolios of less than £250,000 from BPS to MPS where appropriate for the client. This will offer a better value outcome to clients with the most appropriate investment solution for their needs.
Our response
Given market uncertainty, within our asset allocation, we advocate balance in portfolios, both between value and growth stocks and across geographies, including the UK. Our gilts offering has proven popular in the high interest rate environment, given the attractive yields on offer. Low coupon UK gilts can be tax efficient for UK taxpayers, so we continue to offer a range of portfolios investing in gilts, giving investors a low-risk alternative to cash.
Our response
We have strong offerings in both MPS and funds (our Blueprint and Risk Managed ranges), and we have made them available in different formats, e.g. our Responsible Investment MPS, across all major platforms (21 in total). This has enabled us to drive strong positive net flows, particularly in Platform MPS where the portfolios are held on third-party platforms, and where we are an
Brooks Macdonald Group plc Annual Report and Accounts 2024
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