New data revealing that ‘target market’ was the most crucial factor for MPS selection in 2024 suggests that Consumer Duty is having a considerable influence on adviser practice.

User data from financial services consultancy The Lang Cat showed nearly three-quarters (72%) of MPS due diligence exercises ranked it as top feature, above cost or performance.

The data from the firm’s Analyser MPS software assessed all MPS due diligence reports from the past 12 months. It showed that advisers do not select primarily on cost, with suitability factors occupying seven of the top ten most important selection criteria.

The Lang Cat said the data matched up with its experience of working with advice firms “where there is clear recognition that Consumer Duty has moved the dial on what it takes to perform compliant and thorough product due diligence.”

It said that part of that “is a cemented focus on ensuring that target client suitability is being taken seriously when it comes to panel product selections.”

Terry Huddart, digital director at The Lang Cat said: “There’s an open debate around whether the MPS sector has become commoditised on cost and performance, but this not what we are seeing. It’s natural to think that, with so many to choose from, cost and performance would be the path of least resistance.

“It’s great to see that advisers are thinking beyond just those aspects and focusing on the vital factors of their own firm’s investment philosophy and target client definitions.” 

Top 10 most selected features as part of due diligence in 2024

Source: Analyser, The Lang Cat, 31 December 2024

Mr Huddart said performance is not represented in the data as it comes from the proposition feature screening phase of the process. Instead, it comes towards the end and is naturally looked at in 100% of due diligence exercises. As is underlying portfolio level detail, such as risk rating and costs, again at a separate part of the process.

He added: “As vital as assessing past and ongoing performance is, we’d challenge much of the commentary seen around it. Performance is a combination of returns and volatility, which also speaks to overall client suitability in terms of life stage and attitude to risk among several other factors.”

Analyser’s MPS comparison tool was launched in June 2022.