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Managed Portfolio Services Revolutionize Investment Advisory Industry

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In the investment advisory industry, a noticeable shift is underway, driven by the rise in popularity of managed portfolio services (MPS). MPS consists of outsourcing investment management to specialized firms, a strategy increasingly adopted by investment firms. The trend is sparking a surge in asset inflows into the sector, influenced largely by the regulatory emphasis known as the Consumer Duty, stressing the importance of delivering value for money and achieving positive outcomes for customers.

Consumer Duty and Its Impact on MPS

The Consumer Duty’s influence on MPS is analyzed in an exclusive MPS Watchlist, backed by renowned financial institutions like Carmignac, Invesco, LGIM, Quilter, Schroders, and Tatton. The report explores the strategies for tackling volatile markets through model portfolios and discusses the ongoing debate between active and passive investment approaches.

Decrease in Model Portfolios and Rise of SMAs

A report by Cogent Syndicated underscores the declining reliance on model portfolios by advisors and the rising trend of boosting allocations to separately managed accounts (SMAs). Advisors serving high-net-worth clients anticipate substantial increases in their SMA holdings over the next couple of years. This shift could significantly impact how asset managers operate within the wealth management industry, with customization and value becoming increasingly important for advisors serving high-net-worth clients.

Growth of Actively Managed ETFs

On another note, the growth of actively managed Exchange-Traded Funds (ETFs) is a focal point, given the surge in this area and the reasons behind the increasing investor interest. The segment has seen a 55% increase in assets under management by the end of 2023, the launch of new actively managed ETFs, and positive cash flow for firms. Specific ETFs like the ARK Innovation ETF have seen significant growth. The rise in actively managed funds happens despite historical data favoring passive strategies. The risks and potential benefits of actively managed ETFs compared to passive strategies and mutual funds are also explored.

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