Disclosure standardisation
In our previous podcast, we discussed the need for the FCA to consider greater disclosure standardisation between Multi-Asset Funds (MAFs) and Managed Portfolio Services (MPS). While the two formats differ in delivery, legal format and tax treatment, they are similar in scope and function. Funds require KIIDs, factsheets, benchmarks and standardised performance reporting. MPS, by contrast, have no such requirements, making comparison difficult and transparency challenging.
We therefore very much welcome the FCA’s proposals to align MAF and MPS disclosure and reporting standards. Greater alignment would help advisers and therefore their clients in three critical areas: consistency, comparability and transparency.
Consistency: moving beyond voluntary standards
Currently, performance reporting for MPS relies on voluntary market conventions rather than codified rules. While many providers adhere to best practices, these are not enforced, leaving room for variation and ambiguity. By introducing regulatory standards similar to those governing funds, the FCA would ensure that all providers operate under the same framework. This would reduce uncertainty around data quality and create a level playing field, making it easier for advisers and their clients to trust the data they receive.
Comparability: tackling the naming problem
One of the most glaring issues in the MPS space is the lack of standardised naming conventions and risk labels. Unlike funds, which benefit from sector classifications and risk-rating systems, MPS portfolios often use marketing-driven names that obscure their true risk profile. For example, the term “balanced” might describe a portfolio with 50%, 60% or even 85% equity exposure.
Emotional labels such as Cautious or Aggressive are also problematic. These can mean different things to different people and may deter clients from taking the level of risk required to achieve their investment objectives. These inconsistencies leave advisers and their clients struggling to interpret what these non-descriptive, emotional labels actually mean.
Risk-rating providers attempt to bridge this gap but their methodologies differ widely, making cross-platform comparisons challenging. In the funds world, ESMA’s SRRI score provides a standardised risk metric, but that system lacks granularity for multi-asset portfolios. The reality is that equity content remains the primary driver of portfolio risk. That’s why we have long advocated for clear percentage equity labels in portfolio names and the creation of discrete, non-overlapping sectors. The current IA Mixed Investment sectors are too blurred. This long-standing problem needs resolution.
Transparency: raising the bar on disclosure
Transparency is another area where MPS risks falling short. While there are informal norms around what a good factsheet should include – objectives, performance data and other disclosures – the quality and completeness of these documents vary significantly from provider to provider. Standardising disclosure requirements would ensure that advisers and clients receive consistent, reliable information from all providers. This is not just a compliance exercise; it’s about empowering advisers to make informed decisions on comparable metrics.
Will greater standardisation increase costs or create barriers?
Some are asking whether aligning MPS regulation with managed products will add compliance burdens or create barriers for smaller MPS providers. In our view, it shouldn’t. Good practice MPS providers already comply with Product Governance rules and produce key documents such as factsheets, Assessment of Value statements and Target Market Statements. Greater standardisation simply formalises practices that should already be in place.
This is not a size or consolidation issue. Any firm, regardless of scale, should be able to accurately describe, present and report on the strategies they manage.
Impact on market growth
Could these changes slow the rapid growth of the MPS market? We don’t think so. If anything, they underscore the need for consistency. Assets in discretionary MPS are growing at pace. This growth is driven by advisers shifting toward managed services, not by an increasing number of providers entering the market.
Without standardisation, this growth risks becoming a free-for-all of non-comparable data and disclosure – a scenario that could lead to accidents and erode trust. Regulation is not a brake on growth; it’s a safeguard for success.
Clarity brings confidence
Standardisation will improve comparability, reduce confusion and enhance due diligence processes. Powerful MPS directories from FE and Morningstar already assist advisers in researching MPS options, but consistent disclosure would make these tools even more effective.
Any measure that improves disclosure consistency and comparability is a win for consumers, advisers and the industry as a whole. Aligning MPS regulation with managed products is not about adding complexity – it’s about creating clarity, fostering trust and ensuring that growth in this market is sustainable and transparent. The FCA’s consideration of this change is significant, and we believe it’s a step in the right direction.
Photo by Gustavo Fring
