FCA's MPS review should raise standards, says Isio's Daniel Nilsson

FCA Turns Up Heat on Model Portfolio Services

The UK's Financial Conduct Authority is stepping up its examination of the Model Portfolio Service market—a fast-expanding corner of wealth management where advisers select ready-made investment portfolios for clients. As the review progresses, industry voices are urging the regulator to enforce stronger governance, sharper transparency and clearer benchmarks for what constitutes value for money.

Daniel Nilsson, senior portfolio manager at Isio Investment Management, said the scrutiny is "appropriate and necessary" given the market's rapid growth. He warned that "scale, longevity and brand recognition should not be treated as substitutes for a robust investment process," and argued that advisers must be able to distinguish providers that embed genuine governance from those treating it as a compliance box-tick.

The comments come as the FCA examines whether investors are getting good outcomes from MPS products—a market that has attracted billions of pounds in assets. The regulator is focusing on how portfolios are constructed, how decisions are monitored and whether fees are justified by the net performance delivered to end clients.

Nilsson also called for "more consistent guidance on performance reporting and benchmarking," which would allow advisers to compare MPS offerings on a like-for-like basis and give investors greater confidence that they are not overpaying for underperformance. The overall aim, he said, is to shift the industry "beyond product-led competition" and toward a focus on the quality of investment decision-making.

Why Governance and Transparency Are Now Make-or-Break for MPS Providers

The Regulatory Drive to Protect Investors

The FCA's deepening focus on MPS governance mirrors its wider Consumer Duty regime, which requires firms to prove they deliver good outcomes. So far, MPS providers have operated with relatively light-touch oversight, but the review signals that regulators are no longer willing to accept that a well-known brand or a long track record automatically meets that standard. For advisers, this means the onus will shift to documenting why a chosen MPS is suitable, not just which provider it comes from.

How the Scrutiny Reshapes the Competitive Landscape

The push for transparent reporting and meaningful benchmarking will separate providers that have institutional-quality oversight from those whose governance is largely cosmetic. Portfolio managers who can show clear, committee-driven decision-making, regular risk reviews and a defensible investment philosophy are likely to gain market share. In contrast, firms that have expanded rapidly on the back of marketing budgets and brand familiarity may find their offerings harder to justify once the comparative data becomes public. The review could accelerate a consolidation among MPS providers, with the strongest players attracting the bulk of adviser recommendations.

What Advisers Must Now Prioritise

The shift in regulatory tone means advisers will need to upgrade their due diligence. They must ask providers not just for past performance numbers but for granular breakdowns of net returns after all fees, risk-adjusted metrics and a clear explanation of the portfolio construction process. The days of relying on a glossy factsheet and a relationship with a sales representative are numbered. Those who fail to raise their standards risk being unable to demonstrate suitability under the new regulatory expectations, potentially exposing themselves to compliance breaches and client complaints.

What Investors Should Demand from Their Adviser and MPS

Investors who use a financial adviser and are recommended a model portfolio service should ask these specific questions, informed by the FCA's scrutiny and Isio's comments:

• "How do you select and monitor the MPS provider?" Insist on a clear explanation of the governance structure, including who sits on the investment committee and how often portfolios are reviewed. Nilsson's call for "formal governance structures" makes this a non-negotiable check.
• "What is my net return after all costs?" Ask for the performance net of adviser fees, platform charges and underlying fund costs. The FCA's value-for-money focus means you should know exactly what you are paying for the investment outcome.
• "Can you provide a like-for-like benchmark comparison?" Request a comparison against a relevant index or peer group that accounts for the portfolio's risk profile. Consistent benchmarking, as highlighted by Nilsson, helps spot whether the MPS is delivering genuine value.
• "How often will I see a detailed portfolio report?" Look for quarterly or half-yearly reports that break down holdings, changes and risk metrics—not just a performance number. Greater transparency is a hallmark of the providers likely to thrive under the FCA's tightening oversight.