Model Portfolio Services vs Bespoke Portfolios: Which Approach Suits Your Practice?

Choosing between MPS and bespoke: why it matters now

The 2026-27 tax year began on 6 April, and many advice practices are using this natural reset point to review their investment proposition. One of the most consequential decisions a wealth adviser can make is whether to serve clients through a model portfolio service (MPS) or through bespoke, individually tailored portfolios managed by a discretionary fund manager (DFM).

This is not simply a question of cost. The choice shapes the client experience, determines how much flexibility you have, affects your regulatory position under Consumer Duty, and ultimately influences the long-term value of your practice. Getting it right means understanding what each approach actually delivers, where each falls short, and how to match the right solution to the right client segment.

What is a model portfolio service?

A model portfolio service provides a standardised range of portfolios, usually between five and ten, graded by risk. An adviser selects the appropriate risk profile for each client, and the MPS provider handles asset allocation, fund selection, and ongoing rebalancing across every client using that model.

MPS has grown rapidly in the UK. According to research from NextWealth ↗, assets held in MPS solutions exceeded GBP 300 billion by the end of 2025, more than double the figure from five years earlier. The appeal is clear: MPS offers a professionally managed investment solution at a relatively low cost, with minimal ongoing involvement from the adviser on the investment side.

Key features of MPS

• Standardised portfolios: Clients are allocated to a risk-graded model, not a personalised portfolio.
• Centralised management: The provider makes all investment decisions. The adviser has no input on individual holdings.
• Low cost: MPS fees typically range from 0.10% to 0.30% per year, making them one of the cheapest outsourced investment options.
• Scalability: One model serves hundreds or thousands of clients, which is efficient for the adviser and the provider.
• Limited customisation: Ethical exclusions, tax-loss harvesting, or accommodating existing holdings are usually not possible.

What is bespoke portfolio management?

Bespoke portfolio management, sometimes called tailored or discretionary portfolio management, involves a DFM constructing and managing a portfolio designed specifically for an individual client. The portfolio reflects that client’s goals, risk tolerance, tax position, income needs, ethical preferences, and any constraints such as concentrated stock positions or trust structures.

This is the approach used by most discretionary fund managers when serving HNW clients. The DFM works closely with the adviser to understand the client’s full financial picture and builds a portfolio accordingly.

Key features of bespoke portfolios

• Individual construction: Each portfolio is built for a specific client, not selected from a menu.
• Full customisation: The DFM can accommodate ethical constraints, tax considerations, concentrated positions, and bespoke income requirements.
• Direct market access: Bespoke portfolios often hold individual securities (equities, bonds, structured products) rather than only funds.
• Active relationship: The DFM maintains an ongoing dialogue with the adviser about each client’s portfolio.
• Higher cost: Bespoke DFM fees typically range from 0.25% to 0.75%, reflecting the additional expertise and resource required.

MPS vs bespoke: a side-by-side comparison

Feature	MPS	Bespoke DFM
Portfolio construction	Standardised, risk-graded	Individual, tailored to client
Customisation	Very limited	Full
Typical annual fee	0.10% to 0.30%	0.25% to 0.75%
Minimum investment	Often GBP 10,000+	Usually GBP 250,000+
Ethical/ESG screening	Limited (whole-model only)	Per-client screening
Tax-loss harvesting	Not available	Available
Underlying holdings	Funds and ETFs	Funds, ETFs, direct equities, bonds, alternatives
Adviser involvement	Low (select risk profile)	Medium (ongoing dialogue with DFM)
Scalability for adviser	Very high	Moderate
Reporting	Standardised	Bespoke, often detailed
Regulatory suitability	Best for standard needs	Best for complex needs

When MPS makes sense

MPS is a strong choice for practices that serve a large volume of clients with relatively standard needs. If your typical client has investable assets between GBP 50,000 and GBP 500,000, a straightforward risk profile, and no complex tax or ethical requirements, MPS delivers a professional investment outcome at a competitive cost.

There are clear advantages to this approach.

• Efficiency: You spend less time on investment management and more time on financial planning, which is where most clients perceive the greatest value.
• Consistency: Every client in the same risk bracket receives the same portfolio, which simplifies compliance and suitability documentation.
• Cost to client: The low MPS fee helps demonstrate fair value under Consumer Duty, particularly for clients with smaller portfolios.
• Practice scalability: MPS allows you to grow your client base without proportionally increasing your investment management workload, which is a key factor in building enterprise value.

MPS works best when the investment proposition is not the primary differentiator of your practice. If your value lies in financial planning, tax planning, or retirement income strategy, MPS handles the investment component capably while you focus on advice.

When bespoke is worth the extra cost

Bespoke portfolio management becomes the better choice when clients have needs that a standardised model simply cannot address. For HNW clients with investable assets above GBP 500,000, the limitations of MPS often become apparent.

Consider these scenarios where bespoke is necessary.

• Concentrated stock positions: A client who has built wealth through a single company holding needs a portfolio built around that position, managing concentration risk while considering capital gains tax implications.
• Ethical and values-based investing: A client who wants to exclude specific sectors, apply positive screening criteria, or align investments with religious principles needs per-client customisation that MPS cannot provide.
• Complex tax structures: Clients with assets across ISAs, SIPPs, general investment accounts, trusts, and offshore bonds need coordinated management across wrappers, considering the tax treatment of each.
• Multi-currency or international exposure: Clients with liabilities or income in multiple currencies need portfolio construction that reflects their actual financial picture.
• Income requirements: Retirees drawing a specific natural income require a portfolio designed around yield, not simply total return within a risk bracket.

Research consistently shows that what HNW clients actually want is a genuinely personalised service. For this segment, the bespoke approach is not a luxury; it is an expectation.

Access to broader asset classes

One of the most significant advantages of bespoke management is access to a wider range of asset classes. While MPS typically invests in funds and ETFs, a bespoke DFM can construct portfolios that include direct equities, individual bonds, structured products, and multi-asset class allocations including private markets and alternatives.

For larger portfolios, this breadth of asset selection can improve diversification, reduce costs (direct holdings avoid fund-level charges), and create more tax-efficient structures.

Consumer Duty implications

The FCA’s Consumer Duty ↗ framework adds a regulatory dimension to the MPS versus bespoke decision. Under the Duty, advisers must demonstrate that the products and services they recommend deliver good outcomes for consumers, including fair value.

This creates obligations in both directions.

The risk of using MPS for complex clients

If you place a client with complex needs into an MPS that cannot accommodate those needs, you may fail the outcomes test. For example, a client with significant capital gains tax liabilities who needs careful disposal planning will not receive appropriate management within a standardised model. The fact that MPS is cheaper does not justify its use if it delivers worse outcomes for that specific client.

The risk of using bespoke for standard clients

Conversely, recommending an expensive bespoke service for a client whose needs could be well served by a low-cost MPS raises questions about fair value. If the additional cost does not translate into additional benefit for the client, the recommendation may not stand up to regulatory scrutiny.

The FCA’s guidance on Consumer Duty ↗ is clear: the approach must be proportionate to the client’s actual needs. This reinforces the case for segmenting your client base and applying the right solution to each segment.

The hybrid model: combining both approaches

Many of the most successful advice practices operate a hybrid model. This is not a compromise; it is a deliberate strategy that matches the investment approach to the client’s complexity and portfolio size.

A typical hybrid structure looks like this.

• Segment A (standard clients, sub-GBP 250,000): Served through a carefully selected MPS, often on a platform like those discussed in our guide to choosing the right platform.
• Segment B (HNW clients, GBP 250,000 to GBP 1 million): Served through a bespoke DFM with individual portfolio construction.
• Segment C (UHNW clients, GBP 1 million+): Served through a multi-family office or specialist DFM offering institutional-grade custody, alternative asset access, and comprehensive reporting.

This tiered approach allows the practice to demonstrate proportionate value at every level, which is precisely what Consumer Duty requires.

Choosing the right DFM partner

If you decide to incorporate bespoke management, the quality of your DFM relationship becomes critical. Thorough due diligence when choosing a discretionary fund manager protects both you and your clients.

Look for a DFM that offers genuine customisation, not simply a range of in-house models badged as bespoke. The best providers, such as Alpha Investment Office (FCA Ref 1019537), offer individually constructed portfolios with institutional-grade custody through firms like SEI and direct access to a named portfolio manager. This is a materially different service from an MPS with minor tweaks.

Questions to ask before deciding

Whether you are evaluating MPS providers, bespoke DFMs, or both, these questions will help clarify your decision.

Questions for MPS providers

• How many models are in the range, and what asset classes do they cover?
• Can individual clients be excluded from specific holdings (e.g. for ethical reasons)?
• What is the total cost to the client, including underlying fund charges?
• How frequently are the models reviewed and rebalanced?
• What is the provider’s track record relative to their stated benchmark?

Questions for bespoke DFM providers

• What is the minimum portfolio size, and does this vary by wrapper?
• Who will manage my client’s portfolio, and what are their qualifications and experience?
• How do you handle tax-loss harvesting and capital gains management?
• What custody arrangement do you use, and what protections does it provide?
• Can you accommodate alternative assets, structured products, and direct holdings?
• How do you report to advisers and clients, and how frequently?

Questions for your own practice

• What percentage of your client base has genuinely complex needs that MPS cannot serve?
• Do you have the time and expertise to oversee a bespoke DFM relationship effectively?
• Does your current proposition deliver fair value at every client tier?
• Would a hybrid model allow you to serve more clients without compromising quality?

Making the transition

If you are currently running your own investment management or using a single approach for all clients, transitioning to a more structured MPS or bespoke arrangement requires planning. Consider the following steps.

1. Segment your client base by portfolio size, complexity, and needs. This exercise alone often reveals that a significant proportion of clients would be better served by a different approach.
2. Review your regulatory position. Ensure that your chosen approach is defensible under Consumer Duty. Document why each segment receives the investment solution it does.
3. Conduct provider due diligence. Whether evaluating MPS or DFM providers, apply a structured framework. Do not rely on brand recognition or existing relationships alone.
4. Plan the migration carefully. Moving clients between investment approaches involves re-registration, potential capital gains events, and communication. Build a realistic timeline.
5. Communicate clearly with clients. Explain the rationale for any change. Clients who understand why a particular approach suits their needs are more likely to stay engaged and committed.

The bottom line

There is no universally correct answer to the MPS versus bespoke question. The right choice depends on your client base, your practice model, and your ambitions for growth.

For many practices, the answer is both. MPS handles the volume, bespoke handles the complexity, and the adviser sits at the centre, ensuring every client receives the right level of service. That is a proposition that works commercially, stands up to regulatory scrutiny, and delivers genuine value to clients.

With the new tax year under way, now is the right time to assess whether your current investment proposition is truly fit for purpose, or whether a more deliberate structure would serve your clients and your practice better.

Ready to explore bespoke portfolio management for your HNW clients? Learn more about how discretionary fund management works in practice, or review our guide to conducting due diligence on DFM providers.