A considerable growth in the number of available MPS solutions is helping to drive down charges, according to adviser data provider Defaqto.

According to the data provider, average charges are falling more because of new entrants coming in at very competitive costs. Whilst the firm has seen charges falling for more established propositions, it has only been relatively marginal.

The 108 DFM firms now offer some 222 MPS propositions, according to a Defaqto study in the latest issue of Financial Planning Today magazine.

Within these propositions, there are over 300 ranges of portfolios to choose from and over 2000 individual portfolios. Over 800 of these portfolios (direct and on platform) have been launched in the last 5 years.

According to Defaqto, DFM firms were able to launch to market with relatively low overheads by making their offerings available only on platforms, effectively outsourcing most of their administrative services.

In 2016, Defaqto covered some 84 DFM firms. This has now increased to 108. Twenty of these new firms are only available through an adviser platform.

Most of this ‘new’ activity has taken place on adviser platforms which is an acknowledgement that DFM firms see this as the main route to the adviser market, according to Defaqto DFM expert Fraser Donaldson.

Mr Donaldson said it remains to be seen how many of the new propositions will last long term. He said: “The success and longevity of these increasing numbers of new firms, propositions and portfolios will be dictated by the amount of assets they attract. It is getting to be a more crowded market, but we do not see any significant slowdown in the launches, and there is certainly evidence that some of the new entrants are gaining traction in the adviser market.”

In the latest edition of Financial Planning Today magazine, Mr Donaldson shares his thoughts on what Financial Planners need to check when considering using a DFM, and what factors they need to take into account when considering value for money.

The article is included in the latest issue of Financial Planning Today magazine. Subscribe now to Financial Planning Today magazine - and get access to a 3-year library of back issues plus every new issue as it's published.