Three quarters of advisers use multi-asset funds, with 31 per cent using them as their main solution, a report from NextWealth has found.
The report said advisers are moving away from building their own portfolios, a trend accelerated by consumer duty regulations and the heightened due diligence this has encouraged.
"While ‘build your own portfolios’ remains a popular choice, we continue to see financial advisers moving away from this approach," NextWealth's Multi-Asset Distribution Dynamics report stated.
"Financial advice firms building their own models are designated co-manufacturers under consumer duty. Heightened due diligence requirements and the focus on evidencing value has accelerated the trend away from adviser managed models and that is set to continue."
The report found growth in the multi-asset space was aided by strong market conditions, consumer duty, fee pressure and a focus from advisers on client-facing activities and away from investment management.
Nearly half of the advisers asked said they blend multi-asset funds with model portfolio services and 28 per cent expect to increase their allocation to multi-asset products in the next three years.
NextWealth's managing director, Heather Hopkins, said: "With this report we have found while multi-asset funds are widely used, they attract a smaller proportion of new client money compared to MPS or adviser managed models.
"Among a cohort of advisers (31 per cent), they are the main solution used. Among the rest, they are used as appropriate to manage CGT concerns, for smaller client portfolios and to access specific investment objectives."
The study involved in depth interviews with 10 employees of financial advice firms and an online survey of 200 advisers.
Multi-asset funds were seen as more tax efficient by a fifth of the respondents.
A quote from a head of financial planning at a firm of 28 employees read: "You can get active management and get trades made in the wrapper while still accessing asset classes and investments you were accessing in the MPS and DPS but now you don’t need to worry about CGT.
"You can be intentional about how you use your CGT allowance with multi-asset."
Looking at the approaches to blending multi-asset funds, 65 per cent said they combine active and passive to keep costs down for customers, while 50 per cent said they combining multi-asset funds with different risk ratings to suit a client's overall risk appetite.
Summing up its findings, NextWealth said while multi-asset funds are widely used they attract a smaller proportion of client money when compared with MPS and adviser managed models.
tara.o'connor@ft.com
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