AJ Bell reduces adviser risk on MPS funds

The company has changed the investment terms for its MPS funds to operate in future on a ‘reliance on others’ (ROO) basis rather than an ‘agent as client’ basis.

The company says the change means that advisers will not be “responsible or liable” for the investment decisions made in the underlying portfolios within each MPS fund.

{loadposition hidden2} 

The changes apply to the full AJ Bell MPS range which includes active, passive, ‘pactive’ and responsible MPS options, as well as its Retirement Portfolio Service, a centralised retirement proposition for clients in drawdown.

Previously AJ Bell’s MPS operated on an ‘agent as client’ (AAC) basis.

According to AJ Bell, under AAC, the adviser – not their client – is treated as the client of the MPS manager. This means the adviser could be liable for customer complaints on the underlying investments. This can tie up their time, compliance resources and potentially impact their PI cover.  

Under ROO, the client is treated as the investor, resulting in a direct relationship between all three parties: the adviser, their client and the MPS manager. Responsibility for managing the portfolios rests with the MPS manager, leaving the adviser to assess only the initial and ongoing suitability of the MPS solution itself, the same as if choosing a multi-asset fund, AJ Bell says.

As part of the move AJ Bell has updated its terms and conditions for its MPS but it says no action is required from advisers. Advisers and their clients will see no change in the way the MPS operates, the firm says. There will be no additional costs, no extra contact with clients by AJ Bell, and no additional client information required by AJ Bell on an ongoing basis.

Kevin Doran, MD of AJ Bell Investments, said: “This is a change driven by advisers. Our MPS is growing in popularity as advisers appreciate the combination of choice, cost and communication we have committed to offering the market.  

“Having operated our partnership portfolios on a Reliance on Others basis for a number of years, many advisers have told us that they’d prefer the MPS to operate on the same basis.  Advisers will understand the importance of that to their business, both in terms of the reduction in risk it delivers and the substantial time savings it will generate.”

AJ Bell was established in 1995 and has assets under administration of £70.4 billion and 368,000 customers as at June.

{loadmoduleid 444}