Vanguard will be on the lookout to build more custom model portfolio services next year, to cater for advisers looking to outsource investments in a bid to keep costs down.
Robyn Laidlaw, head of distribution for Europe, said she anticipates a shift towards custom MPSs next year.
Vanguard already built such a service for Rosebridge Asset Management in 2023, its first time developing a bespoke solution for a UK advice firm.
Laidlaw said Vanguard would be “actively seeking opportunities for similar collaborations”.
She said: “Adviser businesses looking to preserve margins are increasingly focusing on the investment aspect of their proposition as an area to keep costs down.
“We’ve seen signs of this already in 2023, with Vanguard funds continuing to experience strong inflows, particularly regarding ETFs, and on the fixed income side, where bonds are indeed back.
“However, an increasing number of adviser firms are choosing to outsource investments entirely, and catering to the needs of this group will be a key focus for Vanguard next year.”
The tie up with Rosebridge and Redington saw Rosebridge launch a DFM, whose custom active and passive portfolios are available on AJ Bell’s institutional platform.
'A world of higher rates'
Looking forward more broadly, Vanguard’s economists anticipate the Bank of England may start cutting rates in the second half of 2024, after a possible recession in the early part of the year.
In a joint statement, chief economist Jumana Saleheen and senior economist Shaan Raithatha said: "We expect the UK economy to have tipped into technical recession by the end of 2023 or early in 2024, and while restrictive fiscal and monetary policies linger, growth is likely to be anaemic.
"While necessary to bring down the rate of inflation, we should not lose sight of the effect on the everyday public.
"As the BoE begins to feel more confident in inflation’s path back towards target, we expect they will be in a position to start cutting policy rates in the second half of 2024."
Despite an expected cut in the Bank of England rate, they believe policy rates will settle at a higher level compared to the past 15 years.
The pair of economists added: “The era of zero rates is over. For households and businesses, higher interest rates will limit borrowing, increase the cost of capital and encourage saving.
“For governments higher rates will force a reassessment of the fiscal outlook sooner rather than later and put questions on fiscal sustainability at the heart of policy debates.
“For the markets, the rise in interest rates is probably the single-best financial development in 20 years.”
They concluded it would take the global economy some time to adjust to a world of higher rates which could lead to market volatility in the short-term.
“Advisers have a vital role to play in helping their clients stay the course” the economists added.
tara.o'connor@ft.com
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