The MPS review asked a question most advice files cannot answer

The temptation when a regulator publishes a multi-firm review is to read it as a verdict on the firms named in it. The more useful reading is to treat the questions it asked as a list of things your own file will be asked next, because supervisory attention moves and the questions travel with it.

For advice firms using a model portfolio service, the central question is simple to state and uncomfortable to answer from most files. Why is this client in this model?

Not why the MPS is a sensible arrangement in general. Not why the provider was selected. Why this particular client, with their particular objectives and capacity for loss, sits in the balanced model rather than the one either side of it, and what would have to change about them for the answer to be different.

Describing the portfolio is not the same as justifying the placement

Most files I read are strong on the first half. The provider's literature is on file, the charges are set out, the risk mapping is recorded, the asset allocation is there. All of that describes the product.

The placement is the advice, and it is usually a sentence. Often it is a sentence generated from a risk questionnaire score, which is a mapping rather than a judgement. A questionnaire can tell you a client sits around the middle of a scale. It cannot tell you that this client has a defined benefit pension underpinning their essential spending and can therefore take more risk with the rest, or that the number on the form was produced on a day when their circumstances were about to change.

Where the file records only the score and the resulting model, the reasoning has been outsourced along with the portfolio. That is the gap.

Three places it goes missing

The first is at the edges of the risk bands. A client whose score puts them a point away from the next model is the case a reviewer will pull, because that is where judgement had to happen. If the file says nothing about why the adviser stayed on this side of the line, there is nothing to review.

The second is when circumstances change and the model does not. An inheritance, a redundancy, a diagnosis, a retirement brought forward. The review note records the event. The portfolio stays where it was, and no line explains why that remains right. Sometimes it genuinely does remain right, which is worth writing down precisely because it looks like inaction.

The third is the concentration question nobody owns. The MPS provider manages within the mandate. The adviser manages the client. Neither necessarily looks at the client's whole balance sheet, so a client with a large employer shareholding can end up with more of the same exposure arriving through the model, and the file shows two parties each doing their own job properly.

What to change this month

None of this needs a new system. It needs the suitability file to carry one short passage that a stranger could read and follow: these are the client's circumstances, this is why that points to this model, and this is what would move them.

A practical way in is to take ten files at random from clients in an MPS, and for each one try to answer the placement question using only what is written down. Where you cannot, the file is describing a product rather than recording advice. Ten files will tell you whether this is a training issue with one adviser or a template issue across the firm, and those have different fixes.

The review will be read as being about outsourcing. It is really about whether the reasoning stayed in house when the portfolio left.