22 July 2025
Client segmentation more likely to lead to MPS action, new research finds
Advice businesses that have a defined client profile are more likely to have a distinct due diligence process when it comes to assessing investment providers, data from Quilter Cheviot and NextWealth has found.
The research found that among advisers with a clearly defined client profile, 96% also have a structured due diligence process. In contrast, only 4% of advisers with a target client profile lack such a process. This figure rises to 28% among those who do not segment their clients at all.
Advisers with a defined target client profile also tend to work with more investment partners – an average of 3.6 compared to just 2.6 for those without a defined profile.
Similarly, those with any form of client segmentation strategy work with an average of 3.3 investment providers, compared to 2.9 for those without one.
Segmentation is also linked to greater partner turnover. Among firms with a segmentation strategy, 37% have reviewed their outsourced investment partners in the last 18 months, and 33% have started work with a new provider. For firms without a defined segmentation strategy, only 14% have conducted a review and just 7% have engaged a new partner. Notably, two thirds of these firms have taken no action on their outsourced investment relationships during that time.
The data underpins a guide from Quilter Cheviot and NextWealth designed to help advice firms better meet their increasingly detailed obligations around MPS due diligence.
Simon Doherty, head of managed portfolio services at Quilter Cheviot, said: “The data is quite clear that defining your client offering and target market is likely going to lead to more activity. Forward-thinking advice firms know their clients’ needs and circumstances inside out, and as a result this is likely to result in a wider range of propositions being made available.
“Consumer Duty has been a force for good in encouraging advisers to kick the tyres on their investment providers. Clearly the burden of regulation and the tax landscape means advisers are time poor or may not have the confidence in understanding the regulatory needs. But the benefits of having that defined client profile and segmentation strategy will mean the adviser can stay in control and on top of the partners they trust with their clients’ assets.”
Julie Best, Insight Director at NextWealth, added: “The research highlights that client segmentation plays a critical role in delivering better outcomes. Firms that clearly define their target clients appear to be not only more structured in their due diligence, but also more confident and proactive in managing investment relationships.
“More generally, we would encourage adviser firms to consider the benefits of taking a more proactive stance with investment providers, taking more control of the relationship and recognising that due diligence is not ‘just a job for compliance’ but for several parties.”
