Full Discretion or MPS Partnership? What Firms Discover When They Look Beyond the Idea

Choosing Your Investment Management Route: Full Discretionary vs MPS Partnership?

Few conversations in the advice world provoke the same mix of enthusiasm and apprehension as the question of bringing investment management in-house. Increasingly, this comes down to a decision between full discretionary vs MPS.

It often starts with a well-meaning comment in a board meeting: “Should we be doing more ourselves?” Within minutes, someone mentions MiFID permissions. Someone else is Googling application fees. A third person is already picturing a growing pile of spreadsheets.

For firms looking to evolve their proposition, improve consistency, or gain greater control over investment outcomes, full discretionary permissions can seem very appealing. But once explored properly, the reality is often more complex than the initial enthusiasm suggests.

The Fully Authorised Route: Freedom with Strings Attached

If you are considering a full MiFID wholesale application, you are likely weighing freedom against responsibility.

Discretionary permissions give you full control over how investments are managed. You can design processes from scratch and build a client journey that reflects your philosophy. You are no longer working within someone else’s framework. For firms with a clear vision and the resources to deliver it, this level of autonomy can be genuinely liberating.

There is also an efficiency angle. Once established, operating your own permissions gives you more control over how and where costs arise. Instead of absorbing external DFM or platform structures, you can shape a model that reflects your priorities. This could mean simplicity, closer alignment, or greater flexibility.

This is not about removing platform fees. Those remain unless you take on custody. It is about designing a framework that works for your business, rather than adopting one off the shelf.

The Reality Check: Time, Cost and Regulation

This is often where enthusiasm begins to fade.

The application process is not quick or light touch. Preparing and submitting a MiFID application can take several months. That is before the FCA even begins its review.

There is also the cost. The application fee is currently around £11,000. Many firms also choose to bring in external support to ensure documentation is robust. On top of this, there is the capital impact. Financial resource requirements are significantly higher than for a typical advisory firm.

For some, this is expected. For others, it is where the idea of in-house discretion begins to lose its appeal.

The FCA will expect:

• A detailed business plan
• A Consumer Duty value assessment
• Clear financial projections
• A well-developed ICARA
• Strong systems and controls

You must also show how you will meet ongoing regulatory obligations. This includes regular reporting, enhanced oversight, and clear evidence of good client outcomes.

It is achievable, but it is not simple.

Support Makes the Difference

You do not have to do this alone.

Many firms bring in external expertise to guide them through the process or review documentation before submission. Having someone experienced can make the journey less daunting and the decisions more informed.

At B-Compliant, we have supported firms through this process successfully. One consistent lesson stands out. Honest expectations matter. Firms that approach this with clarity, not just optimism, tend to achieve smoother outcomes.

With the right preparation and support, the process becomes far more manageable.

The Alternative: An MPS Built Through Partnership

If going fully discretionary feels like climbing Snowdon in office shoes, there is another route.

For many firms, partnering with a third-party investment and platform provider to create a model portfolio service feels more manageable. It is also more collaborative and far less capital intensive.

Under this approach, the third party holds the regulatory permissions and responsibility. Your firm works with the provider to shape how the models behave. This includes investment approach, asset allocation, risk bands, fund selection, and expectations around rebalancing and reporting.

You influence the investment philosophy, but you do not carry the full burden of managing it day to day.

Trade-Offs to Consider

For clients, the main benefit is responsiveness. Investment changes can be implemented quickly. There is no administrative lag that often comes with advisory-led updates.

There are trade-offs. Costs can be higher. Flexibility may be reduced. You also lose the ability to manage tax positions at an individual portfolio level.

For firms, the advantages are clear. An MPS reduces administrative pressure and removes the need for client sign-off on every change. It allows you to retain influence over strategy without full regulatory responsibility. It is also cheaper to establish and gives access to experienced investment professionals.

The trade-off is the involvement of a third party and less control over every detail.

A Growing Trend

We have supported a number of clients as they moved from an advisory model to a third-party DFM solution. This approach is becoming increasingly popular.

It may be the easier route, but it still requires careful thought. Choosing the right partner takes time. Due diligence is essential. Clients also need to be prepared for a smooth transition.

Choosing the Right Path for Your Firm

There is no single correct answer.

Some firms thrive with full discretionary permissions. Others find that a partnership-led MPS offers the right balance of control, efficiency, and practicality.

Clarity is what matters most. You need to understand the operational reality, not just the strategic appeal.

If you are unsure where each option leaves you from a regulatory perspective, or you want an experienced view on your plans, please contact us. We help firms navigate both routes and choose the structure that works in practice, not just on paper.