Exchange-traded funds will not be allowed in model portfolios on the Alliance Trust Savings (ATS) platform, limiting the products investors and discretionary fund managers (DFMs) can use in them.

According to a source, ATS will not be offering ETFs in its model portfolios due to rebalancing issues.

ETFs are traded in fractional units, which can sometimes cause issues on platforms due to how they are set up. Most platforms in the UK are designed to trade funds in whole units, not securities in fractional units which requires certain technology and servicing capabilities.

Model portfolios were launched on the ATS platform last year. They are available through discretionary fund managers (DFMs) or can be built bespoke. Many DFMs offering model portfolios on the platform include ETFs in them. It is likely that ETFs will have to be swapped out for other products.

ATS said in a statement: "We've recently started offering model portfolios and our early experience, in line with most platforms, is that not being able to trade ETF fractions creates a problem when re-balancing. We are working with the industry to find a solution to this issue, but for the time being we are unable to support ETFs within model portfolios. We continue to offer an extensive choice of ETFs outside of model portfolios."

The platform has come under criticism in the last year following a delayed upgrade to its platform technology, which it hoped to launch in the third quarter of last year. According to recent reports advisers criticised the platform for delays, missed income payments and poor communication during its re-platforming project.

It also raised charges on the platform last year; there are now two charging structures on the platform, inclusive and standard. The model portfolio cost, if used as part of the inclusive account charge, has an annual service charge of £120 - there are no extra costs for rebalancing.

According to the Langcat Financial, assets under administration on the platform at the end of June this year were £15bn, up on the £12.1bn at the end of 2016 and £8.5bn in 2015.