Model portfolios are becoming increasingly popular among many in the retirement industry, as they can provide an extra layer of protection for wealth managers, simplify the investment process for advisors, and provide a reliable investment experience for plan participants.
Those are the core results from Natixis’ latest Executive Summary, which finds that 77% of wealth managers credit models for helping them manage risk while offering a more customized client experience. Sixty-nine percent say models provide an extra layer of due diligence, and 77% believe models deliver a more consistent investment experience to clients.
Wealth managers are likelier to use models to help address critical concerns, Natixis finds, like overseeing investment decisions of advisors who manage investments, while helping clients stay the course during volatile markets.
On the other hand, models can help advisors streamline the investment process while increasing their own efficiency and offering key growth to their practice, says Natixis. According to the findings, 63% of advisors say demonstrating their value beyond asset allocation is critical to their success, and 60% say it is key to establishing a relationship with their clients’ families.
Forty-two percent of advisors surveyed say they utilize models for retirement account rollovers, and 29% utilize them to transfer assets when they win new clients.
As for clients, they were twice as likely to say they are confident in their finances (45%) compared to those who are not invested in models (24%). Model clients were also half as likely to say they are stressed about their finances (11%), compared to those not in models (23%). Almost all (97%) invested in models were more likely to trust their financial advisor when making financial decisions, compared to those not invested in models (73%).
Clients were also more likely to be interested in broader advisory services like retirement income and financial planning, found Natixis. Sixty-two percent of model users say they want to know more about retirement income, compared to 53% of overall respondents. Fifty-nine percent of models also indicated interest in financial planning, relative to 42% of the overall population.
Other areas of interest include sustainable investments (50% vs. 35%), tax-efficient investments (41% vs. 32%), private investments (38% vs. 23%), estate/generational planning (37% vs. 24%), and lending/credit solutions (19% vs. 12%).
As interest grows, Natixis recommends firms and advisors align themselves with more financial objectives while continuing to provide model options and advice. Specifically, Natixis urges advisors to provide services outside traditional asset allocation strategies.
“They have to go beyond asset allocation to earn new assets form new clients or win more assets from current clients,” the findings read. “Right now, many are challenged by the time it takes to deliver. But model adoption shows that it may provide the time advisors need, without compromising on investment quality.”
SEE ALSO:
- Inflation Fears Continue as U.S. Ranks 18th in Retirement Security
- Plan Participants Want ESG Investments: Natixis
- U.S. Economy Heading Towards Recession: Natixis
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
