Model Portfolios Crucial for Advisor Success
Advisors who outsource portfolio construction spend additional time with clients on high-demand service offerings, finds a report from Cerulli Associates.
The latest Cerulli Edge research shows that advisors who utilize model portfolios spend, on average, 10.6% of their time on investment management. This leaves extra time to focus on client-facing activities and other offerings, Cerulli observes.
Cerulli notes that outsourcers are generally younger advisors with less experience compared to insources, or advisors who create portfolios on a “client-by-client basis.” These outsourcers also tend to have smaller teams and therefore benefit from subcontracting portfolio construction, Cerulli adds.
Further, training curriculums for younger advisors today tend to promote the idea of outsourcing portfolio construction, the research finds. This then encourages newer advisors to utilize such services.
“In many cases, broker/dealer (B/D) training programs have done a good job educating up-and-coming junior advisors on the benefits of leveraging model portfolios,” says Kevin Lyons, senior analyst. “As a result, they are more likely to feel comfortable and confident relying on financial planning and, increasingly, tax management as the primary pillars of their competitive positioning.”
As retirement plan advisors expand their services to include wealth management offerings, a growing number of professionals are seeking ways to maximize client experiences. This includes offering tax management services to affluent and high-net-worth clients, Cerulli states. According to the research, four in 10 outsources advisors describe tax management services as “very valuable,” as more utilize model portfolios to focus on client acquisition instead.
Of those who utilize model portfolios, 87% of advisors list competitive product information, best practices from other advisors, and access to portfolio managers/product specialists as “at least somewhat valuable to them.”
“Model providers will need to keep the advisor informed on the nuances of the products and the asset allocation framework of the model, so they are capable of passing that knowledge along to their clients during meetings,” said Lyons. “Additionally, the need for best practices speaks to this segment’s desire to learn and grow, likely part of the reason they leveraged models to help them focus more time on growing their practices.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
