The growth in programs allowing advisor discretion makes sense given that many advisors continue to view investment selection as a key element of their value proposition. Cerulli reports that 57% of advisors consistently use model portfolios created at the practice level or start with home-office or third-party models and modify as they deem necessary for customization at the client level.²

While these programs satisfy advisor demand for flexibility and autonomy, they may also introduce enterprise and operational risk. Without the right technology and processes in place, the home office may struggle to maintain oversight and control. And the challenge is compounded when the home office permits varying rule sets for different types of advisors. In fact, just over a quarter of managed account sponsors say they are content with their advisor directed programs.

Specifically, sponsors cite straying from investment policy, lack of investment review and lack of manager oversight among the top compliance concerns around Rep-as-Portfolio Manager programs. So how can the right technology help firms address these concerns?

The Scalable and Compliant Solution

Using the VestmarkONE® platform, firms can launch and manage any advisory program, including advisor directed. The platform provides you with dynamic tools to apply and oversee advisor, program, product, or manager-specific compliance rules. You turn the dials as needed to enforce portfolio construction, investment selection, trading, compliance and other workflow-related guidelines while providing degrees of flexibility to segments of advisors.

A highly configurable compliance rules engine enables rules and restrictions to be set for client, home office, security, model, program, or specific managers. And customizable graphic visualizations and alerts proactively notify the home office and advisors when investor accounts need attention, violate rules, or exceed tolerances, allowing more effective and efficient compliance oversight and surveillance across the entire book of business.

In short, firms can give their advisors the flexibility to customize portfolios in a scalable way while implementing guardrails to effectively mitigate enterprise risk.

Learn more about how Vestmark can help.

1. The Cerulli Report US Managed Accounts 2023 “Decisions About Discretion,” January 2024.
2. The Cerulli Edge US Managed Accounts Edition 3Q 2023.