Best Tactics for Delivering Strategies as Models

By Lauren Yeaton Hunt, VP, Product Marketing

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After decades of feasting on mutual funds and years of devouring ETFs, the market has found an appetite (whetted by declining fees and improved technologies) for personalized SMAs and UMAs.

Advisors are hungry for model-based strategies, and when you have successful products to offer, you have a good chance of finding sponsors – if you have a successful delivery plan as well.

Once your model has been adopted, your work has just begun. Now you’re obligated to get accurate model changes to every sponsor in a timely way. Basically, you have two options.

Option 1: Do it yourself

Traditionally, this has been the only choice. Do it yourself means you deliver the models to all the participating sponsor firms. You need to transmit the model to them, in their required method, in their unique prescribed format. Each time there is a model change – a swapping of assets, an adjustment of percentages or a corporate action event -- you have to distribute a new model to each of the platforms.

If only one party were involved, this would not be a big deal. But if you’re successful, you may be sending revised models in various formats to dozens or hundreds of sponsors....using myriad methods. You must keep track of what you send to whom, what order you send them, and what time you send them.

Here’s the rub: if you forget to send a model change or if you send the wrong version of a spreadsheet and cause a trading error, that’s your firm’s responsibility and your risk. You’re on the hook for potential losses, multiplied by the number of accounts involved, at the mercy of the movement of the market.

You could automate all of this and add controls to the process, but you would either have to build or buy some form of automation and then manage and maintain this system – either way you’re talking time and money.

There is an alternative.

Option 2: Let someone else do it

Yes, outsourcing. Vestmark can distribute models to as many endpoints as you need. In whatever formats and methods they need. Period. We can give you immediate scale, and expanding your distribution and/or participating in new programs is easy and virtually instantaneous.

Not only that, but we deliver models following your intentions. One of the uglier challenges of model delivery is the rotation of model change communications to sponsors. We can randomize the delivery of models, or establish the order of changes to your preferences. In fact, Vestmark can optimize your existing trade rotations to keep up with the latest regulatory demands.

When you utilize Vestmark to deliver models, you leverage our 20 years of experience and expertise, including an outstanding track record of error-free delivery. Speaking of errors, there’s the issue of risk. Vestmark’s position on risk is comparable to our position on scale: it’s simple -- by choosing to outsource to us, you offload some of the risk.

The more models in play, the greater the opportunity for error. But when you work with Vestmark, we help take some of that risk off your firm’s shoulders. We follow your intent; we put two sets of eyes on each rotation; we have controls in place for mitigation. If there’s an error, it’s on our dime, not yours.

Focus on what matters

According to estimates from a recent Cerulli report, separate account programs grew 34.1% from 2019 to 2020 and are expected to grow 42.9% over the two years ending 2021. Separate accounts within UMAs are estimated to have grown 71.4% over one year, and 64.7% over two.1

The opportunity is there. Are you ready for it?

You can build an infrastructure yourself, or you can gain immediate scale and offload risk by leveraging what others have already constructed: built, tested, and reliable. When you get down to it, the decision is really about what kind of business you want to be in. Do you want to spend your time managing spreadsheets, delivery formats, and managing rotations? Or would you prefer to focus on expanding your distribution partners, increasing sales, and developing new products?

When you’re ready, we’re ready for you.

1 The Cerulli Edge: U.S. Managed Accounts Edition, 2Q 2021, Issue #80

By Lauren Yeaton Hunt, VP, Product Marketing