Benefits of Bespoke Advisor-managed Portfolios:

Although the statistics point to the benefit of using models, Rep as PM is the fastest growing advisory program over the last 5 years, second only to UMAs, according to Cerulli.¹

• Proponents of bespoke portfolio construction believe that Rep as PM programs enable them to perform more effectively during down or volatile markets, and advisors often believe this is a key way to justify advisory fees. There is also a view that this approach differentiates advisors from self-serve and robo-advisory options.
• For HNW clients, direct indexing – which can be facilitated via some Rep as PM programs - can differentiate from passive, low-fee index products and allow for the generation of tax alpha, by leveraging the portfolio management skills of the advisor.

Benefits of Third-Party Models & Outsourced Portfolio Management

• Vanguard Research suggests that most of an advisor’s alpha-generation comes from behavioral coaching (approx. 150 bps).²
• While many advisors believe that advisor-managed portfolios will outperform models in any given year, these portfolios often exhibit more occurrences of significant underperformance and significantly more volatility than that of fund strategist models.
• The use of third-party investment management frees up the advisor to spend more time on client relationships, behavioral coaching, and financial planning, as well as other revenue-generating activities.

You Can Have the Best of Both Worlds

Vestmark maintains that the necessity to decide between advisor-driven bespoke portfolios and using models is a false choice. With the right technology partner, financial advisors can have the freedom to construct portfolios outside of product-centric program silos, in line with what best fits the needs of individual clients, all in a scalable way.

The VestmarkONE® platform enables advisors to view and use investment vehicles – including funds, ETFs, third- party models, SMA managers, and individual equity and fixed income securities – as portfolio building blocks, providing many benefits to advisors, investors, and the home office.

• Advisors: Leverage a range of portfolio building blocks on a single platform, enabling multiple discretionary parties in a single account, with scalable customization at the account level for accounts of all sizes.
• Investors: Enjoy access to more sophisticated portfolio solutions (including options strategies, a blend of outside managers with advisor’s management, etc.), consistency in household-level reporting, and transparency in the pricing relationship with advisors.
• Home Office: Enable the home office to more effectively balance enterprise risk and advisor autonomy – allowing you to attract and retain advisors at both ends of this spectrum.

Learn More about Vestmark’s solution.

¹ Cerulli Associates. “U.S. Managed Accounts 2019: The Challenge of New Platforms.” Ch.2, pg. 54. 2019.

² Vanguard. “Putting a value on our value: Quantifying Vanguard Advisor’s Alpha.” Pg. 8. 2019.