Vestmark

The Benefits of Using Models to Help Achieve the Advisor's Value Proposition

By Amanda Beitler, Associate Marketing Analyst

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A recent survey, conducted by TD Ameritrade and FA Insight, revealed some interesting information about the preferences of clients towards advisory behaviors. The survey showed that while 71% of advisors believe clients prefer in-house investment management, only 17% of advisory clients (clients with 70% or more of their assets managed by an advisor) actually indicated a preference for in-house investment management.1

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Although there are challenges to be considered as advisors consider utilizing third-party models as their main portfolio management program, the use of models is trending up. According to Ignites, in 2020 and 2021, 28% of advisors plan to increase their allocation to model portfolios and 2% plan to start using models.2 In addition to this data, a recent Broadridge study included 5 reasons that advisors cite for using models:

  1. Business scalability
  2. Ability to leverage investment management expertise
  3. Ability to focus efforts on client acquisition/retention
  4. Ability to better address compliance/regulation
  5. More stringent manager due diligence3

The common theme of these benefits is that they free up time for advisors to focus on client relationships and driving organic asset growth, which in turn benefits the client. Home offices striving to allow advisor autonomy while maintaining control benefit from the use of models because even as advisors customize portfolios, the use of those products helps create guardrails for advisors’ investment decisions. The VestmarkONE platform enables advisors to maintain autonomy and customize portfolios at scale on a single technology platform, that can run all programs (UMA, SMA, Fund Wrap, Rep as PM) as a fully outsourced middle or back office solution, or in a modular way.

Learn More about how Vestmark’s solution can enable your firm to access the benefits of this model trend.

For more information on this topic, please read The False Choice in Portfolio Construction, Building Blocks and the Advisory Solution of the Future, by Vince Pellegrini.

1 FA Insight, TD Ameritrade. “Outsourcing: Striking the Right Balance Between Customization and Efficiency. May 2019. Pages 4, 17.

2 Ignites. “Advisors Wants Model Portfolios – With A Twist.” Carmen Germaine. October 29, 2019.

3 Broadridge. “Distribution in a model-driven age.” 2019. Page 5.

By Amanda Beitler, Associate Marketing Analyst