Vestmark

Trends in Model Portfolio Usage

By Amanda Beitler, Associate Marketing Analyst

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The case for advisors to use models – either home office or third-party – as their primary approach to portfolio management is increasingly strong. Utilizing models in place of constructing and managing bespoke portfolios for an entire book of clients gives advisors time to focus on generating meaningful alpha through behavioral coaching and financial planning. It also gives them more time to spend on client relationships, other services clients expect of them, and business development.

Recent trends indicate that usage of model based advisory programs continues to grow. Yet, according to a new report by Cerulli Associates, more advisors could benefit from outsourcing all of their portfolio management to a third-party model provider than currently are.1

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Consistent with this point, a recent article by Ignites explains that of the advisors who use models at all, only 8% use the prepackaged products as they come.2 Most advisors who use models want the flexibility to customize them with their own ideas, most often by changing the asset allocation mix or weightings, or swapping out one fund for another. These advisors are defined by Cerulli as ‘modifiers’. The VestmarkONE® platform enables this kind of flexibility by offering mass customization at scale. Such a platform offers meaningful benefits to advisors, investors, and home offices alike. While advisors are no longer faced with the false choice between utilizing models or constructing and managing bespoke portfolios, investors are provided access to a wide variety of investment options and improved household-level performance reporting, and the home office can experience efficiency across product, trading, overlay, operations, and compliance teams.

Please contact us to learn how the VestmarkONE platform can improve efficiencies at your firm.

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 Cerulli Associates. “The Cerulli Report: U.S. Managed Accounts 2019: The Challenge of New Platforms.” 2019. Page 154.

2 Ignites. “Advisors Wants Model Portfolios – With A Twist.” Carmen Germaine. October 29, 2019. Page 1.

By Amanda Beitler, Associate Marketing Analyst