Why today's time-strapped advisor needs model portfolios

Financial advisors — some of the hardest working professionals that I know — prioritize attracting and retaining clients. Often, the key is quality time spent with the client offering products that align with a long-term investment horizon and produce a consistent income stream. 

But according to a recent survey from J.D. Power, about one-third of financial advisors don't feel they spend enough time with clients. What's more, advisors are increasingly finding it a challenge to deliver the services necessary to grow their business, according to Craig Martin, executive managing director and head of wealth and lending intelligence at J.D. Power. 

For their parts, RIAs and independent broker-dealers are engaged in a high-stakes competition for the highest producers in the industry. To succeed, they know they must listen to their advisors and understand their pain points, including declining customer engagement amid the rise of direct-to-consumer platforms.  

In their current iteration, model portfolios are an important part of the answer to this dilemma because they meet the highest producers where they are and drive growth, efficiency and client satisfaction. An added advantage: While some model portfolios are proprietary, most of today's model portfolios can go with an advisor to a new firm.

Model management has always equipped financial advisors for growth by allowing for effective implementation of third-party or advisor-driven model portfolios to deliver personalized portfolios at scale. The current generation of model portfolios deliver more sophisticated tailored investment advice, often at a much better price than competing options like bundled mutual funds. And, with their efficient implementation and intuitive rebalancing systems — and particularly when they are linked to digital account opening and wealth management — they give advisors back the time they need to effectively manage and grow their businesses.

These advantages are crucial in the post-pandemic economy, one that has produced a new breed of financial advisor, particularly in the independent broker-dealers and RIAs spaces, who simply must do more with less in terms of time spent with clients. 

A large segment of the model portfolio universe is focused on broadly diversified combinations of equity and fixed income-focused ETFs. Now that interest rates on high-quality bonds are in the 4% to 5% range, this rather simple implementation is providing significant income, and bonds are providing a greater counterbalance to equity volatility than they have for several years. The cost-effective structure of model portfolios enhances these benefits. In addition to more traditional investment allocations, current model portfolios contain structured products and other risk-focused strategies. 

Earlier this year, our multicustodial TAMP introduced two modules on an all-in-one platform that aims to remove the technological, operational and financial barriers to implementing model portfolios. Advisors can select from dozens of vetted, digitally distributed, institutional quality model portfolios and strategies. This expansive selection allows advisors to deliver more investment options to end clients at a lower cost.  

In many ways, the advice business is moving into a new world order, and model management is a large and very positive part of this evolution. For advisors working with clients focused on long-term, steady income from investments, an all-in-one platform allows advisors and clients to adapt to digital disruption and participate and grow in this new environment.