Advisor Practices Are Adopting Model Portfolios

October 12, 2022 — Boston

Increased use frees up advisor time for client service and business development

More advisor practices are adopting the use of model portfolios to help advisors better serve clients and develop their business, according to the latest Cerulli Edge—U.S. Advisor Edition.

When used appropriately, model portfolios can be an effective tool that can free up time advisor practices spend on portfolio management, allowing them to reallocate that time toward other highly valuable functions, not the least of which includes the delivery of financial planning services and asset gathering. Cerulli expects that the industry’s slow and steady transition toward a financial planning-oriented service model will be a powerful impetus for the adoption of model portfolios.

Among advisor practices, insourcers—those who either customize portfolios on a client-by-client basis or use practice-level resources to build a series of custom models—spend 18.5% (practice models) and 29.5% (customizer) of their time focused on investment management. Model portfolio use allows advisors to reduce that time commitment to less than 10%. “This saved time can be put toward client-facing activities, a particularly important activity, for example, for younger advisors that are focused on asset gathering and building a book of business,” says Brad Bruenell, associate analyst.

The way in which model portfolios can fit into an advisor’s practice varies significantly, depending upon the individual circumstances of each advisor and their practice. For example, for younger advisors focused on building a book of business, model portfolios can be an effective tool to maximize the available time to spend on asset gathering. For larger, more experienced advisory practices, model portfolios can be an effective way to efficiently service younger, less affluent clients, such as the future expected inheritors of an advisors’ wealthier clients, enabling advisors to serve the financial needs of multiple generations of a family. “The effective use of model portfolios can increase advisor efficiencies and service offerings in both maturing and fully mature practices, in a variety of ways depending upon the preference of the practice,” says Bruenell. “We anticipate this trend will continue to gain traction among advisors in the future as they seek to improve their scale and service differentiation.”

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Note to editors

These findings and more are from The Cerulli Edge―U.S. Advisor Edition, 4Q 2022 Issue.

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