Managed Account Sponsors Are Keen to Make Advisors Better Portfolio Managers

October 10, 2023 — Boston

Managed account sponsors actively use internal resources and those of product providers to ease concerns about the use of advisor discretionary programs

With many advisors reluctant to delegate portfolio construction, managed account sponsor firms and their asset manager distribution partners are keen to provide advisors with the necessary tools and resources to become better portfolio managers, according to the latest Cerulli Edge—U.S. Managed Accounts Edition.

Managed account sponsors remain concerned about the operation of their advisory discretionary programs, ranking consistent underperformance (82%), straying from investment policy, (79%), and lack of investment review (71%) as chief issues.

To address these concerns, sponsor firms are introducing new tools and resources to help steer their advisors toward better portfolio outcomes, rolling out resources for better security research and selection as well as access to professional portfolio managers and risk-budgeting tools.

While these tools likely enable portfolio construction and management, sponsors are also providing access to performance analysis on their performance relative to peers (40%) and information on the dispersion of accounts (33%), which could tilt advisors toward a home-office or third-party solution. “Sitting down with an advisor and showing them why they may be underperforming, have inconsistent returns, or may not perform as well as others in downmarkets can be a simple but very powerful tool to spark a change in the way in which an advisor thinks about portfolio management,” says Michael Manning, analyst.

Asset managers also play a critical role in supporting advisors, ranking thought leadership (73%), asset allocation information (50%), and portfolio construction resources (46%) as valuable resources. Cerulli recommends managed account sponsors consider firm-wide priorities to help define and clearly communicate to asset managers which resources they believe would be useful to help support the portfolio construction and management efforts of their advisorforce.

Likewise, home offices should seek input from their advisors in terms of what they need help with as well as what additional education is necessary for portfolio construction. “Frequent communication is critical to ensuring that sponsor firms provide resources that add value to portfolio management and that advisors are aware of and are taking advantage of them,” concludes Manning.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Managed Accounts Edition, 3Q 2023 Issue.

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