Advanced portfolio rebalancing: Making it easier to meet the complex needs of your wealthiest clients

July 13, 2022
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Advanced portfolio rebalancing: Making it easier to meet the complex needs of your wealthiest clients

July 13, 2022

Media team

If you’re a single - or multi-family office serving sophisticated, multi-generational clients, you must continuously meet or exceed their expectations. And that means you need a proven, robust portfolio rebalancing tool to meet more complex needs, simplify the process, and scale efficiently across your entire client base.

According to McKinsey, when wealth management firms become digital leaders in their industry, they have faster revenue growth and higher productivity than less-digitized peers.

If (family offices) choose not to innovate, they risk going the way of Sears or Blockbuster.

Craig Iskowitz
Industry influencer

No two family offices are alike, nor are your clients. Delivering highly personalized investment and portfolio services is a must. With increased ESG and alternative investments adding to model and process complexity, an advanced rebalancing solution is the best way to reduce friction around service and scale. And it will allow you to spend more time delivering value to your clients.

Meeting sophisticated, changing client needs

Alternative investments, from real estate and private equity to fine art and precious metals, are increasing in popularity among the high-net-worth (HNW) and ultra-high-net-worth (UHNW).

More clients want householding, separately managed accounts (SMAs), limited partnerships and customized portfolios. This means you’ll need to be more precise and flexible in your rebalancing capabilities. For example, a client may want to include alternative investments in her overall portfolio as exposure rather than net worth. Or view real estate holdings in one portfolio.

Your rebalancing platform needs to easily support your client’s specific requirements and preferences.

How to exceed your clients’ expectations

Today’s affluent clients want more transparency, reduced tax burdens, wealth and asset preservation, and socially responsible investing. They also want the flexibility to include alternative investments in their portfolios in ways that make the most sense to their specific needs and goals.

Many advisors are using advanced rebalancing capabilities to handle a greater variety of client needs and scenarios. These include:

  • Split compensation – Consider the multi-dimensional nature of alternative investments by compensating to one or more classifications at customized ratios

  • Separately managed accounts (SMAs) – Gain flexibility in how and where SMAs are securitized and traded during a rebalance

  • Capital gains budgets –Establish capital gains limits to help control your clients’ annual tax burdens

  • Customized investment policies and reporting – Ensure investment policy compliance during rebalancing and maintain constant oversight of potential policy violations

What do we mean by advanced rebalancing?

Challenging market conditions mean you have to react quickly to your clients' changing goals and circumstances. Your rebalancing software should make it easy for you to appropriately manage your client’s asset allocation and risk at all times.

However, portfolio rebalancing capabilities vary widely in terms of their ability to handle complex asset management requirements.

Deciding on what rebalancing software to use should be driven by the sophistication of your clients’ portfolios and asset allocations. And you’ll need to be able to scale across a diverse set of clients.

Million-dollar households invest differently than billion-dollar households. While investing in exchange-traded funds, mutual funds and equities are typical among clients up to and including the HNW, the UHNW tend to have more complex and diverse portfolios with a greater focus on private equity, SMAs, real estate, and partnerships, and are more aware of the need to control tax liabilities.

Therefore, you need to be able to tailor services to specific clients while also scaling quickly to meet the needs of all your clients.

A rebalancing solution should allow accounts to be combined into million- or billion-dollar households. It should provide transparency into the securities and investment instruments used. And it should offer modeling flexibility using restrictions, compensation and target overrides while handling alternative assets and taking them into consideration during a rebalance.

Regardless of the sophistication of your clients and their portfolios, a rebalancing system should make the rebalancing process simple and ultimately empower you to exceed your clients’ expectations.

Learn more about the advantages of our rebalancing capabilities.