9 advantages of scalable trading and rebalancing
Whether your an RIA, family office or money manager, firms need to be able to differentiate, compete and grow. Rebalancing that is personalized, precise and scalable can change the game for advisors looking to grow their businesses. When trading and rebalancing is scalable, you can gain nine benefits that will level-up your business.
1. Grow quickly
In the past five years, 21% of firms have engaged in M&A activity and 27% have had an advisor with a book of business join.1 Firms must be able to successfully onboard advisors, transition portfolios, and scale to significant growth without missing a beat. Advanced portfolio rebalancing and consolidated, streamlined trading are essential to supporting diverse clients, advisors and portfolio models while maintaining the ability to individually tailor portfolios and meet on-demand requests from clients across multiple segments, accounts and households.
2. Save time
Rebalancing is ineffective if done once or twice a year, or because the calendar says it’s time. Opportunistic rebalancing ensures that trades are made when needed and omitted if not needed. Without software, attempting this process at any time requires days of work. Automated rebalancing should be capable of directing trades across thousands of portfolios in minutes – making the decision to trade solely based on strategy.
3. Reduce expenses
Firms need to address the inflection point around declining operating margins using strategic, structural and tactical initiatives to reduce expenses while increasing the flexibility and scalability of the cost base. For example, workflow efficiencies gained from multi-tier modeling can allow you to trade more and manage more money, increasing your margins and growing your business while decreasing operational costs.
4. Uncover more opportunities
A manual or inefficient process means that when a firm gets around to rebalancing client portfolios, the markets may have shifted once again and the rebalance opportunity was lost. Automated and scalable rebalancing makes missed opportunities a thing of the past. In addition, advanced rebalancing can open up more ESG or sustainable investment opportunities for clients. Starting with a client’s investment policy statement (IPS), risk profiles and preferences, deciding on the portfolio model structure and asset allocations could be as simple as applying security restrictions and ESG preferences in the model. A rebalancing platform’s model management capabilities are cruicial to making the process faster and easier.
5. Customize at scale
The ability to customize model portfolios at scale is a key requirement of top investment advisors. With the use of target overrides in the rebalancing and trading process, you can simultaneously become equally responsive to the needs of your clients, investment managers and portfolio managers. For example, by applying and augmenting a 60/40 model with target overrides to modify allocations to client-specific needs, you gain simplicity and scalability without losing the ability to tailor models to individual needs.
6. Reduce tax burdens
Market volatility and bear-market leanings are underscoring tax-aware rebalancing as a significant value-add, year-round opportunity for you to help your clients reduce or eliminate the client’s tax consequences. Asset location optimization, tax-loss harvesting, target overrides, capital gains budgeting, and custom thresholds on tax rules are powerful ways to meet your clients’ specific tax strategies and control their annual tax burdens at the individual or household level.
7. Test scenarios
Increasingly, advisors are leveraging what-if scenarios on model allocation changes or tax-loss harvesting events. A rebalancing solution can give you the flexibility and power to test different scenarios across your entire client base or a subset of clients before following through on trades.
8. Act quickly
A centralized trading infrastructure with efficient workflows for order review sets, trade blotters, and order archives can make a huge difference in an advisor’s effectiveness in taking immediate action on model drifts from anywhere in the system.
9. Future-proof the business
Fewer financial advisory firms today desire to manage technology in-house, while others face internal IT or resource constraints to
support such infrastructures within their organizations. Cloud-based rebalancing tools can quickly scale to support your firm’s growth for many years in terms of users, accounts, multiple custodians, and complex investment strategies.
intelliflo redblack is an award-winning platform that offers comprehensive rebalancing and trading capabilities, including portfolio monitoring, pre-trade and post-trade compliance and order management, all within a single multi-custodial solution. intelliflo redblack’s new OMS allows advisors to quickly move across a large book and across many brokers. It performs at scale, proven to complete up to 150,000 orders including individual, blocks and allocations in under 20 minutes. This update brings institutional-type trading capabilities to advisors of all sizes.
Source: Charles Schwab’s 2022 RIA Benchmarking Study, July 2022