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Unlocking growth and efficiency through the power of model portfolios and dynamic rebalancing

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In today’s fast-paced financial landscape, financial advisors seek innovative ways to save time, scale their services, and fuel business growth. Model portfolios have emerged as a popular solution, empowering advisors to manage their clients’ investments efficiently.

With the increasing availability of diverse model options and the support of turnkey asset management platforms (TAMPs), the benefits of model portfolios are more accessible than ever.

Here, we’ll explore the advantages of model portfolios, the importance of dynamic rebalancing, and how this winning combination can elevate your practice.

 

Why model portfolios are gaining ground 

According to Morningstar, model portfolios held a staggering $350 billion in assets as of March 2022, reflecting a remarkable 22% increase in just nine months. The number of available models doubled in the past two years, reaching over 2,500 in November 2022. This growth demonstrates the growing preference among financial advisors for model portfolios, which offer efficient and effective investment management solutions.

Many financial advisors tout these benefits:

  • Time savings: Frees up valuable time, allowing advisors to focus on client relationships and other essential services like financial planning.
  • Scalability and growth potential: Enables advisors to scale their business and expand their services to a broader client base.
  • Comparatively lower fees: Offers cost advantages over traditional mutual funds, providing clients greater value.
  • Availability via TAMPs: Provides advisors with convenient access to a diverse range of model portfolios, streamlining their investment process.
  • Accessible IP: Gives advisors access to the intellectual property and expertise of top asset and money managers.
  • Boost for smaller firms: Serves as an excellent starting point for smaller firms looking to grow their book of business by offering a solid foundation for their investment strategies.

 

The importance of dynamic rebalancing 

To maximize the benefits of model portfolios, a flexible and dynamic rebalancing and trading process is crucial. This process empowers advisors to effectively respond to evolving client needs, investment manager requirements, and portfolio management strategies by personalizing model portfolios to meet their clients’ unique risk profiles and preferences. An advanced rebalancing platform can allow advisors to achieve greater workflow efficiency and scalability, making managing universal modeling strategies, retirement plans, and tax strategies easier across multiple clients.

 

Driving growth and customization

Dynamic models and flexible rebalancing provide advisors with the tools to tailor portfolios against benchmarks, allocate assets tax-efficiently, and personalize risk profiles for complex households. Additionally, substituting models at the portfolio level facilitates rapid scalability and smooth transitions when adjusting investment strategies or accommodating M&A activities. Advanced rebalancing technology also aids in consolidating and managing an optimal number of models, reducing complexity while ensuring optimal portfolio performance.

 

Rebalancing for scale and diverse clients

Streamlined rebalancing and trading processes empower advisors to meet the demands of sophisticated clients across multiple segments, accounts, and households. Key benefits include reducing compliance violations, monitoring, and addressing portfolio drift, rebalancing efficiently considering various factors, creating different models to implement investment strategies, and gaining greater control over security selection. These features help advisors exceed client expectations and differentiate themselves in a competitive market.

 

Fueling efficiency through outsourcing

TAMPs provide a viable solution for advisors seeking to outsource investment management tasks. By leveraging TAMPs, advisors can scale their operations, focus on higher-level functions such as financial planning, and access best-of-breed investment management.

TAMPs that offer a wide range of portfolio solutions can provide diversified ranges of model portfolios that are managed to pre-defined risk targets, enabling you to choose the one that best suits your clients’ risk profile. Partnering with a TAMP that offers cutting-edge technology and comprehensive support for integration and workflows can enhance your ability to meet clients’ evolving needs while staying ahead in an evolving market.

 

Transforming the way advisors manage investments

Embracing model portfolios and dynamic rebalancing can revolutionize how you manage your clients’ investments. The time-saving efficiency, scalability, lower fees, and personalization possibilities offered by model portfolios make them an invaluable tool for advisors looking to grow their practice and deliver exceptional client experiences.

By selecting a robust rebalancing platform and partnering with a reliable TAMP, advisors can streamline their operations, alleviate administrative burdens, and focus on providing expert financial advice and building strong client relationships.