Five Things That Advisors Want from Model Portfolio Providers

Nearly 8 in 10 financial advisors use model portfolios according to our recent survey of financial advisors, conducted in association with Horsesmouth. Of those that use model portfolios, 75% do so because using model portfolios helps them to provide better service to their customers or because using models gives them more time to build their businesses and interact with clients. For asset managers who provide models, this contingent of advisors is important. They represent nearly 71% of assets among advisor practices that use models.

What these advisors say will tip the balance when deciding to select models from a specific asset manager over another

More than half (54%) would choose one asset manager's models over another if an asset manager can present information about the products within the model in a way that is approachable to, and understandable by, investors. Additionally, 43% say that performance is the most important factor when choosing a model and 77% list performance in their top three most important factors. Price was the second most common factor listed in advisors' top three, with 44% of advisors listing it among their top three factors for selecting one asset manager's model over another's. Beyond performance and price, 60% of these advisors indicated that the level of support offered to them and their customers by the model provider would most influence them to select a model from a fund company over its competitors.

Advisors using models to improve their effectiveness and operational efficiency were clear about what expectations they had for asset managers providing them with models:

1. 69% want timely updates for performance commentary for the model portfolio as a whole.
2. 64% want notifications when allocations within the model change.
3. 57% want updates about changes to the investment team and process.
4. 55% want the asset manager to put outperformance/underperformance into context.
5. 55% said model providers do not offer enough portfolio construction support.
6. 53% want portfolio analysis consulting to understand and modify models.
7. 53% want capital market support/rationale for asset allocation.

Asset managers must focus not just on convincing advisors to use their model portfolios, but also ensure that they provide adequate support for the advisor once their model has been selected. Performance of the model is crucial, as is price when advisors are selecting the models that they will use, but the level of support provided by the asset manager can keep advisors satisfied with the models they continue to use over the long term. This includes performance commentary, timely notification of changes, assistance with portfolio construction and model modifications, and more. With 80% of wealth managers using models in their practices to some degree, asset managers cannot drop the ball once the model is selected.

To learn more about advisor behaviors, contact us.