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BLOG. 3 min read

What Do Model Portfolio Users Expect from Model Providers?

The use of model portfolios among financial advisors is nearly ubiquitous—with nearly eight-in-10 advisors using models in their practices to some extent based on our Advisor Insights research, conducted in association with Horsesmouth. Advisors in every business model and asset range are using models in their practices in some measure for accounts of all sizes.

Our "What Financial Advisors Expect from Model Portfolio Providers" study provides an assessment of the current state of model use, as well as the tipping points and servicing expectations that advisors have of model providers.

model providers 1

Among advisors that do leverage model portfolios, three in four say that they do so to provide better service for their customers, or because using home office or third-party models gives them more time to build their businesses and interact with customers.

model providers 2Source: SS&C Research, Analytics, and Consulting: What Financial Advisors Expect from Model Portfolio Providers, 2021

The COVID-19 pandemic put practice efficiency and the need to more frequently, more deeply, and more effectively engage with clients in the spotlight for advisors. Most advisors have found a happy medium—allocating some of their book-to-model portfolios and building custom portfolios for the rest of it. Most who are building custom portfolios do so by leveraging existing home office or third-party asset manager models.

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Source: SS&C Research, Analytics, and Consulting: What Financial Advisors Expect from Model Portfolio Providers, 2021

For advisors using models, how they deploy them has also evolved. Account size no longer dictates whether a financial advisor will consider model portfolios for their clients. Nearly six in 10 advisors who deploy home office or third-party models use a mix of 100% allocation, partial allocation or zero allocation, irrespective of the size of the client’s account. Just 13% use models exclusively for smaller balance accounts.

An asset manager that wants to cast a broad net for model business must provide high levels of support/services for advisors and their customers. They must provide content, materials, digital programs and/or tools that make explaining the benefits of using models easier for advisors. They must contextualize market insights and performance, and make content readily customizable and sharable via email, client meetings, or social media posts.

model providers 4Source: SS&C Research, Analytics, and Consulting Productivity Insights NS Team Survey 2021

Our analysis identifies six resources and five value add programs that when combined would matter to 70% of advisors when they are choosing one model portfolio or model portfolio provider over another. See our What Financial Advisors Expect from Model Portfolio Providers study for the full analysis.

Asset managers need to understand who relies on models, why, and how they use them—steps that can help you prove to gatekeepers that your products meet the needs of their advisors. Asset managers also need to continue to win over advisors with exceptional value-add programs that help them understand what the models represent, how to use them in their practices, when the models change and why. The final leg for asset managers is keeping advisors engaged with the models. That can be accomplished through clarity and honesty about performance, clearly explaining when the model outperforms and underperforms, and by providing the tools and content that shows the overall value of using models and the value of your specific models for the advisor’s clients’ strategies.

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