Leveraging Tech to Customize Model Portfolios

HFA Padded
Advisor Perspectives
Published on
Updated on

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

When used effectively, model portfolios enable financial advisors to streamline and standardize the portfolio management process without sacrificing performance. Advisors can still deliver and manage a tailored portfolio based on a client’s specific goals without spending excess time and resources starting the portfolio construction process from scratch.

With the right tech in place, advisors can access reliable, high-quality models that can be used repeatedly across their book of business. Considering the key to scaling a firm is standardizing practices (without sacrificing quality), ensuring an equitable experience for all clients is key.

Those who implement model portfolios into their practice can take full advantage of the robust institutional resources that go into developing these third-party portfolios. Keeping that in mind, clients are best served when the advisor maintains the ability to customize model portfolios to address each client’s unique needs.

Break Out of the One-Size-Fits-All Box

Model portfolios are built by skilled, third-party financial professionals with extensive institutional resources at their disposal. When incorporated into your portfolio management process, they can save you valuable time while helping to provide a standardized experience for your clients.

There are often cases, however, where a model portfolio doesn’t quite meet your client’s needs right out of the box. For that reason, many advisors prefer to have the ability to customize their model portfolios.

The ability to customize model portfolios creates a happy medium for advisors — they can leverage the research and expert guidance of highly skilled money managers while still maintaining control over what’s included in their clients’ portfolios. This ability to optimize, without building from the ground up, gives advisors a leg up on achieving the best performance for their clients while effectively scaling their firm.

With an understanding of why having opportunities to customize is important, the question becomes how advisors can most effectively compare pieces of their models, research suitable replacements, and ultimately screen for the best-performing assets available.

Leverage Technology to Research, Screen, and Replace Assets

Data points are powerful tools when it comes to researching and selecting adequate replacements for a model portfolio. Yet it’s unrealistic that any advisory firm would have the staff or resources to sift through thousands of options manually. The key to efficient and effective customization is leveraging technology applications built with customization in mind.

Intuitive portfolio analytics software gives advisors the ability to filter investment options based on criteria established by you to acquire the best-performing assets or based on your client’s unique goals. With that information in hand, you can easily and quickly identify the most appropriate assets — including similar assets — that match your criteria based on millions of risk, performance, and allocation data points.

Having this screening process baked into your portfolio analytics software helps you sort through a plethora of ETFs, mutual funds, SMAs, individual stocks, and other asset types based on your custom filters. Not only can you more effectively and accurately home in on the best-performing assets based on your criteria, you save valuable time while doing it — time better spent on relationship building, enhancing the client experience, and moving the needle closer toward your firm’s growth goals.

Reiterate Your Value Over Time

One of the challenges with personalizing model portfolios to meet clients’ needs is accurately tracking and calculating performance over time. After you’ve made tactical changes to a model portfolio, how do you paint a realistic picture of performance to your clients?

Again, this hurdle can be addressed based on the portfolio analytics tools you’re using to model and manage client portfolios. Having the ability to not only screen and select replacement assets, but also adjust the model portfolio’s history to account for those changes, is critical.

By tracking a model portfolio’s history of changes, advisors can better ensure that the performance calculations shared with current or prospective clients align with the specific changes made – ultimately giving a much more realistic look at portfolio performance over time.

Perspective is imperative for investors – particularly those who reach out to their advisors with concerns anytime the markets take a turn for the worse. Having accurate, historical data that’s easily accessible can help your investors maintain a long-term focus on their investment journey and avoid impulsive, short-sighted decisions based on immediate market movements.

Marry Model Portfolios with a Client’s Unique Needs

The ability to deliver tailored guidance and customizable portfolio construction gives advisors a competitive edge not only against other firms, but institutions and AI-driven robo advisors as well.

Model portfolios include institutional-grade investment selections with proven histories of positive performance, making them a powerful tool for advisors looking to deliver optimal returns while creating a scalable client experience. Yet in many cases, clients’ needs deviate from the standard options; in which case, having an efficient way to replace model assets and adjust portfolio history becomes critical.

When leveraging tools and platforms like Kwanti, the process of researching, screening, and replacing assets becomes fast and easy — making it possible to still customize the portfolio construction process without taking time away from other critical client tasks.

Josh Schwaber is head of customer experience at Kwanti (www.Kwanti.com), a portfolio analytics solution aiding financial advisors and investment managers with model management, prospect conversion, client retention, and more.

A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out our podcasts.

Article by Josh Schwaber, Advisor Perspectives

HFA Padded

The Advisory Profession’s Best Web Sites by Bob Veres His firm has created more than 2,000 websites for financial advisors. Bart Wisniowski, founder and CEO of Advisor Websites, has the best seat in the house to watch the rapidly evolving state-of-the-art in website design and feature sets in this age of social media, video blogs and smartphones. In a recent interview, Wisniowski not only talked about the latest developments and trends that he’s seeing; he also identified some of the advisory profession’s most interesting and creative websites.