Displaying items by tag: advisors

Often, there is a mismatch between how an advisor spends his or her time, and what drives ultimate success for the practice. By embracing technology and model portfolios, advisors can free up more time to invest in activities that build their business such as client service, marketing, and prospecting.

Surveys show that client retention and satisfaction are ultimately linked to frequent communication. However, many advisors are spending a chunk of their time managing portfolios and researching investment ideas. In fact, some research indicates that advisor-managed portfolios underperform especially in more volatile markets. 

Now, there are increasingly more complicated and sophisticated investment options which increases the burden on advisors and further compromises client services. With model portfolios, advisors can outsource large parts of the process such as research, portfolio management, and onboarding while providing more options and better performance. 

By outsourcing this function, advisors can also reduce costs and create greater efficiencies. Model portfolios can also help in other areas such as tax management which is another priority for clients. By centralizing information, it can identify opportunities across portfolios and lead to a more personalized experience. 

Ultimately, model portfolios are a way for advisors to leverage technology to drive better outcomes for their clients and business while creating a more efficient practice.

Finsum: Model portfolios offer many benefits to advisors. The primary one is it frees up more time for client service. 

Strive Asset Management, the upstart asset manager which was founded by Republican presidential candidate Vivek Ramaswamy, is launching its own model portfolio offerings. Strive is seeking to compete with Blackrock and Vanguard by solely focusing on economic factors when it comes to investing rather than also accounting for non-economic factors like ESG.

Strive’s model portfolios would also have the same investing and voting style as its funds. In its filing, the company said, “Strive engages in advocacy intended to encourage public companies to focus on economic factors in maximizing value for shareholders. This may include submitting or supporting shareholder proposals at public companies, advocating for changes in management or corporate structure at public companies, and a wide variety of corporate and/or public engagement.”

Its model portfolios would use existing Strive ETFs and one third-party ETF. In terms of fees, Strive would only receive its ordinary ETF fees and not charge any additional fees for its models. Currently, the asset manager has launched 11 ETFs with expense ratios between 5 and 49 basis points.

As of last month, these 11 ETFs had just over $1 billion in assets. The company aims to appeal to conservative-minded investors who are turned off by focus on ESG and other non-economic factors when it comes to investing and shareholder initiatives.

Finsum: Strive Asset Management is launching model portfolios as it looks to compete and take market share away from more established asset managers.

At one time, direct indexing was only available and viable for ultra high net worth investors. This is now changing due to technology which is simplifying the process, the sharp decline in trading commissions, and the fractionalization of shares. 

With direct indexing, investors and advisors can replicate any index in a managed account. Instead of buying a mutual fund or an ETF, an investor buys the actual components of an index. This comes with added benefits as they can tweak or adjust the holdings of the index to suit their own inclinations or unique situation. It also means that these investors can harvest tax losses which can then be used to offset taxes from capital gains in another part of the portfolio. 

With direct indexing, tax loss harvesting can lead to better performance especially in more volatile years for the market. Even in up years, some segments of the market may finish in the red which provides opportunities to harvest losses to offset gains. 

Direct indexing is particularly useful for investors who have strong beliefs or unique financial situations. For instance, an investor who does not want to invest in tobacco companies can eliminate these from an index and choose another stock which has similar factor scores to ensure that the benchmark continues to be tracked.

Finsum: Direct indexing is an effective strategy to lower tax bills but is only accessible for a tiny segment of investors . Now due to technology and lower commissions, it’s available to nearly everyone. 

Many advisors aspire to work with high net worth clients. However, this is certainly a competitive market since these clients will have more assets and require more sophisticated strategies and advice. Additionally, high net worth clients will be more demanding in terms of time and the type of services provided. And, it will be more difficult to retain these clients as other advisors may look to poach them.

Yet, there are some methods that you can apply to increase your chances of success. The first step is to have a specialized niche such as estate planning or tax management or even focusing on a particular profession such as doctors or lawyers. Offering specific and specialized services and advice is likely to appeal to high net worth clients and increase your chances of referrals.

Once you’ve picked a niche, the next step is to refine your message and brand. In part, this is about figuring out your unique value proposition relative to other advisors. This includes how you do business, and how you communicate with clients. Often, high net worth clients value regular communication, appreciate being offered a variety of options, and want to gain a deeper understanding of the reasoning behind advice offered.

Finsum: Many advisors aspire to work with high net worth clients. Here are some tips to increase your chances of success.

A lot of conventional wisdom regarding investing and wealth management has been questioned over the past couple of years. The best example is the traditional 60/40 portfolio. In the last couple of decades, this mix has been sufficient for returns and diversification. 

However, this is clearly not the case in the current environment of high inflation and rates, as both delivered poor returns in 2022. In recent months, long-duration bonds have added to their losses, while equity performance has been mixed. The idea that a portfolio of just bonds and equities can deliver proper diversification is no longer valid. 

Given that we have ostensibly entered a new era, advisors and investors have to be willing to rethink their assumptions and challenge conventional wisdom. One potential solution is the use of model portfolios. 

Model portfolios can be used to add exposure to more asset classes which are truly non-correlated. These include commodities, foreign currencies, real estate, quant strategies, alternative investments, private credit, etc. 

Allocations to these areas can lead to a truly diversified portfolio that can sustain performance in all types of environments with the appropriate level of risk. Additionally, advisors can offer more personalized products for their clients that are suitable for a wide variety of goals and needs.    

Finsum: For decades, 60/40 has worked in terms of diversification and returns. This may no longer be the case if we are in a period of entrenched inflation and higher rates.