In an article for ThinkAdvisor, Dinah Wisenberg Brin shared some tips from experienced financial advisors on the best way to integrate model portfolios into your practice. The category has seen rapid growth in recent years with nearly $400 billion in assets as of January 2023 which was up more than 20% over the previous year.
In many ways, model portfolios level the playing field between large and small firms. While some clients will always require a personal touch, model portfolios can be valuable in serving clients who have more typical goals and circumstances. Additionally, model portfolios allow advisors to focus more on enhancing the client experience and growing their business rather than managing investments.
Another advantage is that they give smaller practices the ability to leverage tools and resources of major asset managers. These portfolios are also scalable and also leads to more optimal and efficient asset allocation.
However, one clear disadvantage of model portfolios is that they cannot be customized especially in terms of allocations, time horizon, and risk tolerance. Therefore, they may not be appropriate for clients who have special circumstances or unique goals.
Finsum: Model portfolios are a new innovation and are exploding in popularity. Find out if they are a good fit for your clients.