Displaying items by tag: clients

Model portfolios have been growing at a consistent rate for decades due to increasing adoption by younger advisors and more awareness among investors. Now, they have reached a size at which they are starting to affect markets especially when dealing with more illiquid securities. Currently, they collectively manage $3 trillion in assets under management (AUM).

It’s natural to consider the risks and opportunities as these ripple effects will only grow with model portfolios forecast to exceed $10 trillion in AUM over the next decade. In fact, recent unusual flows into various ETFs are often due to changes in the holdings of model portfolios.

Most model portfolios are constructed with ETFs. They are managed by investment teams of asset managers and can enable advisors to spend less time on portfolio management or security selection and more time on building their business and managing client relations. 

Since 2018, more than 400 model portfolio offerings have been launched. Most research shows that model portfolios tend to outperform advisor-managed portfolios. Ultimately, it’s an acknowledgement that beating the market is nearly impossible and that an advisors’ job is increasingly about financial planning rather than investing. 

Finsum: Model portfolio AUM is already in excess of $3 trillion. Here’s why the category is forecast to exceed $10 trillion over the next decade. 

For advisors, there are many benefits to working with high net worth clients. They have more investable assets and also tend to have a better grasp of what constitutes a fruitful advisor-client dynamic. Of course, there is intense competition to land these clients. Here are some tips to increase your chances of success.

The first step is to understand their needs and goals. It’s also important to be aware that these prospects have seen many sales pitches and tend to be quite savvy. Therefore, any approach should be transparent in terms of purpose and intentions. Instead of being vague, it’s more helpful to focus on a specific topic like retirement planning, charitable giving, tax strategies, succession planning, etc, where you can demonstrate your expertise. 

The second step is to remember what makes you and your practice unique and to focus on these differentiators. Having a specialization can help you stand out especially if the client is looking for that particular service. This can also help you come up with a message around your brand which communicates your value. 

The final step is to spend time and energy into making sure that your prospects are aware of your practice whether this is digital or analog. This means defining your ideal prospect and figuring out where they spend time and attention, physically and virtually.. 

Finsum: Getting a high net worth client has many benefits for advisors, but the landscape is quite competitive. Here are some tips to increase your chances of success.

Picking the right niche can really help an advisor differentiate themselves in a crowded market to create a unique brand. Typically, a niche means that an advisor is focusing on a particular demographic such as a particular profession or demographic. But, it can also refer to advisors who specialize in specific areas such as financial planning or alternative investing.

Specialization can lead to more knowledge and expertise. It’s also likely that prospects will seek an advisor out who has more experience in their area of interest or need. In terms of the best niches, one strategy is to specialize in a particular stage of the planning process.

Nearly everyone’s most important financial goal is to prepare for retirement. Therefore, retirement planning is an evergreen niche for advisors and also where they can be most impactful. This involves becoming well-versed about various retirement plans and options. Ultimately, it’s about helping retirees and prospective retirees have the best quality of life. 

Another possible niche is to focus on younger clients. This would involve being digitally savvy and understanding their needs and goals with a major emphasis on education around personal finances and investing. Many younger clients also stand to inherit money from older generations given the country’s demographic realities.

Finsum: Picking the right niche is an important decision for every advisor. Here are some tips on picking the right niche and some examples.

In an article for AdvisorHub, Lisa Fu covers a recent research report from Cerulli Associates which shows that portfolios managed by CIOs outperform those managed by advisors over multiple time frames. Over the last 3 years, model portfolios earned a 1.8% annual return which beat the 1% return of advisor-managed portfolios. The outperformance was similar on longer timeframes as well. 

Further, the outperformance was even stronger during periods of market volatility. During negative quarters over the last decade, model portfolios outperform 60% of the time. Model portfolio performance was also more consistent while advisor-led portfolios have much wider dispersion in terms of results. 

Of course, this is an indication that most advisors are better off using model portfolios which frees up more time to focus on operating a business, prospecting for new clients, and investing in client services and relationships. 

Many older advisors are resistant to giving up these responsibilities given that it was an integral part of the job for so many years. Yet, firms are encouraging younger advisors to go with model portfolios due to better outcomes for clients’ portfolios and more time and energy for tasks and actions that are more correlated with success.

Finsum: A research report from Cerulli Associates shows that model portfolios perform better than advisor-managed portfolios.

Although the advisor recruiting frenzy is certainly slowing down, two trends clearly standout. One is that LPL Financial has been a big winner with its variety of models and offerings for incoming advisors. The second is that Merrill Lynch has been a big loser with several high-profile exits.

This continued this week with two teams leaving Merrill Lynch who collectively manage over $1 billion in assets. The Coutant Group which is led by Kevin and Keith Coutant announced that they are leaving for UBS. The five-person group manages $700 million in assets with lead advisors Keith and Kevein having spent 23 and 20 years at the company, respectively. At UBS, they will be joining Soundview Wealth Management and continue operating in Connecticut. 

So far in 2023, UBS has recruited away nearly $4 billion in client assets from Merrill Lynch. Reportedly, the bank has been offering generous packages to brokers including guaranteed back-end bonuses and deals that are in the 400% range. 

The other major exit from Merrill was John Foley who managed $340 million in assets and left for RBC. According to reports, the exits are motivated by competitors offering more generous compensation and providing more freedom in terms of product recommendations and client relationships.

Finsum: Merrill Lynch has seen a steady stream of exits from advisors and brokers with large books. The latest are more than $1 billion in assets leaving for UBS and RBC.