“These strategists are, in fact, active managers using passive products to maximize returns,” Montgomery said.
The ability to adjust positions within a managed portfolio allows strategists to adapt to changes and opportunities that are not available to traditional mutual fund investors, providing investors broad exposure to areas that a quantitative model signals as an opportunity or markets to avoid, Montgomery added.
Moreover, by outsourcing a portion of the workload to strategists, financial advisors may be left with more time to focus on maintaining client relationships and developing new businesses. In a recent survey, Northern Trust Co. has found that 70% of advisors who outsource investment management reported their decision was well received by clients and allowed for further business growth. Additionally, 80% of advisors surveyed said they did not lose clients because of the decision.
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Max Chen contributed to this article.